The Only Game in Town

Mohamed El-Erian Random House, 296 pages, $28

The past seven years have been an extraordinary period for central bankers. Not only have they cut interest rates to zero (and even below) in the developed world; for the first time in their history, central banks have greatly expanded their balance sheets, buying government bonds and other assets. Most economists agree that vigorous action was needed in the wake of the financial crisis. Nevertheless, the sheer scale and protracted nature of such monetary stimulus is now a cause for concern among some commentators. Mohamed El-Erian, a former IMF economist and executive at the Pimco fund management group, is the latest to sound the alarm in "The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse." While central banks "averted tremendous human suffering," he argues that they have failed to generate what the Western world really needs — "the combination of high, durable and inclusive growth together with genuine financial stability." Other problems include high long-term unemployment, a loss of trust in authority and the failure to coordinate economic policy. El-Erian does a good job of describing the problems. The book falters when he tries to set out his plan for taking the right path. He cites a number of necessary measures, including revamping the education system and strengthening infrastructure, while simultaneously closing tax loopholes and increasing marginal tax rates on the wealthy. But he only touches on these issues; a lot more detail is needed.