ADVERTISEMENT

Mohamed El-Erian compared coronavirus stimulus packages to a poker game, and warned policymakers going 'all in' could backfire

Global economic stimulus packages have rapidly been used in the fight against the coronavirus pandemic, but an "all in" approach is not sustainable, famed economist Mohamed El-Erian told IFC Insights in an interview.

GettyImages 1200819731
  • El-Erian compared emergency government interventions to a poker game and said an all-in approach works well for one-round, but could massively backfire in a multi-round game.
  • The economist called for policymakers to clearly outline metrics of success and course-correct if needed since they are currently prone to "acting in the fog of war."
  • Visit Business Insider's homepage for more stories .
ADVERTISEMENT

Governments and central banks have made significant headways with their responses to battle the coronavirus pandemic, but an "all in" approach could backfire, according to Mohamed El-Erian, chief economic adviser at Allianz.

In an interview with IFC Insights, El-Erian equated the case of economic stimulus packages doled out by governments around the world to an all-in situation in a poker game, when a player at the table goes in with all the money they have.

The economist, who in 2009 warned against the onset of a "new normal" involving sluggish growth, went on to say that in case an all-in effort succeeds in a one-round poker game, the player gets to walk away from the table in triumph.

ADVERTISEMENT

On the other hand, if the effort is lost, the player is left with nothing for another game. An all-in, therefore, would function well for a one-round game, not a multi-round game.

He seemed to indicate that global government interventions in resisting the pandemic is a multi-round game.

Read more: Bank of America says a new bubble may be forming in the stock market and shares a cheap strategy for protection that is 'significantly' more profitable than during the past 10 years A key suggestion he made is that policymakers must understand countries will undergo different phases relief, tentative opening, and community immunity for which they will require immense help, and each phase must be recognized accordingly. El-Erian also recommended outlining clear metrics of success since emergency interventions are prone to error when governments are "acting in the fog of war." "You don't have sufficient clarity. And you rightly believe that the best can be the enemy of the good. Under all these conditions, there is an inevitably high probability of mistakes. The important thing is to spot them quickly, and course correct as needed," he said. Anticipating the arrival of a third era of deglobalization, he predicted developing countries would find it trickier to pull through the coronavirus pandemic. The first era, he said, was brought on by the household sector's struggle against globalization's capacity to isolate certain segments of the population. The second was propelled by a government-led shock from US-China's trade war in 2017-2018. Read more: GOLDMAN SACHS: Buy these 25 stocks that are wildly popular with hedge funds and have crushed the market this year NOW WATCH: Why electric planes haven't taken off yet See Also: Economists expect another 2.1 million Americans filed for unemployment insurance last week May consumer confidence tops estimates as the US unwinds economic shutdowns 'Likely to be excruciating': A notorious stock bear says investor reliance on Fed money-printing is misguided and warns of more than 50% crash from current levels SEE ALSO: Billionaire investor Carl Icahn dumped all of his Hertz shares at an almost $2 billion loss after the car-rental giant's bankruptcy

FOLLOW BUSINESS INSIDER AFRICA

Unblock notifications in browser settings.
ADVERTISEMENT

Recommended articles

10 African countries that waste the most food in 2024

10 African countries that waste the most food in 2024

US troop withdrawal from Niger hangs in the balance

US troop withdrawal from Niger hangs in the balance

Detained Binance executives sue Nigerian authorities for human right violation

Detained Binance executives sue Nigerian authorities for human right violation

Nigeria's central bank increases minimum capital base for banks

Nigeria's central bank increases minimum capital base for banks

Sony’s creators convention redefines the creative landscape for content creators

Sony’s creators convention redefines the creative landscape for content creators

Exploring the popularity of progressive jackpot slots in Indonesia

Exploring the popularity of progressive jackpot slots in Indonesia

Egypt, Nigeria, and South Africa ranked as Africa's most polluted countries in new report

Egypt, Nigeria, and South Africa ranked as Africa's most polluted countries in new report

10 African countries with the lowest life expectancy according to the World Bank

10 African countries with the lowest life expectancy according to the World Bank

Kenyan women are more obese than their men - here’s why

Kenyan women are more obese than their men - here’s why

ADVERTISEMENT