Mohamed El Erian on The Global Economy

PIMCO CEO Mohamed El Erian on The Global Economy


Mohamed El-Erian : "the impact for Japan is firstly a destruction of wealth there has been a lot of physical damage a tremendous amount of human suffering so once and for all destruction of wealth secondly once and for all decline in economic activity so the heading hat the economists call the wealth effect and an income effect "..." going forward you gonna see different things , first you will see a massive reconstruction program to give you a sense Kobe 1995 was 2 per cent of GDP reconstruction people estimate this will be two to three times as large " " so you gonna see a pick up in economic activity driven by reconstruction , second the private sector is not going to go back to where it was before and that's because of the nuclear element , electricity generation is going to be less going forwards may be as much as 25% less.......".... I doubt there will be a QE3 I am not saying it's impossible but I doubt there will be a QE3 , the economic argument for Qe3 is weaker the US is slowly healing , secondly the political argument has to be taken into account society is nervous when an unelected body starts acting as a fiscal agency and that what QE2 is so there is a limit to how often you can do it and thirdly Chairman Bernanke was very clear in his august statement in Jackson Hall which really was the introduction to QE2 he said there are benefits costs an risks in PIMCO's language we say well collateral damage unintended consequences ...
AS WE DO WE DISCLOSE OUR HOLDINGS EVERY MONTH AND SOMEONE found out that our holdings of US treasuries has gone on to ZERO , now why , everything you buy and hold must have value is that simple must have value , it must perform a role in your portfolio nobody has a monopoly over a position in your portfolio it has to have value and our estimation at the time is that there was better value elsewhere ......"