Mohammed El-Erian on Obama's Debt-Ceiling Surrender
Some technical dodge would have been vastly superior. He does not like it:
PIMCO CEO Mohamed El-Erian: "I think this compromise will lead to an increase in the debt ceiling, and therefore avoid default. But this relief will be short. We have one rating agency out there that said it would downgrade unless certain things happen, and these things are not happening fast enough. If the U.S. loses that AAA status, it will be much more difficult for the U.S. to restore growth, so it's unambiguously bad….
The rest of the world is watching, and this will do very little to reduce the concern that the rest of the world has about the role of the U.S. in the global economy….
[The potential budget agreement] does nothing to restore household and corporate confidence. So unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise…. We have a very weak economy, so withdrawing more spending at this stage will make it even weaker…
