The Only Game in Town: Central Banks, Instability, and … (2024)

Recently I have watched Mohamed El-Erian on Bloomberg, periodically predicting exactly what was going to happen in the economy, and what he thought the Federal Reserve should be doing, and what he was afraid they were going to do instead. He seems to be invariably correct, at least lately, so it caused me to wonder what he was saying several years ago, prior to the pandemic and associated Great Reset. This book was copyright 2016, presumably written in 2015, and it holds up pretty well.

El-Erian's reputation is probably mostly a result of the fact that during the Great Fiscal Crisis in 2008, he and PIMCO, the company he worked for, pivoted extremely well to avoid the worst of the carnage. He attributes this not to their ability to see what was coming, but rather to their ability to recognize that it was uncertain.

"...I (and others) have been quick to point out that we did not predict the failure of Lehman. We just responded better and faster than others because we had undertaken a series of robust scenario analyses, coupled with detailed action plans...We had assigned the biggest probability to a repeat of the March 2008 Bear Sterns experience - namely that a fragile and failing Lehman would be taken over by a bank with a strong balance sheet. A default would be avoided, and the system would dodge a bullet that would have entailed systemic disruptions...But we did not focus just on this possibility. We also asked ourselves the following two questions: Assuming that we made a prediction mistake, what could that mistake look like?"

So, El-Erian's talent appears to be not necessarily that he can predict the economic future accurately (no one always does), but that he does not assume that he can, and plans for the possibility of being mistaken. This is the sort of thing that might make him a good choice for running a central bank, but perhaps he would not take the job. Because his central thesis in this book, is that we are relying on our central banks too much, and they aren't as powerful as we think.

It is certainly true that both supporters and critics seem to both believe, whatever else they may disagree on, that central banks are very powerful. I suppose El-Erian might agree up to a point, but he perceived in the post-GFC world, that they had become, as the title of the book suggests, treated as if they were the only means of dealing with economic problems. It is as if we had no car mechanics, and our only response to any issue with our cars was to either depress the accelerator, or the brake pedal. Central banks do have a bit more power than that, but fundamentally they cannot do much about how the real economy works. As El-Erian points out numerous times, in numerous ways, most of what needs fixing about the post-GFC economy is not fixable by central banks; it requires the legislatures of the world to step up.

Wage inequality. Parts of the labor force kept out of productive work by discrimination or lack of job training or lack of opportunity (what he calls "the unemployed becoming the unemployable"). Environmental dangers. None of these are fixable by the Federal Reserve (or any other central bank), but they are all issues which a democratically elected government should be expected to take action on. But, because the post-GFC legislatures and executives froze up in partisan bickering (not just in the US, but in most democracies), he sees the central banks of the world as akin to nurses giving one blood transfusion after another to a bleeding patient, who the surgeons are not willing to sew up the wounds of. The easy money and other "extraordinary measures" of the years between 2008 and 2016 (when this book was published), fixed nothing, they just kept the economy on life support while we waited for the problems to fix themselves. They did not.

I do think that El-Erian is missing a central issue that drives that paralysis, which is that there was no agreement as to what needed doing. I, for example, saw globalization as responsible for moving the manufacturing jobs out of the wealthy economies, and the artificial boom in construction was at least in part an attempt to create jobs for the working class that was no longer manufacturing. On the other hand the ruling elites were not, in 2016, prepared to consider abandoning the idea that all expansions of world trade were good. If you have ideological commitment to the opposite of what is needed to fix a problem, it is not uncommon to have inaction as a result. The legislatures didn't avoid action because they were lazy or stupid or didn't try hard enough, but rather because they fundamentally could not agree on what needed doing. But El-Erian is surely correct that the decade since the GFC was a "lost decade" in terms of any fundamental reform; we could not even break up the banks which were "too big too fail" (really, too big to succeed). Whatever it is that you think needed doing, "nothing" (or "print money") was surely not the answer.

