IRAQ AND THE FINANCIAL CRISIS - articles, opinions, interviews - daily updated

The market tried to tell us something and no one listened'

Interview with Mohamed A. El-Erian, co-chief executive officer of the world's largest asset management company Pimco. An interview about the ins and outs of the credit crunch.

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"Let me leave you with a thought that scares me the most. So far the world is
deleveraging three balance sheets. First that of US housing, which peaked in the
summer of 2006. Secondly the financial sector, which peaked in the summer of
2007. The third one , which peaked this summer and now starts to deleverage, is
the US consumer. The good news about all of these three things is there is a
stock of wealth underneath them, to dampen the consequences.
"But there is one balance sheet out there that so far has avoided all this, but
is now coming under pressure. That is the growth in emerging markets. It is
slowing down. If that balance sheet is forced in contraction, the welfare
implications are huge. Because those markets do not have a wealth cushion. It
will mean poverty, much more pain, and much more human suffering. That’s my
major concern: if this doesn’t get stopped and the tidal wave is going to hit
people that are least able to survive it."

"Crisis is as far-reaching as the fall of the Soviet Union"

John Gray

"Our gaze might be on the markets melting down, but the upheaval we are
experiencing is more than a financial crisis, however large. Here is a historic
geopolitical shift, in which the balance of power in the world is being altered
irrevocably. The era of American global leadership, reaching back to the Second
World War, is over
…
The fate of empires is very often sealed by the interaction of war and debt.
That was true of the British Empire, whose finances deteriorated from the First
World War onwards, and of the Soviet Union. Defeat in Afghanistan and the
economic burden of trying to respond to Reagan's technically flawed but
politically extremely effective Star Wars programme were vital factors in
triggering the Soviet collapse. Despite its insistent exceptionalism, America is
no different. The Iraq War and the credit bubble have fatally undermined
America's economic primacy. … Retrenchment is inevitable and it is
unlikely to be gradual or well planned.
Meltdowns on the scale we are seeing are not slow-motion events. They are swift
and chaotic, with rapidly spreading side-effects. Consider Iraq. The success of
the Surge… how long will this last, given that America's current level of
expenditure on the war can no longer be sustained? ..."