George Soros

For the past 25 years or so the financial authorities and institutions they regulate have been guided by market fundamentalism:
All the innovations – risk management, trading techniques, the alphabet soup of derivatives and synthetic financial instruments – were based on that belief.
The innovations remained unregulated because authorities believe markets are self-correcting.
George Soros FT 2/4 2008

Soros: Euro may 'disintegrate'
BBC 2000-05-08

George Soros: markets must be regulated Speaking to BBC News Online, Mr Soros said that markets would continue to view the single currency as a "one-way bet," which could easily tumble to below $0.80 and even risked "disintegration" as a currency.

Mr Soros warned that the world's next financial crisis was likely to originate in the relationships among the world's biggest countries, not in the "periphery" as during the Asian crisis of 1997.

In particular, he was worried about the growing imbalances in the US economy.

He warned that the US was running an unsustainable current account deficit, and that the dollar could come under pressure in the event of a stock market crash.

And he said that the consequences of a "hard landing" where the US was forced to raise interest rates to defend the dollar, would be severe for the rest of the world.

Mr Soros spoke to the BBC at the sidelines of a conference on reforming the global economic architecture sponsored by the Centre for Economic Policy Reserch and the UK's Economic and Social Research Council.

Soros Recommends ECB Intervention To Support the Euro
International Herald Tribune Friday, May 5, 2000

George Soros made his reputation as the man who broke the Bank of England by betting against sterling in 1992, a wager that helped drive Britain out of Europe's exchange-rate mechanism and earned him a cool $1 billion profit

But as the euro touched another new low Thursday, Mr. Soros had some unusual advice for the guardians of Europe's beleaguered single currency: Abandon your liberal economic orthodoxy and intervene massively on currency markets to support the currency, which Mr. Soros regards as oversold.

''I personally think the European Central Bank ought to intervene,'' said Mr. Soros, who spoke at a luncheon of the Association of American Correspondents in London. ''They sit on incredible reserves of dollars, so their intervention would be extremely credible.''

Many analysts say the absence of a clear and consistent stance from Europe's finance ministers and central bankers has played a key role in the currency's decline. But if central bank intervention no longer seems appropriate in today's market-dominated world, some analysts share Mr. Soros' view that that is precisely the reason it could work today.

In 4 P.M. New York trading, the euro was at 89.06 U.S. cents, down from 89.53 cents late Wednesday. At current prices, the euro is trading not just at its lowest level ever but also at the lowest level seen by its predecessor basket of European currencies since February 1985. That was several months before the United States and its Group of Seven partners reached the so-called Plaza Agreement to work together to bring down the dollar.

The rout of the euro in recent days suggests that investors have moved beyond a sober assessment of Europe's relative economic prospects and are simply placing one-way bets on a further decline, said Avinash Persaud, a currency strategist at State Street Bank in London.

''The price action suggests that fundamental reasons have been put aside and a negative psychology has taken grip of the euro,'' Mr. Persaud said. ''The circumstances are ripe for intervention.

It remains far from clear whether the central bank will intervene. Mr. Soros said Europe's central bankers appeared to have accepted the role of market forces so thoroughly that they no longer regarded intervention as a ready tool.

''I sense a great reluctance on the part of the authorities to mess with the markets,'' Mr. Soros said.

And with inflation remaining low at about 2 percent, a weak euro seems a relatively low-risk way for Europe to generate some export-driven growth.

''At the moment, the problem is one of hurt pride rather than economic danger,'' Mr. Persaud said.

Mr. Soros, meanwhile, said his hedge fund group was braced for sizable redemptions by investors after the resignation last week of his top money managers, Stanley Druckenmiller and Nicholas Roditi, and his decision to move the $14 billion funds away from their high-risk investing strategy.

Mr. Soros said the recent turmoil signaled that equity markets were overvalued and due for a fall.

''We are heavily liquid, and rather happily liquid,'' he said. - ''We are probably in a bear market, although we don't know it yet.''

Soros bok: The Crisis of Global Capitalism: Open Society Endangered

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