El-Erian had issued a stern warning about the potential of the crisis to escalate into something resembling, though not duplicating, the 2008-09 financial crisis before the DOW had the biggest intra-day decline in history of almost 1,000 points.
"We've seen a crisis start in a country—Greece—become regional, impact the whole of the Euro zone and is on the verge of truly going global," said El-Erian, CEO of the world's biggest bond fund. He said the debt is a "transmission mechanism to go from country to region to global. So we should take this very seriously."
The United States faces a debt burden that, while not as large a percentage of gross domestic product as Greece, is approaching that level and could spark major problems domestically.
"We are not Greece. We have more time. But what the Greek crisis tells you is debt and deficits matter," El-Erian said. "The structure of your deficits matter and the US doesn't have much flexibility. "Don't underestimate how quickly this can happen," he added. "There are structural headwinds out there and we better get our act together before those structural headwinds become overwhelming."
Asian stock markets opened sharply lower on Friday, after U.S. stocks plunged more than 3 percent lower triggered by Europe's debt crisis gathered speed. Markets were also unsettled by news of an erroneous trade on Wall Street, which caused the Dow to plunge nearly 1,000 points, wiping out nearly $1 trillion off U.S. equity values in less than ten minutes before paring those losses.
Trading glitch or not, we can’t get a 1,000 point intra-day decline unless something is very wrong with the world. Both Democrats and Republicans are trying to convince us that banks and insurance companies are the problem.
As usual, the politicians are lying to save their own sorry butts. GOVERNMENT is the problem.
The governments that generate jobs for others, especially China and Brazil, are hitting the brakes. The European Union is desperate to pay their bills and are doing it at the expense of jobs. The United States is focused on punishing rich people who work at banks after adding trillions of dollars to the U.S. deficit.
Jim Cramer (a registered Democrat) who works for CNBC says, “as long as governments around the world are committed to agendas that wreck stock market profits, my prediction is pain.”
If you think it was painful watching your 401K collapse today, just wait until the stock markets open in the United States later today. The pain has only just begun.