El Arian: MEGATHREATS FACING ECONOMY,: Insufficient Supply, End of Unlimited Liquidity, Fragile Financial Markets

Top economist Mohamed El-Erian says we’re not just headed for another recession, but a ‘profound economic and financial shift’

Investors and economists have been sounding the recession alarm. But one major economist who has seen warning signs mounting for many months says this potential recession is unlike what we’re used to.

That economist is Mohamed El-Erian, previously the chief executive officer of the massively influential bond-market player PIMCO. He also chaired former President Barack Obama’s Global Development Council and has written several economic best-sellers. Simply put, he’s one of the best Fed and markets watchers alive, and he hasn't liked what he's seen for some time now.

There’s a tendency to see economic challenges as “temporary and quickly reversible,” El-Erian wrote in a commentary for Foreign Affairs, citing the Federal Reserve’s initial thought that high inflation would be transitory or the consensus that a recession could be short.

“The world isn’t just teetering on the brink of another recession,” he continued. “It is in the midst of a profound economic and financial shift.”

The first transformational trend, El-Erian says, is the shift from insufficient demand to insufficient supply. The second is the end of boundless liquidity from central banks. And the third is the growing fragility of financial markets.

El-Erian isn’t alone in citing multiple threats to the future of the world economy. The veteran economist Nouriel Roubini and the financial historian Adam Tooze are two other prominent voices warning of interrelated threats. Roubini has just authored a new book called “MEGATHREATS” about no fewer than 10 giant economic problems facing the world, while Tooze has popularized the term “polycrisis” to describe a group of related and compounding problems.

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