As the 'new' normal limps on, PIMCO's Mohamed El-Erian focuses his attention on the political dysfunction that roils the 'new new' normal in an excellent op-ed in Foreign Policy today. The economic and financial system risks breakages that the political system will be increasingly incapable of mending rapidly enough," he opines as he fears sluggishness in economic growth, unacceptably high youth unemployment and long-term joblessness, redoubled debt and deficit concerns, and worsening inequalities between rich and poor leading the US down a path towards Europe's disruption.
Via Foreign Policy:
"Sadly, neither Obama nor Romney has yet offered a meaningful, forward-looking economic reform program to address problems such as a malfunctioning labor market, unsustainable public finances, a broken credit system, inadequate infrastructure, and a lagging education system.
The risk for the United States, as well as the global economy, is that a lack of vision and political courage ends up leading to even greater economic disappointment and financial instability, bringing with it the social unrest we've seen in so many other countries over the past 18 months. Occupy Wall Street and the Tea Party may have somewhat fizzled, but populist anger could return with a vengeance.
The longer America's interlocking economic and political challenges persist, the greater the number of companies and long-term investors that begin to worry -- and, more importantly, act on those fears. They hire fewer people and invest less in factories and equipment. As they increasingly sit on the sidelines, the country's fate will be left in the hands of tactical position players and short-term traders, further ramping up volatility and reducing future growth and job opportunities. And when day traders and company flippers start running a country's economy, watch out.
The warning bells are ringing, and they are ringing loudly. We've already allowed bad economics to lead to bad politics. Now, it's high time to put a stop to the cycle where bad politics undermines an already fragile economy."