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The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse

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The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse

Authors Mohamed A. El-Erian

Country United States
Language English
Genre non-fiction
Publisher Random House
Publication date January 2016
Pages 296
ISBN 9780812997620
OCLC 934627682
The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse is
a 2016 economics book authored by Mohamed A. El-Erian.

El-Erian argues that, forced to take on massive policy responsibilities with inevitably
partial tools, central banks only managed to put a band-aid on the consequences of the
Great Recession,[1] and that a continued period of low-growth and financial repression is
not sustainable for much longer.[2] The global economy and markets are on what he calls
a "T junction". The current path being our pursued – or what he labeled back in 2009 as
the "new normal" – will likely end within the next three years; and to illustrate this, the
book identifies the mounting tensions and inherent contradictions that are becoming more
visible at the domestic, regional and global levels. But what comes thereafter is not as yet
pre-destined. It depends on choices that are made by governments and other members of
One road out of the T junction involves even lower growth, periodic recessions and
financial instability; and it is a road that will fuel even greater political dysfunction, a
worsening of what he calls the inequality trifecta (that of income, wealth and
opportunity), and social tensions. The other road is one that unleashes the considerable
productive capacity of the global economy, which is then turbocharged by the
deployment of corporate cash sitting on the sidelines and exciting innovations. El-Erian
then identifies the key drivers of each.
Reviewing how they have ended up as the only game in town policy-wise, El-Erian
argues that, by necessity rather than choice, central banks have ended carrying too many
responsibilities for policy decisions in recent years, and that politicians need to, and must,
play a more active role in shaping policy..[2]/
Providing details, El-Erian suggests fixing the Great Recession for good will entail a
four-pronged approach: fostering economic growth through structural reforms;
encouraging greater balance in aggregate demand, including more inclusive access to
consumption; implementing debt reduction in areas where crippling debt overhangs are
destroying potential; and spearheading global coordination of economic policy..[1] Some
policy measures include "revamping the education system, strengthening infrastructure,
improving labour competitiveness and flexibility, while simultaneously closing tax
loopholes and increasing marginal tax rates on the wealthy in order to reduce
Given the "unusual uncertainty" associated with the T junction, the book also discusses
the challenges facing sound decision making by governments, households and
companies. Using the insights of behavioral science, he points to the most common
mistakes that are made in such circumstances, and provides guidance on what can be
done to address blind spots, unconscious biases and other inherent challenges.

Critical reception[edit]
Financial Times
What better moment could there be for a book subtitled "Central Banks, Instability, and
Avoiding the Next Collapse"? And who better to write it than Mohamed El-Erian— the
man who captured the essence of the present era of low growth, low inflation and low
investment returns better than anyone else with his memorable concept of the "new
normal"? It is refreshing to read a policy book with the confidence to say that it is
pointless to dispense elevator-pitch solutions to epochal economic challenges.[2]
New York Times
El-Erian expertly offers a balanced view, commending the central banks for their
necessarily aggressive policy views while noting, for example, the failure of the Fed to
recognize the pre-crisis housing bubble. But title aside, this is hardly just a book about
central banks. Instead, El-Erian offers a grand tour of the challenges we face, along with
ideal solutions and more likely outcomes. He even dips into subjects of questionable
relevance, like cognitive diversity and cultural bias.[4]
Time Magazine
If you want to understand this bifurcated world and where it's headed, there is no better
interpreter than Mohamed El-Erian. El-Erian is the former CEO of PIMCO, the world's
largest bond trading firm, and now the chief strategist for insurance giant Allianz. His
new book, "The Only Game in Town: Central Banks, Instability and Avoiding the Next
Collapse” (Random House), is an excellent primer on how we got here and what to
expect as the world struggles to cope with slower, less equal growth and the resulting
populism, nationalism and ugly partisan politics that we see in countries from the U.S. to
France to China.[5]
The Economist
Mohamed El-Erian, a former IMF economist and executive at the Pimco fund
management group, is the latest to sound the alarm. While central banks "averted
tremendous human suffering", he argues that they have failed to generate what the
Western world really needs—"the combination of high, durable and inclusive growth
together with genuine financial stability". Worse still, politicians have come to rely on
central bankers to provide the main source of economic stimulus. As a result, Mr El-Erian
asserts, they have failed to force through reforms that were badly needed. The long period
of easy monetary policy has pushed up asset prices and thus wealth inequality. It has also
meant that the appetite for financial risks (market speculation, in other words) is greater
than the willingness of businesses to take economic risks by increasing investment.[3]
Publishers Weekly
It is suggested the main thesis of the book was "well-informed, if sometimes
overstretched," but they criticized its forays into "trendy but less relevant territory with
references to "cognitive diversity" and quotes from Sheryl Sandberg."[1] However, they
praised its "prescient warning against our current overreliance on central banks."[1]