Tuesday, February 2, 2010

El Erian Expects ‘Resetting’ of U.S. Economy in 2010

Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said he expects the U.S. economy to experience a “slow resetting” this year.

“2010 is about the multiyear resetting of both the U.S. and the global economy,” El-Erian said today at a Federal Deposit Insurance Corp. conference in Arlington, Virginia. “In this context, do not fall hostage to a cyclical mindset.”

El-Erian has forecast an extended period of below-average economic growth, heightened regulation and unemployment for the U.S. following the financial crisis, a view shared by BlackRock Inc. Chief Executive Officer Laurence Fink. Legg Mason’s Bill Miller and White House economic adviser Lawrence Summers have rejected that view.

“We’ve had a balance sheet recession,” El-Erian said. “Balance sheet recessions are not cyclical. They expose lots of issues over time.”

El-Erian is the author of “When Markets Collide: Investment Strategies for the Age of the Global Economy,” published in 2008 to explain the shifting relationship between international markets. Pimco, based in Newport Beach, California, runs the world’s biggest bond fund.

(from Bloomberg, January 26, 2010)

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