Tags: egypt | pimco | el-erian

El-Erian: Mideast Leaders Need to Reform Policy

By    |   Tuesday, 01 Feb 2011 07:50 AM

The Mideast is subject to more turmoil similar to what’s happening in Egypt unless governments reform their economic policies that discriminate against the masses, says Pimco co-CEO Mohamed el-Erian.
 
"What happens is the rulers in the Middle East will understand that the combination of unemployment, high prices, and the demonstration effect are such that they need to get ahead of the curve," he tells CNBC.
 
"It's the same for U.S. foreign policy — understanding that you need to get ahead of the curve and that people matter."
 
In terms of investing, El-Erian urges caution for now but says any strong market declines may create opportunities for rebounds.
 
"We think of it as having to play both defense and offense," he says. "On the defense side, we have a concept at Pimco of safe spreads — make sure you understand where your real purchasing power is coming from as investors.”
 
As for offense, “we're starting to see some pretty indiscriminate selling,” El-Erian says. “At some point Egyptian instruments in themselves will offer some value."
 
Many economists are calling for higher oil prices, and that could hurt the U.S. economy big time.
 
“If tensions in the Mideast cause oil prices to rise by $5 for even just three months, over $5 billion will leave the U.S. economy,” Jason Grumet, president of the Bipartisan Policy Center, tells The New York Times.
 
“Obviously, this is not a strategy for creating new jobs.”
 

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The Mideast is subject to more turmoil similar to what s happening in Egypt unless governments reform their economic policies that discriminate against the masses, says Pimco co-CEO Mohamed el-Erian. What happens is the rulers in the Middle East will understand that the...
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2011-50-01
Tuesday, 01 Feb 2011 07:50 AM
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