Here’s an interesting difference of opinion: PIMCO‘s Mohamed El-Erian believes a return to the old ways of thinking threatens recovery.

ECRI‘s Lakshman Achuthan disagrees, stating the U.S. economic recovery is ‘far from fragile.’

Return of the old ways of thinking threatens recovery

U.S. economic recovery is ‘far from fragile’-ECRI

Gotta love it when 2 smart guys disagree . . .

Category: Cycles, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “Mohamed El-Erian vs Lakshman Achuthan”

  1. Two men enter thunderdome, one man leaves!

  2. Winston Munn says:

    One side gives a thoughtful factual analysis of real problems facing growth while the other side does a late-night infomercial for the NEW IMPROVED ECONO-UP-UP-AND-AWAY-O-METER.

    Who ya gonna believe – me or your lyin’ eyes?

  3. Mannwich says:

    That’s OK. Fast forward a couple of years (or sooner) when Lakshman is proven wrong. He’ll still be on the airways spouting off as some “expert” who knows all and we’ll still pay attention to him. Being wrong doesn’t have consequences anymore.

  4. HCF says:

    > Last week, ECRI Managing Director Lakshman Achuthan told Reuters that the group expects an “unstoppable” recovery with “no relevant roadblocks.”

    No relevant roadblocks??? You mean that the fact we’re living in a “Weekend at Bernie’s” moment with the Feds propping everything up with a constant stream of printed dollars is irrelevant? Typically, I agree that Lakshman Achuthan seems like a pretty smart guy, but I think this time, he’s been hitting the hallucinogenic substances a bit too early in the day for me…


  5. HCF says:

    >Being wrong doesn’t have consequences anymore.

    Yes it does… The more wrong he is, the more likely he’ll be nominated to be Fed chairman!


  6. bshaheen says:

    If you take a correlation between the ECRI data for both level and the growth compared with the SP 500 it gives a correlation of .94 and .98 respectively.

    I’m not sure if there is anything in nature that correlates so closely, or am I wrong or missing something.

    Also, looking at the data charted since 1967, the current uptrend in the ECRI is at least twice what is normal.

  7. Mannwich says:

    @HCF: LOL. Sad but true. Crazy, bizarre times we are in.

  8. leftback says:

    The point of maximum confusion, indeed. This could well be a major inflection point and also a major trading opportunity for those who make the right call. If the stimulus is going to bring us out of recession, how come Krugman, Stiglitz and others already think that we will need another one?

    Lakshman looks like he is the guy who didn’t do enough reading in school and just followed the popular crowd. Anyone wants to hear good things, he’s your guy.

  9. call me ahab says:

    from the ECRI article-

    “The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to a 60-week high of 127.8 in the week to Sept. 18 from a downwardly revised 126.1 the previous week, which was originally reported as 126.2. . . It was the highest WLI reading since July 25, 2008, when it also stood at 127.8.”

    so- that print in July of 127.8 sure showed good times ahead [snark]

    BR- you are evasive- I’m not sure whether you are a bull or a bear- holding those cards close to your vest

  10. Mannwich says:

    This seems “bullish” to me for the markets and economy……if we all declare BK, we can just press the reset button and start all over again. The banks and creditors? Not so much. Time to make the banks and creditors who made bad loans take responsibility and fail if they have to fail.

  11. Mannwich says:

    @ahab: Barry already said he’s still bullish but I believe becoming less so. Thinks the market has more room to run a bit. He may be right.

  12. CTX says:

    disappointing appearance on kudlow- you didnt say much…or rather he didnt allow any ofyou guys to say much, waste of time

  13. call me ahab says:


    it’s alright- BR would have only said he’s 70/30 or 80/20 equities/cash- then Kudlow asks his stock tips and he throws out some names-

    and that’s the end of it

  14. HarryWanger says:

    Looking an awful lot like 8/30 – 9/2. If that’s the case we’re going higher. I spent a lot of time recently analyzing job creation. Where are the jobs going to come from? I’ve read every possible scenario and yet I keep coming away empty on that answer. Ask any of these “experts” that question. No one can truly answer it. No one. It’s sad but those jobs are gone, more people are entering the marketplace daily and yet there’s not job creation.

  15. AdilB says:

    I’m with El Erian on this one. Acuthan and ECRI are excellent for garden variety recession. Not so sure how they fare in depressions (the last one was 80 years ago). They called the recession about 4 months late this time. Their numbers are only back to where they were last summer (when we were already in recession). These huge YoY numbers are just because their numbers got so low last fall.

