Pacific Investment Management Co.’s Mohamed El-Erian said the U.S. faces “serious” economic challenges, including lagging housing and labor markets, that will prove resistant to Federal Reserve stimulus efforts.
“You simply can’t overcome these impediments,” said El-Erian, chief executive and co-chief investment officer at Newport Beach, California-based Pimco, manager of the world’s biggest bond fund. “These are structural issues and require structural solutions.”
Responses to financial crises in the U.S. and other countries “have been too cyclical and too dependent on central banks,” he said today at a symposium on Asian banking and finance held at the Federal Reserve Bank of San Francisco. El-Erian’s remarks followed a speech today by Fed Chairman Ben S. Bernanke, who said policy makers stand ready to take action as needed to boost the recovery.
“We’re rather surprised at how cyclical the responses have been,” whether in the U.S. or Europe, El-Erian told bankers, regulators and economists gathered at the conference.
The world is undergoing a “historical” realignment akin to “tectonic plates shifting,” which is focused on balance sheets, growth dynamics among different countries, and policies or politics, he said.
“The key issue any risk manager faces today is that too many parameters have become variables,” El-Erian said. “A cyclical mindset is not sufficient given the world we live in,” he said. “ You need to think structurally.”