Tuesday, October 14, 2008

George Soros and Market Fundamentalism:



Quotes from an October 12 interview:

"What we are witnessing is not the result of some exogenous shock that knocked things off balance, as the prevailing paradigm, which believes markets are self-correcting, would suggest. The reality is that financial markets are self-destabilizing; occasionally they tend toward disequilibrium, not equilibrium."

"In short, the boom-bust sequences, the bubbles, are endemic to the financial system."

Comment:

Soros initiated the Far-Eastern Currency Crisis of 1997 which almost bankrupted Indonesia, Thailand and S. Korea. Indonesia and S. Korea had to approach IMF for rescue while Thailand had to float its currency resulting in massive devaluation and collapse of its financial sector. Malaysia had to scramble to place exchange controls to keep him out and Mohatir Muhammad called him the most evil person on earth - or something to that effect.

What Soros saw was that the Far-Eastern currencies were massively overvalued, accompanied with little or no regulation, in the race to integrate globally in free flow of capital, and could be brought down without much effort (he used just $10 billion leveraged to $100 billion) to great profit for members of the Quantum Fund.

Soon afterwards, Soros himself declared: "Free-flow of capital between nations means the destruction of societies"! This was exactly the tool he used, but admitted quite openly he was just using the system which was not of his making and was in fact opposed to it.

George Soros is an interesting person. He funds many left-oriented media projects such as Democracy Now and NPR. Incredibly smart. He made a billion in 1992 betting against the British Pound and brought it to 1:1 against the Dollar. He again made billions in 1997 defeating many central banks in the Asian Currency crisis using leveraged techniques, but then wrongly bet against the Dollar in 2004/5 and lost a billion when Dollar went up instead of down, and It's reported he recently lost a huge amount in the Russian Rouble - the ultimate speculator.

But he's a person who knows a lot more about the global financial system than any economist.

3 comments:

Zeemax said...

I received this from the research wing of HSBC:

How the bail out works …

Young Chuck moved to Texas and bought a Donkey from a farmer for $100. The farmer agreed to deliver the Donkey the next day.

The next day he drove up and said, 'Sorry son, but I have some bad News, the donkey died.' Chuck replied, 'Well, then just give me my money back.' The farmer said, 'Can't do that. I went and spent it already.'

Chuck said, 'Ok, then, just bring me the dead donkey.' The farmer asked, 'What ya gonna do with him? Chuck said, 'I'm going to raffle him off.' The farmer said You can't raffle off a dead donkey!' Chuck said, 'Sure I can Watch me. I just won't tell anybody he's dead.' A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $998.' The farmer said, ‘Didn’t anyone complain?' Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck now works for Goldman Sachs.

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