    Barry, I saw you on CNBC last night. I always appreciate your viewpoint but I worry that you are putting too much stock in “average 50%” plunges. You throw out 74/75. That was very different than this bear market. That was inflation driven, this is deflation driven. I think the only “recent” comparable in 29-32. Unfortunately, that is a sample of 1 so it is difficult to use only this analogy. However, there were other great credit contraction such as 1873 and 1820 that had ugly endings as well. I’m sure that you are flexible enough though to get out of your longs if things deteriorate though.

  16. hopeImwrong says:


    What happened to the green energy coal jobs you mentioned the other night? I didn’t really understand what you were talking about, in terms of what companies would higher US workers to do what work. But, you seemed to be saying there were plenty of jobs coming.

  17. call me ahab says:

    and to clarify my 1:40 post-

    “so- that print in July 2008 of 127.8 sure showed good times ahead [snark]”


    a short who bought this morning is now underwater-

    i had a feeling dip buying would ensue- we’ll see how the rest of the afternoon looks- a lazy week next week regarding data- economic and earnings-

    so stocks could tread water next week

  18. hopeImwrong says:

    adilb – Japan is also a recent example.

  19. Seattle Chill says:

    “If you take a correlation between the ECRI data for both level and the growth compared with the SP 500 it gives a correlation of .94 and .98 respectively.”

    I notice you don’t specify exactly how far back that correlation goes. Care to elaborate? Specifically, what about the last time total debt-to-GDP was at current levels? (Hint: total debt-to-GDP has never been anywhere close to current levels.)

  20. techy says:


    job creation is happening where-ever stimulus money is flowing:
    1. Healthcare IT
    2. Scientific research

    these are the one’s i directly know of.

    but others should be on the way:
    1. teachers

    you can use the below information to make a guess:

    but so far job loss in private is still huge..

    i just hope that everyone is done laying off, but it is possible that more companies will have to shrink due to loss in business…not to mention the second derivative effect due to further reduction in consumption by consumers due to uncertain job market.

  21. Winston Munn says:

    “Acuthan and ECRI are excellent for garden variety recession.”

    That was somewhat the point of my above post – investment bank computer models “proved” that there could be no losses in MBS because home prices never declined. Oops!

    It seems to me borderline circular logic to point to any model as proof of a conclusion.

  22. rootless_cosmopolitan says:

    Achuthan is apparently another one who thinks that debt levels, 50 trillion dollars total domestic debt, of which 41 trillion dollars are the total domestic private debt just don’t matter for the economy and that relative debt levels can grow infinitely in an economy.

    The ECRI lauds itself with the accuracy of its leading index, which allegedly has never failed, even for the stronger recessions in the first half of the 20th century, with one exception: The Great Depression. Well …

    The odds aren’t so bad that the laugh will be on Achuthan this time at the end.


    did you calculate the correlation by yourself, or could you tell the source of it, please? Thanks.

    BTW: The Weakly Leading Index of the ECRI was down to 127.1 on Sep 25 from 127.9 on Sep 18. But this is just one data point.

  23. HarryWanger says:

    HopeImWrong: Couldn’t find credible information to back up my claim. I was wrong.

    techy: I sure hope there are about 8 million of those jobs within those sectors being created but I doubt it.

  24. bshaheen says:

    I did a correlation just using excel data analysis because one day it just looked to me that the chart for the ERIC level and the SP 500 looked really similar. And the chart for the ERIC growth and the y / y SP 500 also looked very similar. I calculated it all the way back to the beginning of ERIC data in 1/6/1967.

  25. Onlooker from Troy says:

    Yeah I’m not sure what bshaheen’s point was. His post was a bit cryptic. But he might be just pointing out that their indicators are tightly correlated to the market and therefore rather suspect in that way. The myth of the market predicting recoveries, and all that.

    But he needs to clarify his point.

  26. yankee19 says:

    Ummm… I vividly recall hearing Lakshman Achuthan (his name is unforgettable) back in 2007 and 2008 on Bloomberg saying there would be no recession in the U.S. I think the man is without a clue….

  27. hopeImwrong says:

    Thanks Harry. You have my respect.

  28. bshaheen says:

    I’m not sure what the point is, maybe there is no point except that the ECRI level and the SP 500 correlate to .95 and the ECRI growth and the year over year SP500 correlate to .98 using data from the beginning of ECRI data back in 1967.

    It just seems a little strange that this correlation would be so high. Why that is, is something that I’d like to know also. Does the ECRI just track the SP 500 step for step, or visa versa?

