In an interview with Yahoo Finance, the economist cautioned that excessive risk-taking by investors is behind recent credit troubles.
Mohamed El-Erian, Chief Economic Advisor at Allianz, reportedly dived into the “cockroach” talk in the U.S. economy on Thursday, explaining why it might exist in the system.
During an interview with Yahoo Finance, El-Erian explained that there is a fundamental difference between cockroaches and termites when it comes to the economy.
“Cockroaches are unpleasant, they come in groups, but they don’t eat away at the integrity of the system. Termites eat away at the integrity of the foundation,” El-Erian said in the interview.
He added that the reason for the existence of cockroaches in the U.S. economy is that investors have stretched to extract additional returns.
“Some people went beyond their comfort zone and beyond their ability to do due diligence. So I don’t think we should be surprised that we will have these accidents, these credit accidents,” he said.
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