Mohammed El-Erian, chief economic adviser at Allianz, the corporate parent company of PIMCO where he previously served as CEO, recently appeared for an interview[1] on CNBC to discuss inflation, the federal reserve, and the price of bitcoin rising as a result of monetary policy.
In the interview, El-Erian was asked what would happen to gold, bitcoin and other cryptocurrencies if his predictions of the Federal Reserve (Fed) changing their targets for inflation came true.
“They both go higher,” El-Erian answered, but understanding his prediction makes it much more meaningful. The interview began with El-Erian being asked to explain the state of inflation in the economy.
“Basically, I think the markets have understood that we have three issues: One is high and persistent inflation is with us, two is the Fed is way behind, and three, the pathway for orderly disinflation is pretty narrow,” El-Erian told the reporter. “Because of that, you’re starting now to have questions about growth.”
El-Erian went on to explain that Goldman Sachs has stated there is a 35% chance of a recession within the next two years. The fear associated with that large allocation being applied to the idea of a recession adds a level of complexity when one tries to navigate the corridors of inflation and growth metrics.
“I think the concern for the crypto people is this decline is happening at a time when gold is up and hitting almost $2,000,” El-Erian explained in response to the reporter asking what is happening in the market. “Because the big argument for crypto is it’s a diversifier. At a time of inflation, it is attractive.”
El-Erian further detailed the tug-and-pull between liquidity finding new forms of investment opportunity and money exiting its traditional vehicles in times of
