On November 14, Prime Minister Justin Trudeau delivered a prepared statement that called on Israel to exercise “maximum restraint” in its military response to Hamas’s terrorist attacks. He spoke of how “killing of women, children, and babies” in Gaza needs to stop.

He also specifically raised concerns about fighting in and around Gaza’s Al-Shifa hospital, though failed to highlight that Israel believes an operational command centre used by Hamas is located under the hospital compound, an assessment shared by American intelligence services. Following a ground operation targeting the hospital on Wednesday, the Israeli military claimed to have evidence to back up these assertions and released a video that it said showed weapons recovered from the hospital compound.

The prime minister’s statement drew criticism from across the political spectrum in Israel (including the country’s three most recent prime ministers) and among domestic voices who accused him of unfairly targeting Israel and neglecting the actions of Hamas including the 240 Israeli hostages who remain in Gaza. Here are five tweets that reflect that criticism.

Trudeau’s polarizing statement drew several responses from Israeli leaders across the political spectrum who were united in their condemnations of the Canadian prime minister.

Most pointedly, Benjamin Netanyahu, prime minister of Israel, took to X to issue a forceful rebuke. Singling him out by name, he called on Trudeau to stand with his allies in “defending civilization” and opposing “Hamas barbarism.”

Naftali Bennett, former prime minister of Israel, agreed with Netanyahu and stressed the importance of stopping Hamas.

Yair Lapid, another former prime minister and now leader of the opposition party in Israel who has called on Netanyahu to resign from office, found common ground with his political opponent on this issue and released his own statement on X in an attempt to counter Trudeau’s talking points.

Hub contributor and Atlantic journalist David Frum suggests that while Trudeau’s words will make no difference to Israel’s actions, his message may increase harassment of Jews at home in Canada.

The Centre for Israel and Jewish Affairs, which represents Jewish federations across Canada, echoed the statements of Netanyanhu, Bennett, and Lapid by noting that Trudeau’s rhetoric is harmful in the way that it encourages Hamas.

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The Hub‘s executive director Rudyard Griffiths recently spoke with leading global investor Mohamed El-Erian, about his new book, co-authored with former U.K. Prime Minister Gordon Brown and Nobel Prize-winning economist Michael Spence, entitled, Permacrisis: A Plan to Fix a Fractured World.

The two discussed, among other topics, the rising cost of borrowing for companies, governments, and individuals, the structural challenges of a supply-constrained world, and the prospects for a long-run inflation rate in excess of 3 percent. Here are three key insights from their conversation.

1. Yields will be higher for longer

RUDYARD GRIFFITHS: Do you think that this surge in yields will turn into something that could be the next shoe to drop on the global economy?

MOHAMED EL-ERIAN: We are going back to levels of interest rates that were normal, before the global financial crisis. The problem we have is that people believe the abnormal was normal. Central banks pressing interest rates down, throttling them to zero, or in the case of the ECB negative levels, wasn’t normal. People believe that central banks flooding the system repeatedly with money was normal. That was abnormal. So we are going back to something that’s normal. The way we’ve done it, is the issue that raises the risks you mentioned. I think of it as a series of shocks. Shock number one was last year when central banks had to move very aggressively, because they were scrambling to catch up with inflation dynamics. We got the most aggressive and concentrated set of wage increases that we have seen for decades. That didn’t need to be, and it was the result of the mischaracterization of inflation as transitory.

Shock number one came in terms of central bank action. Shock number two, which was for most of the first half of 2023 came in the form of a recognition, that central banks would stay higher for longer. That meant that you had to reflect the higher interest rate throughout the structure. So, you saw long rates go up. Shock number three is what is going to play out in next year, which is the question mark, are there enough buyers for U.S. Treasuries? We’re seeing a massive increase in US Treasury issuance and we’re seeing deficits running at six, 7% of GDP. We have bonds that are being refinanced as three times what they cost before. Who is going to buy all the debt? The Fed can no longer buy treasuries, because it has to deal with inflation. There’s a question mark as to China’s willingness to buy treasuries, Japan’s ability to buy treasuries, and institutional investors are sitting on really big losses.

2. Government deficits and debt

RUDYARD GRIFFITHS: Do you see in that scenario inflation as less of a risk and something that takes a backseat to the growth of deficits and debt as fiscal sustainability and public expenditures move center stage?

MOHAMED EL-ERIAN: I think that’s happening, and issues of the funding rather than sustainability, the funding of deficits and refinancing is going to capture the market’s attention for a while. On the inflation issue, it fundamentally comes down to the following choice that I believe the Fed will face. Do you continue to pursue a 2% inflation target that’s arbitrary to begin with and risk crashing the economy? Or do you accept for now a slightly higher inflation rate, call it 3%, see whether it’s stable, and whether you can live with it. That’s the choice that the Fed is going to be confronted with. I hope that they recognize that the world has changed, that we live not in a world of insufficient demand, but in a world of insufficient supply and that the supply side simply isn’t flexible enough.

3. The golden age of investing is over

RUDYARD GRIFFITHS: Have you thought through what a what the investable world would look like with 3% inflation targeting across the advanced economies?

MOHAMED EL-ERIAN: I think the major implication for investors is the recognition that the golden days over. When a central bank floors interest rates to zero and injects liquidity it will push up every asset.

The example I use is what used to happen when I was at PIMCO. In the investment committee, someone would come forward with an investment proposal to invest in this company or country, and they would be pushed very hard on balance sheet resilience management, market outlook, etc. It was necessary but not sufficient to convince the investment committee on every single one of these issues because we always asked one more critical question: who will buy after us? Now the subsequent buyer is very important, because the subsequent buyer first validates your own purchase, pushes the price up, and brings other people in. The subsequent buyer also provides liquidity in case you have to change your mind about the investment. And we change our minds for many reasons all the time.

If I tell you the subsequent buyer is a central bank with a printing press in the basement, infinite willingness to use it, and someone who doesn’t care about the price they buy at, you will end up taking a hell of a lot more risk than you would have otherwise, which means that all asset prices get pushed up. That’s the golden age we lived in. It didn’t matter whether you own equity, bonds, or real-estate—everything went up in price. Why? Because there was so much liquidity, the subsequent buyer was seemingly an infinite buyer. That’s the notion of a “BFF”, that the central banks are your best friends forever. That has all changed now. I think we need to address the fact that we did live to a golden age that had consequences for inflation, and the sense of malaise we’re dealing with now.

Listen to Mohamed El Erian’s full interview with The Hub’s executive director Rudyard Griffiths on the audio player below or on your favourite podcast app.

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