In the years since this book was published, globalization has begun to be rolled back: the Tea Party and similar movements in democracies around the world began the process. Then the pandemic, the supply chain issues that resulted from that, and now the Russian invasion of Ukraine, have all demonstrated in all-too-vivid ways that there are good reasons to do at least a large portion of your manufacturing close to home. El-Erian does not, in this book at least, see this far, but he does essentially predict that Putin will not be satisfied with the chunk of Ukraine he had taken in 2014, and that he will try for more in the future.

All told, El-Erian may not, as he himself points out, be able to predict the future perfectly, but he does seem to be able to see the limitations (and consequences) of current policies, with uncommon accuracy. It is not reassuring that he currently says that the world's central banks (and legislatures) are mishandling things yet again in 2022.

Mohamed El-Erian is probably a really smart guy, but you wouldn't know it by reading this book, which is 250 pages of turgid jargon masquerading as insight. It's not even decent financial journalism, just a high level overview of trends in the world economy written in central bank speak that does more to obfuscate than elucidate. El-Erian could have written a really interesting book describing the choices made and analysis done by central bankers in pursuing the policies that pulled the world out of the 2008 financial crisis and have kept us afloat ever since. A lot of smart and bold moves were made, and some risky ones, and I would enjoy a book that told me more about them, but don't read this book, if that is what you are seeking. El-Erian seems trapped in the world of central bank messaging where people dwell on the significance of words like "patience" and "considerable period" as predictors of policy shifts. He speaks proudly of his own part in coining the term "the new normal" to describe that world of imperfect recovery that we have stumbled into post 2008. Come on, Mohamed -- "the new normal" is just more jargon. Where's the beef? Not in this book.

It is refreshing as hell to read an author who asserts, "We all owe a big debt of gratitude to central banks. Acting boldly and innovatively in the midst of a massive financial crisis, they helped the world avert a multi-year depression that would have wrecked havoc on our generation and that of our children."

A fascinating look at world banking from an insider.

A must-read not just for investors and investment advisers, but anyone concerned with the global economy. El-Erian gives insight into the coming challenges for policy makers and the pitfalls that may derail economic progress, in a world where monetary policy, vis-a-vis central banks, is "the only game in town."

I went back and forth about this book as I read it.

The author brings a unique perspective to a growing (and increasingly staid) literature on the financial crisis and economics that lie ahead. He's undoubtedly a very smart guy.

However, much of the early chapters is rehash of material already presented elsewhere. There's something a little untoward about quoting yourself at the start of a chapter, as he does at the start of Chapter 7.

There were some novel parts. His analogy comparing bank liquidity to a McDonalds drive through was novel and amusing. The chapter on market liquidity is among the most accessible I've encountered (it's clearly an area he knows very well). The discussion of bimodal distributions and multiple equilibria is probably an oversimplification (and ignores higher order cases), but a worthwhile addition to the standard narrative.

Other parts seem like a stretch. He talks about telling his wife to withdraw as much cash as possible from an ATM on the eve of the Financial Crisis -- I sincerely hope this is an exaggeration. As bad as things were, I don't think any reasonable person thought there was going to be a standard old-style bank run in the U.S. The chapter about diversity in the workplace feels like an afterthought and lip service added by an editor.

Overall, worthwhile and enjoyable... with highs and lows.

Utter failure

El Erian, a usually perceptive observer and strategist utterly fails to make the case. I failed to locate a single argument for his central claim: that we are near the end of the road of central banks as the only game in town and that there are two exits, a good one and a bad one, from here on. There are hints that this bimodal distribution is due to policy divergence among the center countries, but no argument is offered as to why that would be the case. Instead, El-Erian spends the second half of the book discussing disruptive innovations in a sort of management type mumbo-jumbo. Don't bother reading.

This was such a promisingly broad and exploratory book, but it narrows over time and falls pretty short on analysis.

