Around the world with George Soros
On Wednesday, Chrystia sat down with legendary hedge-fund manager George Soros to ask him about his views on nearly every major economy.
They started with Asia. Soros said Japan was right to intervene in the foreign-exchange market to try to drive down the value of the yen, saying the country suffers from a grim combination of deflation and political paralysis. Here’s the video:
Soros pointed out that it took Japan twenty years to get past a crisis similar to the one facing the U.S., i.e. a real-estate bust followed by a banking crisis. It “will take a long time to work off the excess consumption” in the states, he said.
Next came China. Soros called China the “great beneficiary of globalization,” the “winner after the financial crash,” and the “motor of the world economy.” He dubbed the Chinese renmimbi the “strongest currency in the world,” though he added that because of the state’s capital controls it is impossible to own it. The reason for the currency’s strength, Soros said, lies in the state’s ability to skim the surplus value of Chinese labor while keeping the currency undervalued for the benefit of the state:
China’s state capitalist model is “very powerful,” according to Soros, especially compared to the weaker version in place in Russia, which is only propped up by the price of oil. Soros did concede, though, that China’s model is bound to lose power in the long run. He called the trade sanctions that certain members of Congress are proposing on China “destructive” in light of China’s large holdings of U.S. Treasury bonds.
Soros responded to a question about the health of the U.S. economy with a single word: “blah.” A double-dip recession is possible but not certain, he said, adding that Washington’s plans to pare the budget in the current environment are “premature.” He thought President Obama had not received enough credit for stopping the economy’s free-fall, but added that he was disappointed with the continuity of Obama’s policies with those of George W. Bush.
Given Soros’ dim outlook on the economy and view that Gold is the “ultimate bubble,” we won’t have much to celebrate come 2011: