The Only Game in Town

Central Banks, Instability, and Avoiding the Next Collapse

by Mohamed A. El-Erian

Number of pages: 320

Publisher: Random House

BBB Library: Economics and Investment

ISBN: 978-0812997620

About the Author

He is an American businessman, and chief economic adviser at Allianz, a multinational financial services company. He is also the chair of President Obama’s Global Development Council.


Editorial Review

The global financial crisis that shook virtually every country, government, and household in the world in 2008-09 gave way to a frustrating “new normal” of low growth, rising inequality, political dysfunction, and, in some cases, social tensions, so much so that the path of the global economy 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.   

Book Reviews

"A guide on 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." – Time Business

"The first striking message in The Only Game in Town will therefore cause some alarm. It is that the new normal is soon to be no more." – Financial Times

"El-Erian frames “The Only Game in Town” around the world’s central banks, on the sensible grounds that with the rest of government focused on austerity." – The New York Times

"How come the global economy is now run largely by unelected central banks? In this highly intelligent analysis, the author, a respected investor and CEO, explains how elected governments are failing in their basic job to take care of the economy and why this might lead to a massive unmanageable crisis.”–Fareed Zakaria, CNN (book of the week)

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Wisdom to Share

Being the only game in town, central banks found themselves pushed ever deeper in experimental policy terrain, and they have stayed there much longer than anyone anticipated or may have hoped for initially. Policy making often entails difficult trade-offs.

There is a lot we can and should do to help improve the prospects for good outcomes, in the process also increasing our ability to better navigate bad outcomes should the world come out of the T on the wrong road.

Lots of researchers have provided us with tools that may be used to enhance diversity and to reduce errors in judgment and decision making that come from blind spots and unconscious biases.

“Like ancient doctors, who tried to explain the causes of diseases while knowing nothing about germs or bacteria, academics sought to describe the functioning of developed economies while ignoring the financial sector and the risks it contained.” Ferdinando Giugliano

Part of the golden phenomenon was warranted by the central banks’ multi-decade conquering of inflation.

The Economist put it well in May 2014, when it stated that “low interest rates and low volatility have a bigger impact on asset prices than on real investment, and risk creating financial bubbles, long before economies reach full employment.”

The Wall Street Journal article looking at the “Investor’s Dilemma” and noting that “investing these days is like shopping at Neiman Marcus: Almost everything is expensive.”

Never let current success blind you to the greater success that is achievable in the future.

Own the initiative and, as CEO, hold yourself explicitly accountable in front of colleagues.

The divergence between the Fed and the ECB is the one that will matter most—and its impact and reach will assume greater importance as the extent of divergence gradually increases (which it will). The course of economies and policies elsewhere will be altered.

Feedback can be patchy and less than timely and sufficiently open.

Progress can be slow, especially at first.

Be clear about the merit-based arguments for inclusion and diversity.

Recognize that gender diversity, like other forms of diversity, is a fundamental input to cognitive diversity that is critical for navigating a fluid and increasingly complex global economy.

Address the unconscious biases that we all harbor.