    I wish I could copy and past mu excel spreadsheets here, but I can’t or just don’t know how.

  29. call me ahab says:


    harry is becoming a BEAR- and-

    BR is now a BULL-

    i have decided – so it must be true-

    (BR can counter if he is so inclined)

  30. microcap says:

    Ahab beat me to it, but…

    “It was the highest WLI reading since July 25, 2008, when it
    also stood at 127.8. The index’s yearly growth rate rose to a fresh record high
    of 24.3 percent from last week’s high of 22.9 percent. Last week, ECRI Managing Director Lakshman Achuthan toldReuters that the group expects an “unstoppable” recovery with
    “no relevant roadblocks.”

    So according the data, we should expect an imminent sharp downturn and market collapse, right?

    These data series are 99% crap and 1% bad statistics. Lakshman may be right, but so is a stopped clock twice a day.

  31. scepticus says:

    @wanger “Where are the jobs going to come from? ”

    From uncle sam, clearly.

    If you can find $300bn for QE every quarter you can certainly find similar amounts for some jobs here’n’there. Has more impact than QE both in terms of demand and statistics.

    The reason why no experts have any answers is that no-one wants to be the first to say that pretty much all future job expansion will come from an expansion of the public sector. Everyone knows it, but no-one (in the US) will say it.

  32. call me ahab says:


    i know- pretty glaring i thought- and this-

    “unstoppable” recovery with
    “no relevant roadblocks.”

    makes me chuckle- sounds like he has it all figured 0ut- we will probably be reading that quote years from now when they list all the folks that had it wrong about the new GD

  33. HarryWanger says:

    Here’s what I took away from the ECRI data. I went to their site and they have the same logo as the Seattle Mariners. The rest of the stuff is just as microcap says. You can data mine anything.

  34. Thor says:

    HW – Sucks huh? Do you see how it’s not that any of us are pessimists and doom/gloom preachers? We’re just looking at as much information as objectively as we can and not seeing the same things we’re being fed on the MSM.

    Think about it logically, why would any one of us WANT the economy to collapse and the US to fail? There’s no way we’d be immune to the fallout from that.

    I read headlines line this “U.S. Job Losses May Be Even Larger as Labor’s Model Breaks Down ” from the following article.


    I don’t think to myself “HAH! See I was right, things really are worse than they seem” what I think is “well yes, a lot of people have been saying this all along, now it’s finally starting to be reported in the MSM”.

    The information is getting out there, and in reading that article, there is a glimmer of hope at least that 1. the government is aware that their calculations for job losses have been far from accurate and 2. that they may change the way these number are calculated. . . .

  35. Mannwich says:

    Pretty sweet logo though, ain’t it, Harry?

  36. scepticus says:

    Off topic, but does anyone know roughly how much of US national debt is tied up inside interest rate swap wrappers and other derivatives? Is the amount significant or not?

    Have been searching for an answer to this but so far no luck.

  37. rootless_cosmopolitan says:

    Achuthan on August 30, 2007:

    ” ACHUTHAN: Well, you know, without giving a specific policy pronouncement, there are two big concerns that the Fed traditionally has. One is keeping inflation under control and the other is avoiding a recession. And on both counts, we don’t see a lot of trouble in the near term. Inflation is not spiraling out of control. So they have leeway to cut if they wanted to. It wouldn’t be irresponsible in terms of being an inflation steward. On the other hand, the economy is not about to tip into recession. We had some revised GDP numbers out today, 4 percent growth in GDP. This is well above trend. I mean I was looking into the numbers. You had over 27 percent growth in nonresidential construction. That’s — that’s business spending. That is big, booming activity.

    And so it doesn’t seem like the economy is on the verge of stalling out, even though we have some of these credit problems. So we get down to this relationship between the Federal Reserve monetary policy and the target Fed funds rate, and the market and what they want. And certainly the market has made it clear they would like a cut and the Fed would like to hold. We have a little bit of a game of chicken going on here. I suspect it really boils down to what happens in these credit markets that we’ve been watching and if they can become more liquid as we go into September. If they do, the Fed may disappoint Wall Street again.”

    So, if the ECRI predictions are so great, why didn’t Achuthan see the recession coming at the end of August 2007?


  38. sharkbait says:

    By Mohamed El-Erian:

    “Investors have not yet accepted his insight that the absolute levels of income, debt, wealth and unemployment, not just the rates of change, are what matters today. They need to, and soon.”

    -> Agreed.

    “First, consumer indebtedness is still too high relative to income expectations and credit availability, particularly in the US and the UK. This inconsistency will hold back any sustainable bounce in the most important component of aggregate demand.”