3rd book I've read in a series on macroeconomics. This one is less well written and less informative than others so far. El-Erian uses a lot of jargon and repeats himself frequently here. He is good in explaining how the Central Banks have carried most of the load in keeping us out of a Depression, but is too easy on the politicians in accepting their foolish and ignorant neglect of their responsibility in supporting the economic sphere. As best I can discern, the "less government " camp is against government involvement in macroeconomic engineering (fiscal, regulatory, and monetary) because they think that govt. will not do it right, not because it doesn't need doing. So they prefer a free running system that regularly goes off the rails, causing untold suffering and loss of potential for millions? Back to the book, he predicts that the global economy on my is on an unsustainable path (the T-junction) and that we will turn in either a good or a bad way. But he does not flesh out what those two paths would be. He implies we all can influence which path is taken, but doesn't deliver much in terms of guidance.

Divergence is actually a strong theme of this book.

Having found that they are the only ones supporting the economy from imminent collapse since the Financial crisis, Central Banks have become the only game in town. Their action using QEs and lowering interest rates (to negative territories in Japan and Europe) have made them gone into the Unknown. Governments have however not caught up with their part of duty to help the economy (austerity kills). So Central Banks are diverging from governments.

On the other hand, American Central
bank is tapering the QEs and trying to return to a more normal interest rate environment. Europe and Japan are still trying to do more QEs. This divergence is going to cause great exchange rate turmoil in the coming years.

The solution is to be flexible when the world economy is heading to 2 very different possibilities: mass inequality, or prosperity for all. Be prepared to account for different scenarios so as to be able to move swiftly when the need arises.

A great book to read.

For somebody who would classify himself as a "central banking novice" in terms of understanding the influence and role of central banks in the lead-up to the current day macroeconomy, El-Erian's book served as both a fairly solid primer and a not overly directive prescription on how to think about central banks and their role in the global economy on a go-forward basis.

He offers his own thoughts while drawing on the ideas of many other writers, thinkers and thought-leaders, and then he synthesizes all the above in a way that provides the reader with some helpful frameworks for how to think about day-to-day challenges that the world faces as well as how those challenges may spill over into a macroeconomic resurgence and/or meltdown in the weeks, months, or years to come.

Overall an interesting read and worth the length.

El-Erian argues that we are approaching a T-juncture, a fork in the road, at which our economy/society will take one of two vastly different paths: prosperity or recession (or worse). He implores political leaders to step in to influence the outcome, saying that Central Banks lack the tools needed to create sustained, inclusive growth (e.g., ability to invest in infrastructure).

At times this was a bit of a slog (probably could have been condensed), but it's a compelling message.

The author is a brilliant man. I've seen him give interviews multiple times on TV and his thoughts are terrific. However, this book is a nightmare. The author took simple concepts and explained them in a complicated manner. I'm not sure why he decided to speak thoughts that are difficult to comprehend with consistent use of big words (not needed) and ideas in different directions. I would recommend watching his interviews but not reading his book.

Avoid .... You don’t need to read a book which in the end concludes that - ‘nothing is known, everything is uncertain and anything can happen.’ - without any new insights and in the form of a verbal diarrhoea !!!

Honestly the author writes VERY verbosely - which would have been fine if he had read his own book but having a mediocre narrator made it impossible to follow along. so I gave up with a couple hours to go after attempting to finish many times. I didn't expect it to talk so much about central banks but I think I'd have enjoyed it if not for the above.

"Instead of seeing and treating the banking industry for what it is - subservient to the economy - they stood by as the industry was elevated to standalone position that proved unrealistic, unsustainable, and very damaging to the general economic well-being. Thanks to lax supervision and regulation a significant part of the banking sector was no longer focused on its traditional role of serving the real economy by mobilizing savings and channeling them in a cost effective fashion to the most productive investment opportunities and by managing associated risks. Instead banks sought to develop an independent and separate status that would deliver lots of dollars to the bottom line. But it was one that far outpaced, if not ignored, realities and that was undermined by misaligned incentives, comprehensive failures and excessively short term motivations and behaviors. Even the common labeling of the industry itself changed from 'financial services' to just 'finance'. To make things worse the industry was elevated in some quarters as constituting a superior phase in the historical evolution of capitalism. And one that any self-respecting mature economy should aspire to."

