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The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
Reviewed by Nora Rawn
They say not to try timing the market in investing, but Mohamed El-Erian has done it pretty well in his book on central banks, which comes out in the midst of a stock slump and what is sure to be a great deal of pontificating about the economic fundamentals underlying the market panic. He certainly has the credentials for it, with a PhD in economics from Oxford and years as second in command at bond broker PIMCO. Unfortunately he has the buzzy corporate jargon to match his years in the investment sector. Neither a research economist with a deep grounding in the data on the impact of central bank actions nor a journalist with the ability to find concrete stories to illustrate the generalities he throws around, El-Erian's style is better suited to a presentation of shareholders or a Ted talk, and indeed, he frequently quotes statements by made at various international finance conventions. His connections are telegraphed on every page, but being close to the center of things does not always mean being able to cut through them. The structural problems that El-Erian diagnoses as holding back growth are all readily recognizable and his familiarity with the world of global finance is evident, but he attempts to be too comprehensive in setting the scene, and the brief descriptions with which he lays out his case lack the specificity that would make the book truly informative. As for the central banks, the ostensible focus of the book, they are almost impossible to see amidst the many detours. There is a generic vagueness to the explanations of their actions, as well as to the policies proposed as remedies for spurring the world economy into self-generated growth.
Left unanswered amidst the dime-store pontification (the Greek crisis laid bare issues with the ECB's mandate, new disruptors like Uber are changing the economy) are several important questions. To what extent have the central bank actions on interest rates and debt had a concrete effect on markets and economic output? How efficient is it possible for them to be? While El-Erian frequently acknowledges the many headwinds outside the purview of any banking institution, specifically in politics, even absent these factors it is impossible from this book to tell the degree to which central bank policy can drive outcomes in the real world. For a cliff's notes version of the current economic climate and its near-term prospects, El-Erian more than covers the bases, but he does so by avoiding deep analysis in favor of cursory summation. The overwhelmingly piled up jargon can sound convincing at first glance, but there's not much of substance below the surface.
Out of 10: 2.9