    -> Fundamentals – Household assets vs. liabilities: liabilities still too high.

    “Second, some banks’ balance sheets are still too geared for the comfort of regulators or their own managers. This will inhibit them from lending to the real economy at a time when certain sectors (such as commercial real estate, but also residential housing) still require significant refinancing, and when consumers need time to work down their excessive debt loads.”

    -> toxic assets + zombie banks: still there, along with shadow housing inventory. Creative accounting 101.

    Third, unemployment has risen well beyond expectations, and is likely to prove unusually protracted. “It will take years for US unemployment to return to its natural rate, even after the natural rate shifted upwards. This will dampen the recovery of consumption and investment, stress social contracts that assume flexible labour markets, and endanger political support for essential structural reforms.”

    -> employment: +125k-150k jobs/mo. needed for population growth (std. assumption = 150k/mo.). Approx. -7M jobs currently. Assume in expansion: + 150k/mo pop. gr. +100k/mo new = 250k/mo.
    7M/0.1M=5.8 yrs. to pre-recession empl. rate. Still approx. 3yrs. out assuming 200k/mo new. Does not incl. the effects of 1)hrs. worked /wk. to incr., 2) underemployed, 3) discouraged upon returning to labor force post-recession.

    “Finally, public debt has grown so rapidly as to spark concerns about future debt dynamics. This would inhibit the effectiveness of future stimulus measures, as well as complicating the formulation of exit strategies. It could also erode the medium-term ability of the US to fund cheaply its large deficits by undermining both the global standing of the dollar as world reserve currency and the attractiveness of US financial markets.”

    -> $4-5 debt for $1 GDP growth currently. Interest pmnts. major drag on growth + all the other nasties (above).

    Yes, I would agree here. My 2 cents in 2009 USD, or approx. 1/2 1913 USD.

    Taxpayer to Fed + Congress: “Well, here’s another nice mess you’ve gotten me into.” – with credit to Oliver Hardy.

  39. call me ahab says:


    re your link from CR – “ABI: Personal Bankruptcy Filings up 41 Percent Compared to Sept 2008 ”

    that is one way to clean the slate-

    my guess- as more people become stretched and with growing animosity toward the banks- it will be a badge of honor to file BK and let the banks take the loss

  40. Mannwich says:

    @rc: Technology is a beautiful thing, ain’t it? Although in reference to my earlier post, it does not seem to matter how wrong our royal Harold Hill-esque pundits are. They just declare “victory” and move onto the next “town”, racket and topic to be wrong about. It’s all just info-tainment anyway. Not to be taken seriously.

  41. Mannwich says:

    @ahab: Can you say “debt jubilee”? I can.

  42. Mannwich says:

    Mish proposed a new rule that anyone who didn’t see this recession coming isn’t allowed to then make predictions about a nascent “recovery”. I like that new rule. Won’t fly in incompetent bizarro world, but I like it nonetheless.

  43. HCF says:


    We’d only have 3 or 4 professional economists who are qualified to predict then! Perhaps they should just come with a warning:

    Predictions from [list your favorite hack economist] may cause nausea, vomiting, rectal bleeding, and a loss of life savings. If you have thoughts of suicide or an erection lasting over 4 hours, please discontinue immediately!


  44. HarryWanger says:

    Mannwich: Same wizard behind the curtain too. Scary thing is not only did he not see it coming, he’s in charge of the whole thing.

  45. dead hobo says:

    Let’s see. One presents a long and thoughtful analysis. The other says “My Secret Numbers Rule”

    Sorry, I’m stumped here. For once in my life I just don’t know. They both sound so smart. I wish I had a magic chart to help me out here. What does the majority think? I’ll just go with them. If I’m right I’ll look smart. I’f they’re wrong, who could have known?

  46. dead hobo says:

    In Zombytown, if Woody Harrellson runs into a zombie bank ,what’s he going to do?

  47. Mannwich says:

    @dead hobo: Get turned down for a loan even though his FICO score is 800?

  48. SINGER says:


    shoot it with a shotgun…

  49. call me ahab says:

    “Thousands of people are standing in stunned silence in downtown Chicago after watching the International Olympic Committee choose someone else for the 2016 Summer Olympics”

    does anyone even give a shit about this-

    fucking ridiculous

  50. owen b says:

    Everyone here seems to agree that there’s no recovery a la the PIMCO view. When everyone agrees it’s often good to question the collective wisdom as it were.