I was looking for a book on central banks and how all these unconventional monetary policies are affecting our world and how we can get out of this situation. Even though the book was written back in 2015 the issues addressed by the book are at the heart of what is going on right now in the global economy.
The book underdelivers in terms of explaining how central banks got where they are and what are the implications of their particular unorthodox policies being put in place, like quantitative easing and negative interest rates. What i mean by this is that the book underdelivers in economic terms, but it compensates in delivering a very good framework for understanding our social and political circ*mstances.
So do not read this book expecting a deep dive into specific central bank policies and their impacts. Instead will you find here a thorough analysis of their lack of power to foster the changes and improvements our society need to get back to sustainable and inclusive growth.
Amazing book. I did not give it five starts because in the last few chapters the author tries to delve into some behavioral analysis that seems out of place and rushed. Otherwise very insightful read.

Central Banks, Instability, and Avoiding the Next Collapse is the title, but most of the book is drivel,
written more like a memoir to himself.
Just by chance a few days earlier I was reading a book by david dreman,
he sneered at the "new normal",
I'm reading this book & the author claims he came up with that term.
After mentioning that people said it was idiotic, he tells us someone else came up with the term before him.

He whines about 28 years of Greek progress being wiped out.
He doesn't tell us that "progress" was just borrowing a lot of money and having a party.

A lot of other whining, no good solutions.

Always good to hear the perspective of someone as smart and well-informed as Mohamed A El-Erian. That said, this book could have been better. A lot of it was a standard rehash of the financial crisis, then there was an entire section on diversity that seemed to come from no where and didn't fit the book at all. There were enough good sections/ideas (specifically the explanation of the liquidity crunch and his theory of Bimodal Distributions) to make the book worth reading, but it was definitely a bit of a letdown.

The bad: Despite being a good critique of the central bank changing roles and politics over the years, the book doesn’t do much in way of presenting a solution. It serves as mostly a warning on what the possible future consequences are, being 99% problem oriented and 1% solution oriented.

The good: It presented a summarized and concise description of the evolution of central bank activities throughout the years. Great in that specific aspect.

I don’t really know what this was about after reading it. I’ve seen this economist on CNBC from time to time and he made sense there but in written form it was all a bunch of trash. Lots of words that didn’t say anything.

Steer clear on this one.

A really great summary of what's been ailing the global economy the past few years, but I was ultimately disappointed by his policy recommendations.

What follows is a summary of the book (mainly for my benefit)

Part I makes a case for why the El-Erian feels this book is necessary and gives some background.

Part II tries to give a (recent) historical context to the discussion that follows. I skimmed most of this as, having read the papers regularly these past 8 years, a lot of it was review.

Part III is where the meat arrives. El-Erian details the ten main issues he sees as facing society today.

In Chapter 8, he makes the case that non-central bank policy makers (i.e., elected leaders) shirked their responsibilities, making central banks – wait for it – the only game in town. Central banks managed to prevent the gears of the global economy from becoming jammed, but because of the way their policy instruments operate, this has mainly benefited asset owners, i.e., the very wealthy (as an aside, this chapter also made me appreciate the Bank for International Settlements a lot more). The longer traditional fiscal policy makers (i.e., elected leaders) resist coming up with sustainable solutions for the problems facing their economies, the worse the price that will be paid in terms of financial stability.

