CEO of Pacific Investment Management Co. (Pimco), Mohamed El-Erian, thinks that the last decade is a “lost decade” of unemployment for the labor market within the U.S., as outlined by Bloomberg. The economic waters the U.S. has become accustomed to sailing have turned back, never to return, suggests El-Erian. The credit market won’t even allow as many individuals as needed to get loans. He thinks a “new normal” in America is getting set in.
Nevertheless a lot of issues with unemployment and labor in U.S.
El-Erian explained that there is nevertheless a high unemployment rate, credit markets aren’t lending and also the labor market isn’t being fixed by the federal stimulus. Charles Nenner of the Charles Nenner Research Center is even more pessimistic. On Bloomberg Television’s “On the Move,” Nenner predicted the Dow Jones will fall to 5,000 within two years, underscoring El-Erian’s belief the U.S. economy is not as flexible as policy experts believe. Giving people free instant money by holding hands and changing interest rates won’t help anything. It especially won’t help long term recovery. There are too many individuals who just want quick money loans without considering long term impacts. They are doomed to fail because of the idea of propping themselves up now while forgetting about the future.
“This country has very weak safety nets,” El-Erian said on “Bloomberg Surveillance.” “It is built on the assumption that our labor markets are very flexible, that if you lose your job in California you move somewhere else, you get another job, and what we’re seeing is structural unemployment.”
High quality assets
Pimco’s strategy has been to stock up on high quality assets. There has been a 11.8 return within the last year in the company’s Total Return Fund. Bloomberg explains that it is better than the peer bongs return of 67 percent. But for the country as a whole, a more dramatic focus on structure is needed, says El-Erian. Between the stimulus and also the U.S. housing market, the recovery seems fairly far away. The U.S. economy needs to restructure the way business is done. El-Erian said, “It needs other agencies to help and in particular, it needs structural policies to be there,” to Bloomberg. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”
El-Erian’s concept of a “new normal” could act as a fresh rubber band that will snap back after economic calamity, or a faux safety net made from IOUs and dreams of wild market speculation.
Find more info on this subject
Bloomberg
bloomberg.com/news/2010-08-30/el-erian-sees-lost-decade-for-u-s-jobs-amid-weak-safety-nets-tom-keene.html
PIMPCO
europe.pimco.com/LeftNav/AboutPIMCO/Milestones.htm
Understanding the “new normal”
youtube.com/watch?v=t8oyYYBJGX4
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