View Full Version : George Soros: What do you think, America?
ICantSpellDawg
01-23-2008, 15:11
Soros says US recession is likely
"I'm looking for a significant shift of power and influence away from the US in particular and a shift in favour of the developing world, particularly China."
Good to know where he stands and what his campaign donations stand to accomplish. I'm sure China has the world's better interests at heart... at least they will be better than the U.S., Eh?...
I do get the idea of a level playing field, I just can't see the logic that China will aid in that endeavor.
Leathery Bag (http://news.bbc.co.uk/2/hi/business/7204159.stm)
doc_bean
01-23-2008, 16:15
I don't think he means that is what he wants to happen, it's just what he expects to happen.
CrossLOPER
01-23-2008, 16:24
CHINA NEW EMPIRE?!
ICantSpellDawg
01-23-2008, 16:32
I don't think he means that is what he wants to happen, it's just what he expects to happen.
I hope so - that's a stupid gaffe
macsen rufus
01-23-2008, 16:34
There's a reason the BBC interviews Mr Soros rather than Mr Tuff... I think he's right. I just wish he'd answered the question about where he's putting his money for the next few years ~D
(ps why didn't the link "Leathery bag of crap" point to football? :laugh4: )
Vladimir
01-23-2008, 16:39
Just DIE! :skull:
ICantSpellDawg
01-23-2008, 17:37
This writing more clearly elaborates his opinion.
http://www.ft.com/cms/s/0/24f73610-c91e-11dc-9807-000077b07658.html
The worst market crisis in 60 years
By George Soros
Published: January 22 2008 19:57 | Last updated: January 22 2008 19:57
The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years.
However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.
Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case.
Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves. Nevertheless, market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit.
Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced. The US current account deficit reached 6.2 per cent of gross national product in 2006. The financial markets encouraged consumers to borrow by introducing ever more sophisticated instruments and more generous terms. The authorities aided and abetted the process by intervening whenever the global financial system was at risk. Since 1980, regulations have been progressively relaxed until they have practically disappeared.
The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.
Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks’ commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties. The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war.
Credit expansion must now be followed by a period of contraction, because some of the new credit instruments and practices are unsound and unsustainable. The ability of the financial authorities to stimulate the economy is constrained by the unwillingness of the rest of the world to accumulate additional dollar reserves. Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so. With oil, food and other commodities firm, and the renminbi appreciating somewhat faster, the Fed also has to worry about inflation. If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.
Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.
The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse.
The writer is chairman of Soros Fund Managemen
Louis VI the Fat
01-23-2008, 18:20
Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.Spot on, I think.
And of course Doc is right, Soros and his minions are describing what happens, not what they want to happen. (Although, it won't be the first time that the two are difficult to seperate. Like with the currency crisis of the early nineties)
I am not about to panic. We will see a recession, but not any collapse or something.
Neither the recession nor the shift in the world economy are unexpected. Far from it. What does surprise me, every single time, is the complete shock that accompanies economical re-alignments. They are all months or years in the making. Just read the paper. The fall of the dollar, the mortgage bubble, recession, currency value under- or overappreciation - they were all announced an eternity ahead. In a nervous game, the pro's make a profit from the expected yet uncertain day of reckoning, and when the bubble finally bursts some have won, others have lost. The main problem is that it then suddenly moves from the financial section of the paper to the front page. Then the amateurs panic, and public opinion goes in OMGWTFENDOFTHEWORLD mode.
About any global economical shift in power, which I believe is the topic of this thread, why, of course there is going to be a major shift. It has been happening for ages now. And as these things go, some of the shift goes unnoticed, some of it goes with large shocks. I have little doubt that China will take over the US as the largest economy. Sooner, rather than later. A few decades, not even half a century. Say, some thirty years from now?
ICantSpellDawg
01-23-2008, 18:27
Spot on, I think.
And of course Doc is right, Soros and his minions are describing what happens, not what they want to happen. (Although, it won't be the first time that the two are difficult to seperate. Like with the currency crisis of the early nineties)
I am not about to panic. We will see a recession, but not any collapse or something.
Neither the recession nor the shift in the world economy are unexpected. Far from it. What does surprise me, every single time, is the complete shock that accompanies economical re-alignments. They are all months or years in the making. Just read the paper. The fall of the dollar, the mortgage bubble, recession, currency value under- or overappreciation - they were all announced an eternity ahead. In a nervous game, the pro's make a profit from the expected yet uncertain day of reckoning, and when the bubble finally bursts some have won, others have lost. The main problem is that it then suddenly moves from the financial section of the paper to the front page. Then the amateurs panic, and public opinion goes in OMGWTFENDOFTHEWORLD mode.
About any global economical shift in power, which I believe is the topic of this thread, why, of course there is going to be a major shift. It has been happening for ages now. And as these things go, some of the shift goes unnoticed, some of it goes with large shocks. I have little doubt that China will take over the US as the largest economy. Sooner, rather than later. A few decades, not even half a century. Say, some thirty years from now?
I agree. I want to try to avoid it, though.
Louis VI the Fat
01-23-2008, 19:00
I agree. I want to try to avoid it, though.I know, I understand. Me, I'd love to see Denmark become the world's number one. On the off-chance that this isn't going to happen, I'd much prefer the US over China and some others. Or to be more specific, I want democracy to prevail in the 21st century again. Preferably, without the struggles it took in the 20th century.