In Chapter 9, El-Erian lays down the first of his Ten Big Challenges: Repeatedly inadequate and unbalanced economic expansion, reflecting cyclical/secular/structural headwinds, highlights the extent to which many advanced economies still lack proper growth models.. I would translate this into lay-person speak as, "The US, European countries and Japan don't have sustainable growth models." They all got hooked on an unsustainable growth model that relied on credit growth and leverage, that blew up, and now things are so messed up that it's hard to get political consensus to tackle the issues. Greece and Portugal relied on debt-financed government spending to fuel economic activity. Cyprus, Iceland, Ireland, the UK and the US focused on leverage in financial institutions to fund housing bubbles. China and Korea exploited the wave of globalization and trade to capture more market share and a bunch of other countries rode China's coattails. One way countries are (not) dealing with all of this is to try to manipulate their exchange rates to steal growth from other countries rather than implementing harder structural reforms. This is a zero-sum game though and given the limited success developed countries has had in implementing change, reform fatigue has set in. Places like Greece have fallen back on "extend and pretend" policies, "kicking the can down the road". The fact is, El-Erian argues, we're in a "new normal" situation, brought on by the difficulties of escaping from a liquidity trap and dealing with "balance sheet" recessions (a term that I believe he cribs from Richard C. Koo who authored a book of the same name Balance Sheet Recession: Japan's Struggle with Uncharted Economics and Its Global Implications), as well as changes in productivity trends, lack of infrastructure investment and demographic change. It's pretty rough ya'll. And El-Erian doesn't have much to be optimistic about, saying that all these developments probably mean that the slump is going to go on for even longer. There's also a brief but interesting section about prices. Many central banks have price stability as their stated goal and we've got a problem in the world now where our economists and central bankers don't have a good handle on the way prices are changing. The chapter concludes with a lot of really interesting stuff about emerging market economies having to deal with "tourist" flows of money as investors from developed markets economies park hot money in emerging markets financial systems that are not deep enough to handle it as well as encomium for the head of the central bank of India Raghuram Rajan who foresaw these issues. Sadly, there doesn't seem to be much of a prescription and the financial cushions that thoughtful finance ministers in emerging markets economies have been greatly depleted, leaving many of these countries in a tough spot.

Here are the rest of the big challenges, each getting their own chapter:

Issue 2: Unemployment remains too high in far too many advanced countries; and it is getting more deeply embedded in the structure of these economies and, therefore, will become that much harder to solve

While the US has done better than Europe, protracted unemployment – especially in youths – strains social safety nets, risks damaging the prospects and productivity of an entire generation of workers, will make it harder for countries and people to pay down their debts and on and on. A vicious circle.

Issue 3: Fueled by an unusual combination of cyclical, secular, and structural factors, the worsening of income and wealth inequality has been so pronounced within countries that it now also undermines opportunities

Inequality of income, wealth and opportunity are increasing and there are secular, structural and cyclical factors at play. Structural factors refer to the way the nature of the economy is changing to favor high-skill individuals and "winner-take-all" effects as well as a political system favoring the wealthy (a notion that he does not back up – I'd read something lately that showed that policies that the wealthy alone favored were no more likely to be enacted than policies the middle class alone favored, for example). Inequality creates feedback loops to political power as well and savers have been and will continue to be adversely affected while governments reap the benefits of recent low interest rates.

Issue 4: The loss of institutional credibility is part of a more generalized erosion of trust in politicians and the "system" as a whole

Bernie and Trump. Audit the Fed movement. Euroskepticism.

Issue 5: National political dysfunction is still a headwind to overcoming economic malaise and restoring genuine and durable financial stability

Issue 6: As national dysfunction undermines global policy coordination, traditional core/periphery relations fail and geopolitical tensions escalate

Emerging markets countries are seeking to go around the institutions owned by developed markets countries (e.g., AIIB)

Issue 7: With systemic risks migrating from banks to nonbanks, and morphing in the process, regulators are again challenged to get ahead of future problems

The banking system will be continually de-risked and scaled down in the future. As such, we're seeing risk migrate to asset managers (ETFs) and P2P lenders. Stamp out risk in one part of the market and it will tend to re-emerge in a less well-regulated part of the market. Regulators will struggle to keep on top of this.

Issue 8: When the market paradigm changes, as it inevitably will, the desire to reposition portfolios will far exceed what the system can accommodate in an orderly fashion

Broker-dealers are getting squeezed by regulation but end-users are getting larger and more complex. Two things make this a real problem: 1. Only broker-dealers have access to emergency funding from central banks 2. While some have attempted to build new pipes to directly link end-users, these are not all that successful because the end-users don't like to play nice with their own competitors. Systemic risk increases.

This issue, from where I sit, is the scariest.

Issue 9: Yet none of these uncertainties and fluidities seemed to disturb financial markets that, operating with unusually low volatility went from one record to another. As such, the contrasting gap between financial risk taking (high) and economic risk taking (low) has never been so wide

Investors are too dependent on central banks and expect them to keep volatility restrained. This makes the potential for a major dislocation to be even more painful.

