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Markets could be derailed again, warns Soros
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Railway porter-turned-billionaire financier George Soros delivered a stark warning last night that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis.
The man who ‘broke’ the Bank of England (and who is still able to earn a cool $3.3 bln in a year) said the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned.
Soros, who worked as a porter to pay for his studies at the London School of Economics after emigrating from Hungary, warned us to heed the lesson that modern economics had got it wrong and that markets are not inherently stable.
“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods,” he told a meeting hosted by The Economist at the City of London’s modern and impressive Haberdashers’ Hall.
“Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble.
“We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
One crumb of comfort could be the 10-year period between the 1998 Asian crisis and the 2008 credit crisis. If the pattern is repeated, it should at least mean we have another 8 years to go before the next crash…
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He is obviously short the market so he is trying to spook everybody to his side of thinking
He is obviously short the market and he is trying to spook everybody to his side of thinking
There is a major difference between the 97 Asian crisis and the most recent Financial Crash. The Asian crisis was a result of currency floating, and removing the peg to the US dollar for local currencies. While, the current crisis was mostly caused by over speculation of futures trading and resulting collapse of the real estate market. If my memory serves me correct, I recall that the Asian economies emerged out of their crisis by the intervention of western Governments and mainly the IMF. As a result, Most Asian countries went through the current recession Unscathed. I have no reason to doubt that a lesson was indeed learned from that crisis as well as the current one. I am sure, the next financial crisis wont be the same as the last 2, but something entirely different.
He is absolutely right. When home prices in some counties are up %15 year over year, that is not stable growth. That is a bubble. The housing market is filling with hot air. The new home buyers tax credit is also skewing the market by creating an incentive to enter a risky market rather than waiting to buy until the market truly corrects itself. The government is pushing short sales and this creates an incentive for lenders to dole out credit in once again, a risky market.
When the government encourages people to spend their money to “help the economy” when they should be saving their money, it is only creating more bubbles and bad debt.
I think it is again stacking paper on paper that Mr Soros is speaking about. I think that the traders do not know how to operate the market any other way than they are doing it. Why should they care, they still get their money and people are still greedy enough to pour money in. Now we have governments and pension funds playing the same game. When we see solvent businesses that own real estate and own their inventory then we will see stability.
He could be right. The inherent causes of the economic crunch have not been fixed. Real estate is still being purchased by unqualified people, national debt is unmanageable, the balance of trade is negative, unemployment is high and unchanged, key manufacturing sectors like automotive remain near collapse, cheap petroleum is depleted, and more……… The odds are on Soros side. He could be right.
Yes, Karl Polanyi was correct.
Yes, James Gustave Speth is correct when he explains
reading his way down through a 2 foot stack of books.
http://opinionator.blogs.nytimes.com/201 0/04/12/does-reason-know-what-it-is-miss ing/
The German philosopher Jürgen Habermas has long been recognized as the most persistent and influential
defender of an Enlightenment rationality ….
My $4500 library is for sale. -Katjedid@deltathird.com
from the unexpected intelligence in nowhere NM.
I have to disagree here. We are still way lower than the 14000 high on the DOW where we were a few years ago and much of the reason we are still down is that investors simply got out of the stock market in search of safer investments and as they slowly get back in that helps to fuel the small increases we have seen. Coca Cola, Intel, the Aerospace Industry, and other parts of the economic engine continue to march along and have seen gains. A lot of the bail out money is being quickly repaid also. I’m not saying all sunny skies, I just wouldn’t call 11,000 DOW as some big bubble on the brink or collapse.
I think we should actually recover before slamming the optimism we are starting to develop. If I had to make a call I’d be forecasting faster than expected growth and improved unemployment. Bubbles and inflation simply aren’t in the cards!
I do not know about the 8-years predicition of Mr. Soros, but it is about time to admit that markets do not have self-correcting mechanisms, nor they are inherently stable. Left alone, markets are not going to lead to stability and bailing out failed systems and dumping money on problems would’nt solve them. Unless we nip the main culprits that made for the financial crisis in the bud, we are inviting another crisis, as Soros and many others argue. Better international standards and codes, combatting corporate greed, and adjusting current business models to make them heed sound corporate governance practices and corporate social responsibility, are the only way to ward off potential financial crisis.
Ibrahim akoum
This guy is a complete fraud. Whenever he says sell, buy. Whenever he says buy, sell. Nobody makes $3.3 bln per year investing in mutual funds like the rest of the rabble.
***
Note to Reuters: Using ‘us’ and ‘we’ in a supposedly neutral article is distracting.
And please, PLEASE, do not end a paragraph with an ellipsis. It looks really dumb.
