El-Erian: "Financial Repression" In the Form of a Negative Real Rate of Return for Savers Is Coming to America → Washingtons Blog
El-Erian: "Financial Repression" In the Form of a Negative Real Rate of Return for Savers Is Coming to America - Washingtons Blog

Tuesday, May 17, 2011

El-Erian: "Financial Repression" In the Form of a Negative Real Rate of Return for Savers Is Coming to America

As CNBC notes:

“Others are flashing orange, like the US, and already require future sacrifices, most likely through a combination of higher inflation, austerity and, importantly, financial repression,” said El-Erian, who classifies financial repression as seeking to impose negative real rates of returns on savers.

This policy will undermine the real return contract offered to savers and, in El-Erian’s view, come instead of any bold moves to address structural problems and imbalances.

“Secular baseline portfolio positioning should minimize exposure to the negative impact of financial repression, hedge against higher inflation and currency depreciation and exploit the heightened differentiation in balance sheets and growth potentials,” El-Erian added.

In other words, Pimco co-chair El-Erian is saying that the major flaws in the financial system will not be addressed, the government will keep on printing money, and that the inflation-adjusted return on investments for most Americans will be negative.


  1. In other words, Pimco co-chair El-Erian is saying we're f****d.

    Another great article Wash Blog. Thanks. Things are getting jiggy. See you on the other side.

  2. He is also saying that you should position your portfolio in things that counteract inflation and negative real rates of return. He is talking about things like gold and silver, etc. The gold and silver dollar value will continue to rise in such an environment.

  3. Being retired, I have seen my fixed income from savings dwindle to close to zero, I see myself forced to either gamble, which I can't afford, or "bet" on gold and silver for example as Jean Luc Jean says above. I am debating what percentage of my current cash-holdings CAN SAFELY (best guess) go into Gold and Silver? My hunch tells me to do 70%, 45% gold and 25% silver.......as I am a bit more cautious vis-a-vis the volatility of silver.

    Looking forward to feed-back and suggestions from those reflecting on this topic.

  4. It is great to make these kind of broad predictions and I believe Mr. El-Erian is correct. However it is more important to be flexible in your investment approach and let the trends tell you where to be at any given time. There may be periods of indecision, but trends always emerge and provide the guidance necessary to make educated investment/portfolio decisions. Follow the trends...don't guess!

  5. In other words, convert all liquid assets into physical silver and gold in your own paws. And refuse to participate in the games designed by the predators-that-be.

    Best of all, leave the USSA completely. I did, and have not regretted it one iota.


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