Issue 10: All of this adds up to considerable headwinds for the better-managed part of national, regional, and global systems

It's hard to be the only good house in a bad neighborhood. Balance sheet recessions mean that there are very few economic risk takers (i.e., corporations willing to invest in new people and machines) while there are a much larger number of financial risk takers. El-Erian doesn't say so explicitly, but I'd imagine that demographics would drive a lot of this. As boomers retire they will pour more money into stocks and bonds so that they can earn income in retirement. Since returns are lower for all assets, they will need to find more places to park this money.

Part IV, The Desirable Way Forward, is where El-Erian gives his policy recommendations. First, he says we need to get serious about inclusive economic growth. This is a bit vague, but he basically calls for bold experimentation by governments, structural reforms and a willingness to tackle the sources of unequal economic growth. Second, he says governments need to start spending on sound infrastructure projects (not simply bury money), to be matched with closing tax loopholes (e.g., carried interest). Third, he says we need to remove the debt overhangs. This is the most controversial part of this section. El-Erian basically calls for debt forgiveness. He acknowledges that economic growth, historic low interest rates and better debt terms are also going to be needed, but the crux of it is that he feels we need to just write-down the really bad debts (e.g., Greece). He draws parallels with the Latin American debt troubles of the 80s/90s and the Brady plan. This is the second time I've heard such high praise for the work that the Volker Fed did in handling the Latin American debt crisis.

Part V, El-Erian, having laid his cards on the table, talks about what he thinks is more likely to happen.

Read this book because of the recent news of taper tantrum, and find out I only able to understand maximum 20% of the topic 😅
However, re-reading to write this summary build my understanding better, so here the simplest part of the book that probably sum everything
1. Ten issues arise as result of assigning Central bank alone as the only game in town
2. Issue 1: repeatedly inadequate and unbalanced economic expansion, reflecting cylical/secular/structural headwinds, highlight the extent to which many advanced economies still lack proper growth models
3. Issue 2 :Unemployment remains too high in far too many advanced countries; and it is getting more deeply embedded in the structure of these economies and, therefore will become that much harder to solve
4. Issue 3 : Fueled by an unusual combination of cyclical, secular, and structural factors, the worsening of income and wealth inequality has been so pronounced within countries that it now also undermines opportunities
5. Issue 4 : The loss of institutional credibility is part of a more generalized erosion of trust in politicians and the "system" as a whole
6. Issue 5 : National political dysfunction is still a headwind to overcoming economic malaise and restoring genuine and durable financial stability
7. Issue 6 : As national dysfunction undermines global policy coordination, traditional core/periphery relations fail and geopolitical tensions escalate
8. Issue 7 : with systemic risks migrating from banks to nonbanks and morphing in the process, regulators are again challenged to get ahead future problems
9. Issue 8 : When the market paradigm changes, as it is inevitably will, the desire to reposition portfolios will far exceed what the system can accommodate in an orderly fashion
10. Issue 9 : Yet none of these uncertainties and fluidities seemed to disturb financial markets that, operating with unusually low volatility, went from one record to another. As such, the contrasting gap between financial risk taking (high) and economic risk taking (low) has never been so wide
11. Issue 10 : All of this adds up to considerable headwinds for the better managed part of national, regional, and global systems
12. Some potential approach to the ten major challenges : getting serious about inclusive economic growth, matching ability and willingness to spend, removing debt overhangs, getting the architecture right

As the topic is very new to me, so personally I have received many new insights from the author.
Recommend to read for anyone who is keen to take more control on their financial life :)

I will try my best to avoid hind-sighting, but I can't promise that.

It was late 2016. Trump was just elected US president, Brexit was (sort of) activated, and unconventional central bank policies continued. This is where El-Erian's book comes in to argue that CB effectiveness has dropped, is increasing market volatility, and needs to be replaced by structural changes.

