Friday, November 21, 2008

El-Erian says fix everything and fix it now

El-Erian and Marc Faber, both astute investors, think the whole economic system is broken (at least in the US, possibly World). Only the government can fix it, and they have to act urgently now. If a recovery does not happen soon the economy will be worse than in the Great Depression.

El-Erian thinks this is a crisis "of the system" not "in the system"
"This is a crisis of the system, which means it morphs and is ahead of the policy makers still", he says.

A few more thoughts from his interview in CNBC:

"The bond market is telling you this is beyond a flight to quality, this is a flight to liquidity," El-Erian said. "There's damage to the system, and what you're seeing is a reaction to that and a reaction in the yield curve."

"TARP II would be done both with capital injection and asset purchases, dealing with impaired assets."

"There is a desire to say well lets choose between this (asset) and that (asset). This is not about local optimization, ...this is about attacking the problem holistically and urgently, otherwise you have to do the same thing again and it costs you a whole lot more."

click for video

Marc Faber, also called Dr. Doom, sees a strong rally happening very soon, because of all the money that governments are throwing at the broken system. He also thinks if the rally does not happen the economic downturn will be worse than the Great Depression.

Marc Faber said on CNBC Friday:

But "I assure you if you throw enough money at the system, eventually you can reflate, especially in the United States," Faber added.

Statistically a rebound should happen, but if it doesn't "the air is out" and the world faces an economy "worse than the depression of '29 to '32," he said.

source: El-Erian on the Markets


source: Strong Rebound Coming in Next 3 Months: Dr. Doom


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