In The Only Game in Town Dr. El-Arian writes a prescient and provocative book that takes a long hard look at modern central banking and the global economy in an effort to describe where the world can go from where it is right now.
The book itself is divided into six topical parts with 35 chapters. There are 264 pages of text with notes and an index.
The central premise of the book is that since the outbreak of the Great recession in 2008 the only economic institutions that have acted responsibly in response to the crash have been the Central Banks and that have been forced to step into uncharted territory and create new tools for monetary policy out of whole cloth because government and the private sector have failed to do their part. Government has failed by proving incapable of meaning financial and regulatory reform and the private sector has failed because both companies and individuals have refused to invest out of fear of uncertainty.
The main pint of the work is not that central banks have taken on an unprecedented role but that central banks and the monetary policy they control are not and cannot be the only answer to set the world economy back on the path to prosperity.
He makes the analogy of the economy being like a three-legged stool with Central banks, government, and the private sector being the three legs and that thus far the only leg holding up the stool are central banks. They cannot continue this indefinitely and the longer central banks are forced into unconventional and new policies to keep the economy going the more likely it is that the house of cards they have built will be blown down.
He points out that his own research and that of others points to the world economy coming to a T-shaped junction at some point in the near future where the possible outcomes are either real economic take-off or an even worse crisis than 2008. Which path will be taken depends on the actions of all three legs of the stool.
He presents many indicators of what is wrong and what can be fixed laying out a list of ten key areas. These include such issues as income inequality, political dysfunction, the liquidity gap, and national and international trust deficits among others. Each point is examined in detail and the explanations are illuminating and explanatory.
The book is not an indictment of anybody, it is a call to action. Central banks cannot do it by themselves and it is high time for politicians and the private sector to start doing their part to ensure the economy both grows and also benefits the most people.
While I may not agree with everything Dr. El-Arian prescribes I agree with him that something needs to change or the global economy is heading towards a tipping point as central banks cannot continue to be the only game in town. This is an insightful and readable book that I highly recommend for its even-handed assessments and practical policy recommendations. An excellent book.