In the aspect of CB ineffectiveness and fiscal needs, he was mostly effective. Though to be fair, inasmuch as he claims his T-junction perspective is in the "minority," it's pretty much on par with reality and the meta. Per the reality, the fact that he quotes known central bankers in expressing their worries means the risks are known. In fact he mentions the reason for CB normalization hesitancy - the 2013 "taper tantrum." So his points are solid, but they're not that controversial. Meanwhile in the meta, as much as he claims that "books with the one singular vision" are the one who sells, it's not so much the single vision as the claiming of a controversial point. Nonetheless, his description of CB ineffectiveness and fiscal/structural needs are compelling, and had the book focused there, 4* would be proper.

But then came Chapters 30-33. The claim was that they're in this book (titled "The Only Game in Town" ie about CBs) because they are part of the structural solution. Sure, if I squint really hard and follow his thoughts that recognition of and action against biases lead to more optionality in the micro (diverse opinions), which lead to optionality in the macro, which lead to being prepared for a bimodal world, I mean maybe that section fits. But this is supposed to be a macro book, and something so micro as this is just weird. Don't get me wrong: I agree with the premise, hidden biases must be dealt with, I just think it should have merited its own book.

Having said all of that, 3* is a fair grade. The book was informative, but it should have been two books instead of one.

The only game in town – By Mohamed El-Erian

Many of us, including myself, do not clearly understand the role Central banks play in our life, although it’s them who saved the global economy from a devastating collapse in 2008 and continued to play an ever-increasing role in resuscitating it from the many strokes it had since then. This book explains how central banks assumed such role and why is it dangerous if they continue to be the only game in town when it comes to economic growth revival.

Central banks ensure stability through liquidity instruments that prevents economic collapse, but they have no power to resolve fundamental economic issues such as low growth, rising inequality, increasing social frustration leading to the rise of radical right- and left-wing politics.

The problem is the governmental institutions that can do that are handicapped by bipartisan paralysis in the US and lack of regional alignment between EU members. So, these problems are just carried forward from one election cycle to the next without any meaningful solution, while Central banks are called upon to provide their now usual pain killer when the headache is intolerable.

El-Erian, who predicted the 2008 financial crisis in his previous book, warns that this status quo is not possible and the world will have to either face a calamity that even central banks will fail to mitigate, or Governments will finally end their gridlocks and enact a reform that will bring a new wave of economic prosperity.

The book was published in January 2016, so it didn’t witness the US economic boom of 2018-2019, however with continued polarization of world politics and with the economic disaster of COVID-19, I believe we are still in the danger zone.

Worth reading but requires economic/finance knowledge.

Three stars for its historical detail, not its telling of the future. The beginning provided useful context for central bank actions since the financial crisis. The elaboration of the "ten key issues" facing the global economy (see below) in Chapters 9 - 18 was most interesting. The second half of the book, which outlined future prospects, was too vague and scattered to be helpful. Ten key issues (Ch. 9 - Ch. 18)
1. Many advanced economies still lack proper growth models - i.e. too 'financialized'.
2. Unemployment remains too high, embedding itself in the structures of many economies.
3. Worsening income and wealth inequality is also undermining opportunities.
4. There is a generalized erosion of trust in institutions, politicians, and the 'system'.
5. National political dysfunction remains a headwind to overcoming economic malaise.
6. This dysfunction also undermines global coordination, allowing geopolitical tensions to escalate.
7. Meanwhile, systemic risks are migrating to the shadow banking system.
8. The gap between financial risk taking (high) and economic risk taking (low) has never been so wide.
9. There will not be sufficient liquidity when, inevitably, the market paradigm changes.
10. All of this adds up to considerable headwinds for the better-managed part of national, regional, and global systems.

4/10

El-Erian can't write. Writing is an important skill to have when you are writing a book. Someone should have told him.

He writes an industry book to a popular audience, and forgets to translate. The result is a meandering mess, which fails to even answer the questions he himself asks. Chiefly: What is the future of the central bank? He spends most of the book saying he foresaw all the issues, and the Fed is great. I have a decent understanding of macroeconomics and the role of the Fed, but this book just failed to make substantive points.

“I worry less about the risk of inflation down the road, than other factors.” Well you should have worried more about inflation, my dude.

