The past decade is of unemployment and a bad labor market are a “lost decade” reports Bloomberg quoting CEO Mohamed El-Erian of Pacific Investment Management Co. (Pimco). There is also one more flaw El-Erian pointed out. That is that the economy within the country typically moves forward without any looking back at what has happened. Loans are needed by more people than the credit market can allow. A “new normal” is setting in. He thinks America will get used to it.
Unemployment and labor continue to suffer
Unfortunately, El Erian thinks the labor market isn’t going anywhere with the federal stimulus that is really hurting. He also thinks there is nevertheless a high unemployment credit market still isn’t really lending. 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 U.S. economy isn’t really as flexible as policy experts believe. Long term recovery won’t happen when interest rates change and instant money bailouts are given to individuals. Those who do not care about the future and just want to make themselves better right now by taking cash without considering the long term impact are likely to do really bad within the end.
El-Erian said on “Bloomberg Surveillance” that “This country has very weak safety nets.” “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.”
Getting some high quality assets
High quality assets are bought by Pimco right now. Within the U.S., the company’s Total Return Fund is the largest of its kind with the 11.8 return in the last year which is beating 67 percent of peer bongs, say Bloomberg. But for the country as a whole, a more dramatic focus on structure is needed, says El-Erian. Between the stimulus and the U.S. housing market, the recovery seems pretty far away. Businesses from time to time need restructure. The economy needs this kind of restructure. ”It needs other agencies to help and in particular, it needs structural policies to be there,” Bloomberg reported El-Erian saying. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”
There are many dreams and wild speculations occurring with IOUs. El-Erian’s idea of a “new normal” could just help the economy snap back.
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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