Credit problems in Dubai are a "lag effect" of the global credit collapse—and a reminder that governments must work to avoid a repeat of the crisis, Pimco's Mohamed El-Erian told CNBC.
The CEO of the world's largest bond fund, said job creation and fiscal policy changes have to be the centerpiece of efforts in the US and abroad as the world struggles to restore growth.
"The global economy has to produce high growth, the global economy has to produce jobs," El-Erian said in a live interview. "If it doesn't then we're going to have a major adjustment, a multi-year adjustment."
In the US particularly, he said the White House's efforts to get job creation going again have to be accompanied by "structural policy" aimed at preventing recurrences in the credit crisis.
Irresponsible fiscal policy—using high leverage and low collateral—has caused governments like Dubai to take a hit when the time comes to pay on their debts while simultaneously creating programs to jump-start their economies.
"Last year we had a massive shock to public finance," El-Erian said. "The debt levels virtually across the world went up as governments went into stimulus mode. What you're getting now is some countries can afford it and others cannot."
El-Erian said the US also has to "strengthen social safety nets" for those hit by high unemployment and the economic slowdown, and to "reconcile jobs, deficits and the dollar" to create responsible spending policies.
"We haven't had situations where you've shocked the system as much as we have, and we did it right at the core of the system, which is the United States," he said. "We do not have a playbook."