Pimco's El-Erian warning last night: Greek Debt Crisis On Verge Of 'Going Global': Pimco's El-Erian
- "We've seen a crisis start in a country—Greece—become regional, impact the whole of the Euro zone and is on the verge of truly going global," said El-Erian, CEO of the world's biggest bond fund.
He said the debt is a "transmission mechanism to go from country to region to global. So we should take this very seriously."
"We are not Greece. We have more time. But what the Greek crisis tells you is debt and deficits matter," El-Erian said. "The structure of your deficits matter and the US doesn't have much flexibility."
"Don't underestimate how quickly this can happen," he added. "There are structural headwinds out there and we better get our act together before those structural headwinds become overwhelming."
"What you see is the system slowly starting to have cascading failures. It's like a pipe that you need to be free-flowing and it starts to clog, and that's a concern," El-Erian said. "This is a shock to the system and it's going to have an impact on valuation."
Two comments on the article also caught my interest.
- One trader who spoke on condition of anonymity said fixed-income desks in Europe shut down early for the day and that "European banks are halting lending now."
Anonymous trader but if what's said is true.. hello liquidity crisis!
- About an hour or so after El-Erian spoke, global stocks sold off sharply with major US averages shedding more than 3 percent.
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