Around the world with George Soros

By Chrystia Freeland
September 15, 2010

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:

2 comments

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Soros has rightly compared China with Russia but I’m sorry to disagree with him over his opinion about US economy. I fear a lot of world doesn’t know about renmimbi. I saw its first image on internet. I believe US economy is resilient and will hold on to its supremacy in science and technology. Chinese are chasing the world but so do India, Japan, Saudi Arabia and Iran. No doubt capitalism is the value of human mind. It is the ultimate winner. Of course human mind has created currency.

Posted by Shahjahan | Report as abusive

I have to agree with Soros’ concerns about gold. I am also fearful of most world economies suffering a double dip recesion (exceptions such as China do not alay these fears). Is it time to follow the Chinese example, to take State control over the whole economy? Well even if it were it won’t happen.

In the UK our new Lib/Con government have decided – against such eminent advice as that of George Soros – to reduce our deficate more rapidly than is sensible, which only adds to my fears.

Shajahan is right to point to the massive US economy’s current superiority in technical knowhow, but that, like everything else in life, won’t last forever.

Posted by TheGramps | Report as abusive