I am not sure about the 8-year predicition of Mr. Soros. But it is about time to admit that markets do necessarily have self-correcting mechanisms and are not inherently stable. Left alone, markets are not likely to lead to socially desirable objectives. Corporate greed, self-serving managers, and the current business model geared towards profits and more profits are the culprits underlying recent financial crises. But, bailing out failed systems and dumping money on problems wouldn’t solve them. The only way out is to adopt adequate international standards and codes, sound corporate governance, and heed corporate social responsibility.
Ibrahim Akoum
“One crumb of comfort could be the 10-year period between the 1998 Asian crisis and the 2008 credit crisis. If the pattern is repeated, it should at least mean WE HAVE ANOTHER 8 YEARS TO GO BEFORE THE NEXT CRASH…”
THAT is the same exact rational that helped cause the burst bubbles in our past. We knew each one was coming but….because it wasn’t exactly crash time, we chose to milk the tit to the very end. Instead of a “crumb of comfort” that statement is an accurate assessment of the greedy animals we’ve become.
Phew! 8 years, that’s enough time for me to hone my fire-making skills and stockpile some MRE’s.
Eight years my *$$, The State debt bubbles, or Municipal Bond defaults, or Foreign State debt bubbles won’t last another ten years. How far above the historical norm is the Case-Shiller Home Price Index? We will be seeing several more bubbles bursting much sooner than ten years. We should think of this moment as the calm between the crashing waves on a beach during a hurricane. In this context it will be “Hurricane Season” for a very long time to come! Another wave will be crashing down on us long be for eight years go by!
Financiers and speculators, particularly in hedge funds, earn their millions from booms and busts. They even create the cycles, such as the subprime lending and CDOs, that allow for transferring wealth from the economy to themselves. Having public policy to prevent such manipulation and economic destruction would be a form of “socialism” and that is forbodden in America which is based on Darwinian economics where the winners “deserve” to win and everyone is held accountable for themselves.
George Soros is part of the problem. He drives these risky investments and has made a fortune hedging on futures that he creates spin on – depending on what he wants. He is an evil man and many are suffering because of people like him. They have lost pensions, towns and charities have lost investments – the Madoffs and Soros are all the same. I feel very sorry for him because in the end, money will not matter.
Don’t listen to this guy. He’s probably short EVERYTHING – stocks, bonds, oil, the works. You don’t pull down $3.3 big ones investing in mutual funds.
George Soros aught to know–he’s part of the conspiracy to collapse our enconomy.
obviously there is going to be a crash and its gonna be bigger than the last one. why? becouse todays markets are one huge casino, and for casino to operate there has to be violatility, other words boom and bust. dont have to be any kind of genius to work this out.
This writer is an idiot. Because there was 10 years between the Asian & Housing crisis, this is going to be 10 years too? If you look at the great depression the market crashed again about 2 years after October 1929. There are so many similarities between 1929 and 2008, that there is a much better chance another crash is right around the corner. If I had more time I could list off all the reasons it will happen…..
“One crumb of comfort could be the 10-year period between the 1998 Asian crisis and the 2008 credit crisis. If the pattern is repeated, it should at least mean we have another 8 years to go before the next crash.”
Please note that the words quoted above belong to Reuters and not Soros.
Bravo – well said.
Everything George Soros says and does is intended to make him richer.
I think I agree with this commie, for once. Once!
Well George, you have helped to create the crises, maybe now you will get a taste of your own medicine. By the way, there are no openings for Railway porter thanks to people like you.Hey just spread the wealth, yours not mine!
Soros the pirate has already engineered a global currency crash which earned him billions. The fact he’s telegraphing that markets could be derailed again may be his way of helping his friends to sell short.
“We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
Amazingly, I agree with Soros for once. And not only have we replaced private credit, but replaced it with never ending source of money, Gov’t. And the businesses we bailed out, does everybody know that those companies pay far less in risk insurance, since they are backed by the gov’t.
Screw George Soros. He’s made his money at the expense of others. He’s the devil incarnate.
This crook probably has everything shorted so all he needs to do is create a little panic.
Soros is behind Obama so they behave the same way. Both will speak out about what they plan to do! They sound so credible while they stab us in the back. Soros is warning us that he intends to continue to destroy the financial markets in the US and around the world. Where is the Interpol Group when we need them? Where is the CIA and the FBI when we need them or does Soros own them too? Soros belongs in jail and his billions must be confiscated to pay down our deficit that the puppeteer has the puppet running amock in this country. Oh, I forgot something important. Soros can buy his way out of trouble! Lord, we need your Divine Intervention soon!
Amazing how one incredibly wealthy individual can be so concerned about the financial being of the global markets . . . while remaining deaf, dumb and blind regarding the unsustainable debt expendeitutes by sovereign nations.
If anyone knows haow to “crash” a party it is this man. He is troble and a marxsist
If global regulations and taxation are the result of this recession, can you imagine how much more global government we will have after the next one?
Brazil has an oil/natural gas field that rivals Iraq.
India and China now have middle classes. If they integrate their banks into a global scheme, China’s vast cash wealth will be opened. They don’t allow foreign banks easy operation.
The next bubble will be actual globalization. What we have seen to date is just laying the groundwork.
For the man who worked his way from rail porter to billionaire on the opportunities of the the free market, to see such fault and instability with free economies, it is tragic that he does not recognise the irony that his warnings are necessary only because of the government control he promotes. It is the ignorance of arrogance in governement power that creates those instabilities.
He may be a billionaire, but his allusions of granduer are the height of hubris.
of those who who know better how to handle
,,critisizes is so arrogant that he knows better,
made his billions in the free market,
knows better
Quite frankly, right after meteorologists, economists are the “professionals” that get paid to tell us what went wrong with their forecasts, predictions, evaluations, etc.
Maybe if they study Tarot, they might be more successful but apparently they don’t.
Soros had his moment and is milking it for whatever is worth. Or maybe isn’t worth much any longer. The markets are all about speculation not investment. And at any given moment, the dice might come up differently than expected. Let us check with Bernanke, who is trying to follow “the maestro” but fails miserably, what the future has in store. Thanks to him and to the members of the Fed Board, the next bubble is getting pumped up and ready for the blow up.
Too bad that Mr. Soros failed to mention that he, through his privately held OneWest Bank, is one of the major beneiciaries of the bail-out. He is in line to make BILLIONS of dollars in profits, coming directly from the federal government in one of the best-ever sweetheart deals made by Mr. Soros when he picked up the assets of IndyMac for pennies on the dollar.
If you can’t see this is a house of cards have your eyes checked.
Everything is accelerated, crashes are building faster and bigger.
The next crash will come before we can get out of the current one.
The Banks and Fed are pumping up the stock market many times its worth with 0% interst printed money.
People going ‘short’ who thought they were operating in a non corrupt market have lost billions and can probably sue the Fed for compensation.
We are living in a fantasy land where manipulated Government data pretends there is a recovery on whilst real world data and experience tells us things are getting much worse.
People have stopped paying the mortgages and decided to spend instead, they no longer care.
The US crashed under a mountain of borrowing, they have solved the problem they think by multiplying that by one thousand.
The Banks and the Fed and co have guaranteed the next crash will throw the USA out the back door of history.
Only a few bank CEOs will walk away with billions in their pockets.
George Soros is an arch villain. Warning of a crash when his hedge funds would benefit from them ….hmmmmm. Shun this global “Open Society” crook. Hungary has provided the the world many heroes. Soros in contrast is one of that nation’s true bottom feeders.
“Railway porter-turned-billionaire financier George Soros…”
Railway porter, is this what they called the jewish people who helped the nazi’s strip their fellow jews and pack them into the train cars to be shipped to slaughter?
It’s a much nicer turn of phrase than I would use.
Soros preys on nervous markets and with his money drives them into crisis. Indonesia and Britian was killed by Soros. He thrives on misery.
What’s he going to say on hos death bed; “I won!” ?
He’s a pathetic man, and I think he knows it.
This is rich, here’s a guy who has done more to encourage graft, fraud, collusion, dissent and provide cover for pathogenic liars than anyone in the world and he is going to warn us about the mess he helped create…why is this crooked jerk still out living the good life when he should be in a cell?
Soros if you want to do some good then start giving back the money you made by cheating and lying.
Everyone knows that more socialism (interference with the economy through “public policy”) is not the answer to the problems brought on my socialist policy.
The “market” is inherently Stable… it’s only the interference of so-called policy makers that skewer the market, create bubbles, and all of the other difficulties we’ve seen.
It would take a truly stupid person to say (and mean it) that capitalism has failed. Socialism has failed… we need to give capitalism a try.
Separation of economy and state should be as thorough as separation of church and state; and for the same reasons.
So says the speculator who continues to manipulate businesses, financial markets and Western socialist politicians and media to his own ends.
George Soros the economic Terrorists who Brought America Obama. In Sept 08 Soros and all the enemies of the USA took out 250 billion an hours from money market accounts at the sdme time selling/Shorting Bank stocks, the group took 1 trillion dollars out of the US economy just to get this invetted pile s–t Obama elected. Soros should be in jail for 2 life terms!
Interesting article, BUT was the last paragraph spoken by Soros or written by the articles author? It is not clear
Yes, of course Soros is going to WARN us about this after Bernake did the same. Get with the program US Citizens. They both have money to gain from this and will say what they have to in order to save their butts. Come on people. Are we truly at each other or are we doing this to each other because of superficial powers?