“Liquidity is never there when you need it, and always there when you don’t.” I suppose that’s kinda true and kinda obvious.

“Ever since the 2008 global financial crisis, central banks had ventured, not by choice but by necessity, ever deeper into the unfamiliar and tricky terrain of “unconventional monetary policies.” They floored interest rates, heavily intervened in the functioning of markets, and pursued large-scale programs that outcompeted one another in purchasing securities in the marketplace; to top it all off, they aggressively sought to manipulate investor expectations and portfolio decisions.”

Mohammed el Erian often appears on CNBC and makes quite eloquent remarks about the economy and or the general state of affairs. The Only Game in Town" by Mohammed el Erian is a decent read for anyone seeking a comprehensive analysis of the global economy post credit Crisis and the eurozone crisis. In this book, el Erian, examines the challenges faced by policymakers and investors in an increasingly interconnected world.

Throughout the book, el Erian emphasizes the notion that central banks have become the "only game in town." In the aftermath of the 2008 financial crisis, central banks worldwide resorted to unconventional monetary policies, such as quantitative easing, to stimulate growth and stabilize economies. El Erian argues that while these measures were necessary during the crisis, they have created a prolonged period of dependency on central banks. He raises valid concerns about the limitations and unintended consequences of these policies, urging for a more balanced and comprehensive approach to address economic challenges.

In conclusion, "The Only Game in Town" is a decent book that sheds light on the current challenges and dynamics of the global economy. However, el erian should have provided a bit more detail on the alternatives instead of repeating that monetary policy is the only game post Great Financial Crisis.

I am an admirer of Mohamed Aly El-Erian and consider him one of the most thoughtful contemporary socio-economic commentators. This book offers a bird’s eye view of externalities associated with central banks’ mission creep in light of ubiquitous monetary easing following the Global Financial Crisis. Unfortunately, COVID-19 and Chair Powell’s decisions in navigating the pandemic effectively rendered the author’s theses and policy endorsem*nts moot. For example, El-Erian is quick to dismiss inflation concerns, arguing that systemic controls like technological innovation temper price instability. I contrast this book with Ferguson’s “Colossus” — while Colossus grew more apt and poignant following the invasion and occupation of Iraq and subsequent geo-political events, “Only Game in Town” quickly became stale following the Fed’s radical 2020 balance sheet expansion. Nevertheless, El-Erian uses enough neat examples to make the reader feel they’ve learned something. Could have been an article.

El-Erian feels that the Central Banks saved us from a horrible economic collapse ten years ago; however, their effectiveness has waned. For economic growth and stability to proceed, the Banks need to hand off policy to other institutions. El-Erian identifies 10 big challenges, the desirable way forward (functioning government!), moves on from what "should" happen to what is "likely" to happen. El-Erian believes we are nearing a "T" junction in economic policy which will lead to a bimodal distribution of possible outcomes. He offers several keys to navigating the future as Central banks get more ineffective and we become dependent on other policy agents. To be ready calls for almost a bar bell approach, lots of flexibility (heavy cash) with the other end being exploiting specific investment opportunities as we note changes in policy.

This book is a collection of essays from economist and financial strategist Mohamed El-Erian. The author guides us towards new perspectives about the world economy and business environment. The book portrays an image of a T-junction where two general outcomes might lay ahead. One outcome is more volatility in world markets, more income inequalities and more socio-political tensions. The second outcome brings us fewer inequalities, more opportunities for households and businesses along with better sustainable economic growth. The main idea that the author tries to convey is that the Central banks cannot be expected to be the only source of policymaking. In the end, the general direction that the world economy will take is a function of our collective choices.

El-Erian is pro-central banking and advocates for more global banking to avoid the next collapse.
People with a basic economics will be able to read this book but most people will not process his arguments. Demystifying central banks is always difficult especially when the Federal Reserve does not disclose their financial dealings. El-Erian provides a few analogies and examples to justify his faith in central banking. The assumptions are a bit basic but simple enough to understand the framework of monetary policy.

I disagree with most of El-Erian's economic policy but I still enjoyed reading this book.