From every angle, the extremity of this state of affairs – in which those with access to credit do not need it, and those who do cannot get it – is highly problematic. If left unattended, it leads to a gradual, and then accelerated, renewed deleveraging of the economic system, with the highest first-round costs – a longer unemployment and growth crisis – borne disproportionately by those least able to suffer them. In the next round, as the system slowly implodes, even those with healthy balance sheets would be impacted, accelerating their disengagement from a deleveraging world economy.
All of this slows social mobility, tears already-stretched safety nets, worsens inequality, and accentuates genuine concerns about the functioning and sustainability of today’s global economic system.
Read it at Project SyndicateRepairing the Global Plumbing
by Mohamed A. El-Erian
He gets what's wrong but still doesn't get the crucial distinction between currency issuer and currency users in offering solutions. Paul McCulley, where are you when we need to be advising El-Erian and Gross that they are in over their heads on these issues.