Allianz's chief economic advisor, Mohamed El-Erian, said Monday the selloff will continue until one of two things happen: emerging markets put in place a policy circuit breaker or prices fall low enough to bring buyers back.
"Low enough means a lot lower than here because they've been inflated well beyond fundamentals by central bank policies, so in order to bring people back in you've got to overshoot the fundamentals on the down side to induce people back in," he told CNBC's "Squawk Box."
"We are still well above what would be warranted by fundamentals. There has been this enormous faith in central banks, and that faith in central banks means we have borrowed returns and growth from the future, hoping that central banks will be able to hand off to higher growth. That has not happened."
El-Erian told CNBC on Sunday that what markets needed to stabilize was positive economic news or announcements of further stimulus—not from the Federal Reserve or the European Central Bank, but the emerging world.
Absent those developments, emerging market economies will find it difficult to pull themselves out of a hole as commodity prices continue to tumble.
The short-term problem is the lack of that an emerging market circuit breaker, or policy intervention tool, he said Monday. But the long-term issue is lack of economic growth.
Now, the slowdown in emerging markets and currency complex implosion is transmitting contagion to wider markets, he said.
That said, value has already been created in some pockets of the market, he said. One of those spaces is the currency market.
"There's been tremendous overshoot, particularly in emerging market currencies," he said. "So if you have the stomach for enormous volatility, there's already value there, but if you are a beta investor as a whole, then you have to wait a little bit."