Photo: Bloomberg TV
PIMCO’s Mohamed El-Erian was on Bloomberg TV this morning.He says the GDP miss plus super committee failure bring recession risk as high as 50%.
“We critically need a catalyst to bring the two parties together in a forward looking movement. We need progress, we can’t simply stall.”
“If we don’t move quickly our economy will become more fragile and the functioning of markets will become more problematic.
“The right thing for investors today is to be generally defensive and only selectively offensive.”
He says America’s problem is smaller than Europe, which has both a political problem and a structural problem.
Regarding austerity versus money printing in Europe, El-Erian says: “There is no costless way forward at this point. There are no easy solutions. As to which of the two to take in order to save the euro, that is a pure political decision. But they need to make that decision quickly.”
Should the Fed implement QE3?
“The Fed has played an important role. It has tried to build a bridge to somewhere, but this somewhere has not materialised… The effectiveness of the Fed is declining day in and day out.”