Mohamed El-Erian is the Alliance's Chief Economic Adviser. The diplomat's son was born in New York, where his father worked as a UN ambassador to Egypt. After his time as a boarding school student in England, he studied economics in Oxford. Then he switched to the International Monetary Fund (IMF). There, El-Erian rose to become deputy director of the Middle East department. He is now considered one of the most renowned financial market experts and lives in California with his wife and two daughters.
ZEIT ONLINE: Mr. El-Erian, first: How are you?
Mohamed El-Erian: My family and I are fine, we are all at home. We try not to overreact, but to be cautious and socially responsible.
ZEIT ONLINE: Measures such as social distancing to combat the corona virus have almost brought economic life to a standstill in the USA. Up until last Thursday, over three million Americans had registered as unemployed, and not only US President Donald Trump is now asking whether the cure will soon be worse than the evil?
El-Erian: It is understandable that politicians would like to start the economy again, but it would be a mistake to initiate this too early. Then a W curve threatens. This means that we would experience a short-term recovery, only to crash again if the virus spreads again. Spatial separation, quarantine and isolation are absolutely correct and important from a health policy perspective. But they fundamentally contradict the functioning of our society and our economy. This is what makes this crisis so disturbing and destructive.
The decisive intervention of the central banks initially prevented the double crash. But we are anything but over the Mohamed El-Erian mountain
ZEIT ONLINE: What's different from the 2008 financial crisis?
El-Erian: A financial crisis is like a heart attack. As bad as a heart attack is for those affected, there are ways to get it under control quickly. The banks stopped borrowing money from each other in 2008 because they no longer trusted each other, which is why our payment and processing system was in danger of coming to a standstill - a heart attack if you will. This would have led to the collapse of the economy if the central banks had not intervened. They offered themselves as transaction partners for the banks. A partner you could trust because he has a sheet music press in the basement with which he can print unlimited money. The consequences of this heart attack were still massive, but the patient could be resuscitated. But no central bank intervention can save us now.
ZEIT ONLINE: However, the ECB and the Federal Reserve have intervened. The Fed alone pumped billions, not billions, into the financial market within days. That shouldn't help?
El-Erian: This only prevented us from getting a financial crisis in addition to the economic crisis. Last Monday we were very close to falling into a depression like in the 1930s and at the same time repeating a financial crisis like 2008. Not only did the economy gradually collapse, more and more misfires appeared on the financial market. Both effects were mutually reinforcing. A spiral loomed down. The decisive intervention by the central banks has at least prevented this double crash for the time being. But we are anything but over the mountain.
ZEIT ONLINE: On Friday, Donald Trump signed a law that allows $ 2 trillion in aid to flow. There has never been such a huge stimulus package.
El-Erian: Stop, that's not an economic stimulus package! It's not about boosting the economy. It is only a question of limiting the damage. Again, we can get the economy up and running again once we find a medical solution.
ZEIT ONLINE: Are the government's measures enough to save the largest economy?
El-Erian: Two trillion dollars - two weeks ago that seemed absolutely unimaginable. But that's just the beginning, it won't be enough. The correct fiscal policy answer is now: cost whatever it may. But the big difficulty will be the implementation. That is not automatic. The pipelines are often missing, if you will, to get the funds to their destination as quickly as possible. And it's a race against time. If companies run out of money in the short term, even though they would otherwise be viable, they can still slip into bankruptcy.