The light has gone on in vast parts of the world. Good for them. It will mean a relative decline in influence for the current developed economies. It's not the end of the world. (Well it could be, but let's leave environmental issues for other threads). Me, I'd wish it was still 1807, but alas. Countries rise and fall in power. Suxx, but hey, you'll manage. The British aren't masters of the universe anymore either. Europe's doing fine actually. We're still here and prospering.
America, which has 4% of the world's population, can not expect to wield 50% of the world's power indefinately. (Thank God they did for most of the 20th century...)
However, I have no doubt that the 21st century will only see an increase in the quality of life for Americans, be they the undisputed champions of the world or not (anymore).
Seamus Fermanagh
01-23-2008, 22:38
Part of the inevitability is rooted in our success.
We, by growing 2%, increase the economy of the world almost a full point. China, starting from a smaller basis, almost out of mathematical necessity most grow and progress faster than we.
Since the USA is reasonably democratic, surprisingly stable, and fairly inclusive in terms of the success of other nations not impinging our own, I think we've done a good job as leader thus far -- better than some would have.
Will we always remain in the lead -- possibly -- but will that lead continue at the level of USA > all others combined? Seems unlikely.
Geoffrey S
01-23-2008, 22:50
Neither the recession nor the shift in the world economy are unexpected. Far from it. What does surprise me, every single time, is the complete shock that accompanies economical re-alignments. They are all months or years in the making. Just read the paper. The fall of the dollar, the mortgage bubble, recession, currency value under- or overappreciation - they were all announced an eternity ahead. In a nervous game, the pro's make a profit from the expected yet uncertain day of reckoning, and when the bubble finally bursts some have won, others have lost. The main problem is that it then suddenly moves from the financial section of the paper to the front page. Then the amateurs panic, and public opinion goes in OMGWTFENDOFTHEWORLD mode.
Seconded. If (decent)history teaches one thing on this subject, it's that by and large the professionals see the problems coming from a way off and are prepared, leaving the damage to be caused by amateurs panicking and acting rashly and in unison. I wouldn't be particularly surprised if school textbooks in the future point to this as the turning point, when it is nothing of the sort.
It's not like the world economy goes into recession overnight.
Samurai Waki
01-24-2008, 06:30
While I do agree the US will be knocked from the pedestal of superiority, I don't think the consequences will be as far reaching as some might assume. The US is in a stage of rebirth, where inevitably the Upper Crust of Society will see a backlash from the lower, the wealthiest will pay more for the same services that the Poor can get for far less. I don't think this is a bad thing, as credit should be continuous rather than fluctuating, the wealthiest saw their biggest breaks during the Bush administration, and now we'll be seeing the consequences of what a corrupt kleptocracy can do to a relatively stable economy. Yeah, there's gonna be hardship, but I think we'll be better off for it.
OTOH China has experienced a surge of unmitigated economic success. However, with all the good comes the bad. China has been pushing forward for the last 30 or so years, and hasn't necessarily been putting in all the adequate checks and balances required for their economy to thrive. Eventually, everything will fall. Well, relatively everything. I cannot see China pulling the economic plug on their biggest exporter, nor can I see China making any significant gains in markets they haven't already cornered. (As their Auto Industry has certainly floundered).
Whereas India, and most of South East Asia, and Russia will be able to wrangle in more economic increases. But recession is a bad word in general... If the Worlds Super Economy lulls, so to, does the rest. It'll take more than one or two more major recessions before the US really sees itself stepping down as the world economic leader.
Soros is a guru. Period.
I have bet on China since 1996 and they haven't failed me, my business school grades (at that time) or my money, yet. They won't for the near future. The idea that the US will maintain the largest economy on earth forever is => UTTER BS.
Vladimir
01-28-2008, 14:11
Large as in goods produced, GNP or what? China has people but not the infrastructure, governmental or other wise, to become #1 over everything. They've only had several thousand years to get their economy going.
Oleander Ardens
01-28-2008, 15:37
We will see... Huge possibilies and huge problems. For the clever and rich the first outweigth the latter.
That the USA will loose a great deal of influence is clear, however let us keep in mind that actually its strenght lies in the young population. Both China and the EU are getting older at a faster pace...
OA
Vladimir
01-28-2008, 16:07
Interesting. I hadn't thought of how China's one child policy might affect their economic future.
KukriKhan
01-28-2008, 16:08
We will see... Huge possibilies and huge problems. For the clever and rich the first outweigth the latter.
That the USA will loose a great deal of influence is clear, however let us keep in mind that actually its strenght lies in the young population. Both China and the EU are getting older at a faster pace...
OA
My bolding, and add: "... young population, and the steady infusion of non-native born talent and effort."
Just to put a tiny bit o'spin with the immigration angle. :)
Vladimir
01-28-2008, 16:20
My bolding, and add: "... young population, and the steady infusion of non-native born talent and effort."
Just to put a tiny bit o'spin with the immigration angle. :)
Are you talking about the slave labor from the south? You know that's what it is, right? Votes for the Democrats, cheap labor for the Republicans.
KukriKhan
01-28-2008, 16:29
Are you talking about the slave labor from the south? You know that's what it is, right? Votes for the Democrats, cheap labor for the Republicans.
:laugh4: I guess you could put it that way, today. O'course in the 19th and early 20th century, it would have been "slave labor from the East (Ireland, Germany, etc) and Far East (China)...Votes for the Democrats, cheap labor for the Republicans." Yes?
TevashSzat
01-29-2008, 04:51
Are you talking about the slave labor from the south? You know that's what it is, right? Votes for the Democrats, cheap labor for the Republicans.
Well actually, have you taken a look at the medical research field the government has? The numbers of non native born researchers under NIH is mind-boggling....
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