Mohamed A. El-Erian - The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse

The Only Game in Town achieves the nearly impossible: It takes complex financial issues and events and makes them both enlightening and entertaining. Its a must-read for anyone who cares about the global economy and its future, raising critical questions, exploring all the relevant topics, and offering sound policy recommendations. Its a terrific book.

Jack Welch

Mohamed El-Erian understands markets and economics, and he clearly and coolly articulates the forces that created the current global slowdown and the dangerous fork in the road that the world economy is approaching. The road ahead could lead to a perilous U-turn or more durable, inclusive growth. The good news, as El-Erian convincingly argues, is that policymakers, businesses, and the rest of us still have our collective hands firmly on the wheel and can steer the economy in a better direction.

Alan Krueger, Bendheim Professor of Economics and Public Affairs at Princeton University

An indispensable guide to understanding the rapid expansion and current role of central banks in the global economy, as well as the challenges and opportunities that they will confront in responding to future economic shocks.

James Poterba, professor of economics, MIT, and president and CEO, National Bureau of Economic Research

The Only Game in Town says it is about central banks, but it really is about so much more: everything from the investment strategy needed in todays macroeconomic environment to the hard choices about taxes and public works that our politicians face to the economics underlying the still relevant new normal (which he coined). El-Erian has an incredibly rich worldview, far greater than the sum of his impressive diverse experience, and seeing todays world economy through his eyes offers a real education.

Dr. Adam S. Posen, president of the Peterson Institute for International Economics

This book is a must-read for anyone interested in the global economy. A masterful account of how central banks became the only game in town after the global financial crisis but also how other structural and fiscal policies are necessary to resolve key global economic issues. El-Erian is the best thinker on the key global issues of our times.

Nouriel Roubini, chairman, Roubini Global Economics and professor of economics, Stern School of Business, NYU

Mohamed El-Erian knows the global economy as an investor, a public servant, and an analyst with a rare ability to grasp its essentials. He has an urgent message to convey here: Central banks cannot [continue to] carry the global economy on their backs for much longer without a high risk of a very bad global outcome. If hes rightas he has often been beforeall of us, governments, business, finance, and individuals, need to understand why and how to take evasive action.

Jessica Mathews, former president of the Carnegie Endowment for International Peace

Widely regarded as one of the most astute observers of global economic trends, Mohamed El-Erian is famous for having coined the now-ubiquitous phrase the new normal. Five years ago, he was worried that the global economy might take years to regain its footing. Now El-Erian worries it could fall off a cliff. The good news from this book is that if policymakers get their act together, things could be a lot better. The bad news is that this seasoned and influential veteran isnt at all sure this will happen. The Only Game in Town is simply a must-read for anyone trying to understand how the global economy might unfold in the next five years.

Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy at Harvard University, and former chief economist and director of research at the International Monetary Fund

In his next book, The Only Game in Town, Mohamed El-Erian has done several important things superbly. First, he has presented the first really comprehensive assessment of the multiple challenges to sustainable and inclusive growth facing a wide range of countries and the global economy. Second, he does it through the illuminating lens of central banks and monetary policywith few exceptions, the only game in town. Third, he then deftly and insightfully dissects the limits and risks of this almost ubiquitous one-handed policy response. And fourth, he argues persuasively that this is a journey we cannot continue; that we will break either right to a much superior level and quality of growth, or left to declining performance and rising instability. He then suggests mind-sets that will help everyonepolicymakers, and the rest of usnavigate this complex and uncharted territory. It is a tour de force.

Michael Spence, Nobel Laureate and professor of economics, Stern School of Business, NYU

What is needed is not more finance, but better finance.

M ARTIN W OLF

The world has largely exhausted the scope for central bank improvisation as a growth strategy.

L ARRY S UMMERS

I n the last few years, the global economy has evolved in ways once deemed highly unlikely, if not unthinkable. It is a phenomenon that continues today and, as will be made clear in this book, will intensify in the period ahead.

The global financial crisis that shook virtually every country, government, and household in the world in 200809 gave way to a frustrating new normal of low growth, rising inequality, political dysfunction, and, in some cases, social tensionsall despite massive policy interventions on the part of central banks and transformational technological innovations.

Now this new normal is getting increasingly exhausted. For those caring to look, signs of stress are multiplyingso much so that the path the global economy is on is likely to end soon, and potentially quite suddenly.

As we approach this historic inflection point, unthinkables will become more common and insecurities will rise, especially as it becomes clearer that, rather than transition smoothly and automatically, the current path could give way to one of two very different new roads. The first promises higher inclusive growth and genuine financial stability. But, in stark contrast, the second would see us mired in even lower growth, periodic recessions, and the return of financial instability.

Fortunately, there is nothing predestined about what will come after the exhaustion of the new normal. The road out of the upcoming T junction can still be influenced in a consequential manner by the choices that we make, as households, companies, and governments. But to make better choices, we need to understand the forces at play and their likely evolution. There is no better way of doing so than through an examination of the worlds major central bankspast, present, and future.

These once-staid, unexciting institutions have emerged as the major and often sole policymakers. Having fallen asleep at the switch while irresponsible financial risk taking went wild, they pivoted to an aggressive intervention mode during the global financial crisis. In doing so, they saved the world from a multi-year depression that would have devastated lives and fueled social unrest.