Obama’s Favorite Economist Won’t Get Top Advisor Job

On the most recent episode of “60 Minutes”, President Barack Obama spoke of the term the “New Normal”, created by his favorite economist, PIMCO’s Mohamed El-Erian. The incredibly undeserving term, describing a world economy where growth is slowing,  investment and returns are lowering, and historical returns are few and far between, got another boost of attention. PIMCO, the world’s largest bond investor with over $1 trillion of assets under management as of 2010, is big – yes – and El-Erian is in charge. But Insider Monkey thinks this term may just have been a spur-of-the-moment TV quip that turned into a sensation.

Barack Obama serious

El-Erian coined the term back in April, 2009 on an interview on CNBC. The hoopla that followed far exceeded what new wall street slang usually gets. Three months later, Bill Gross predicted that all asset classes would return 4-5% per year during the magic “New Normal” phase.

The new normal will not be investor-friendly unless your forecasting dial is turned to “Pollyanna” or your intelligence quotient is significantly less than 100,”he said. The truth is, the S&P 500 returned more than 39% since then… but Gross and El-Erian still talk about the “new normal” and “low asset returns”.  (See the details of New Normal Nonsense)

To boot, even El-Erian admits that the probability of the New Normal becoming reality is only at 55%. Yet he remains so vocal about it. Now the government’s bigwigs are listening in on this nonsense. Barack Obama not only listens to what El-Erian says, but has been using El-Erian’s rhetoric and terms to justify the Quantitative Easing 2 program to the Chinese and German critics.

There were rumors a couple of months ago that Obama is considering El-Erian as Larry Summers’ replacement. Considering Obama’s new-found love affair with the terms “new normal” and “global imbalances,” this isn’t surprising. But Insider Monkey doesn’t believe Obama will appoint his favorite economist to the top economic advisor position. Why? El-Erian’s first name is Mohamed. Not the right reason, but reason enough for too many.

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