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It’s no secret that Mohamed El-Erian, the CEO of PIMCO–the world’s biggest bond fund–is pretty down on the current crop of global leaders and the way they’ve handled financial and economic crises over the past several years.With attention focused on the upcoming presidential election in the United States, El-Erian writes in a new op-ed in the latest issue of Foreign Policy Magazine that the ability of Europe to handle its crisis rests largely on how the political scene in the U.S. unfolds over the next several months.
However, El-Erian is not optimistic that the U.S. will be able to sort out its own economic issues even after the election, and he offers a vivid warning on how things could get out of hand quickly in the world’s biggest economy. From Foreign Policy Magazine:
Sadly, neither Obama nor Romney has yet offered a meaningful, forward-looking economic reform program to address problems such as a malfunctioning labour market, unsustainable public finances, a broken credit system, inadequate infrastructure, and a lagging education system. The risk for the United States, as well as the global economy, is that a lack of vision and political courage ends up leading to even greater economic disappointment and financial instability, bringing with it the social unrest we’ve seen in so many other countries over the past 18 months. Occupy Wall Street and the Tea Party may have somewhat fizzled, but populist anger could return with a vengeance.
The longer America’s interlocking economic and political challenges persist, the greater the number of companies and long-term investors that begin to worry — and, more importantly, act on those fears. They hire fewer people and invest less in factories and equipment. As they increasingly sit on the sidelines, the country’s fate will be left in the hands of tactical position players and short-term traders, further ramping up volatility and reducing future growth and job opportunities. And when day traders and company flippers start running a country’s economy, watch out.