    Also, it’s not true that ECRI didn’t see the recession coming. Here are two pretty clear statements on the matter.

    Jan 2008 warning of recession starting:

    Mar 2008 statement that recession a done deal:

  51. dead hobo says:

    call me ahab Says:
    October 2nd, 2009 at 3:43 pm

    “Thousands of people are standing in stunned silence in downtown Chicago after watching the International Olympic Committee choose someone else for the 2016 Summer Olympics”

    does anyone even give a shit about this-

    Being from the heartland, I’m smiling ear to ear. Given the credibility of those who run Chicago, I feel safe again.

  52. Mannwich says:

    @owen: But he was very late in calling it, no? See rootless’ post above.

    You make a good point about consensus, but most here at TBP CALLED the recession (and some called the crash VERY accurately), so I’m more apt to side with these folks over others who did not.

  53. call me ahab says:


    to follow up on what manny said-

    i wouldn’t call the TBP crowd the predominate view- except for maybe here and a few other blogs-

    do you consider TBP the predominate view? yeah- right- I didn’t think so

  54. Thor says:

    another selloff into the close

  55. HarryWanger says:

    Closed all my long index positions today. Holding AAPL still. Didn’t feel comfortable going into the weekend.

  56. mkkby says:

    It’s impossible to debate with ECRI because they never give reasons, other than their black-box model. But the only thing up strongly is the stock market, so it is highly likely that is key to their model. In which case it is total nonsense to be bullish because the stock market is just a betting pool. It has no predictive value.

  57. rootless_cosmopolitan says:

    owen b,

    “Everyone here seems to agree that there’s no recovery a la the PIMCO view. When everyone agrees it’s often good to question the collective wisdom as it were.”

    No one hinders you to bring arguments, with which you think you can question whatever is thought by whoever. But pointing out that a majority wherever agrees on something isn’t an argument by itself.

    As for whether ECRI did or didn’t see the recession coming.

    I quote from your first link, which dates from January 2008:

    “The U.S. economy is now in a clear window of vulnerability, given the plunge in ECRI’s Weekly Leading Index (WLI) since last spring. Yet there is a brief window of opportunity within that window of vulnerability to avert a recession. That is why ECRI has not yet forecast a recession.

    WLI growth accelerated to a three-year high last June, anticipating the quickening in GDP growth to a four-year high in the third quarter of 2007. The economy’s resilience surprised most economists, given the earlier Fed rate hikes and oil price spikes – a combination that had helped trigger earlier recessions. But the strength in the WLI underscored the economy’s buoyancy, correctly ruling out a recession.

    WLI growth then turned down sharply, and, by year-end, had plunged to its worst reading since the 2001 recession. This indicated an economy seriously vulnerable to recessionary shocks.”

    So, according to ECRI no recession in January 2008 yet.

    Finally in March 2008, they called the recession.

    However, the NBER has dated the start of the recession for December 2007:

    So where and when did the ECRI see the recession coming? In March 2008, they still might have been earlier than others in acknowledging that there is a recession. But calling the recession when it already has started is not a prediction.


  58. mcHAPPY says:

    Harry? Are you feeling o.k.? I have been relying on you to see the other side of things. Who is going to lead the way now?


    Uncle Sam may not be the future employer of Americans. Did you notice todays jobs that showed Uncle Sam cut nearly 55,000 jobs?

    Also did anyone check out the numbers of actual numbered employed between Aug and Sept? It is a 995K difference – hat tip market-ticker/Denninger for stating the glaring obvious like only he can.

  59. Moss says:

    Which one manages real money?
    Bet on him.

  60. mcHAPPY says:

    Actually could someone verify the Uncle Sam job number? I could have sworn I read it earlier however I can’t find where I read it and Mrs. mcHAPPY is ready to make our dinner reservations! Sorry if I put the wrong number up.

  61. Onlooker from Troy says:

    Don’t even get me started about that ECRI opinion about it having been a “recession of choice.” That right there tells me they/he doesn’t understand a thing that’s going on re: the debt overhang and resultant deflation that’s being fought by the Fed’s money hose.

  62. Pat G. says:

    I gotta admit, I don’t know much about El-Erian because I believe he’s a bond guy. Though not James. I see Achuthan often on Your $$$ on the weekend. I view him as a positive spin kind of guy but what do I know? Almost everyone is more positive than me. I guess the reason for that is largely due to getting older and becoming more cynical. I’ve been riding or watching this merry-go-round for some time now and am convinced that nothing noticeable with respect to man versus man is going to happen in my life time. Man to the moon… big deal.