CNBC recently spoke with Mohamed El-Erian of Allianz on the subject of the sustainability of the current global bond and stock market rally. When asked,  “Are we in a bond market bubble globally speaking or is this just a currency war parading around as a bond market?” Mr. El-Erain revealed some profound concerns.

Mr. El-Erian noted: “It’s both and it’s a reflection of over reliance on central banks and there is a limit to how long this can go on. you know if you put down the lists of issues that we have created for ourselves: negative interest rates on over a third of global government debt, headwinds to European banks, Brexit, governments not able to move on the economy because of political polarization. But in the short run we can continue to go further as long as there is this incredible faith that central banks could do it all.”

He continued “Most people recognize that this path cannot continue. that it is becoming more and more artificial and that we need an orderly hand off. Fiscal is part of that hand-off but so are structural reforms to promote genuine economic growth, dealing with debt overhangs, and much better regional architecture in Europe. So, what the markets are basically saying is that in the short term we can do the heavily lifting but at some point we are going to have to an orderly hand-off otherwise we cannot maintain this huge gap between valuation and fundamentals.”