Soros says worst of global crisis is behind us
Billionaire investor George Soros told Polish television station TVN24, "Definitely, the worst is behind us," Bloomberg News reported Monday. Soros said the current crisis marks the end of an era regarding the belief that markets are self-correcting and self-policing, and reiterated his recommendation for new regulations.
"This is not like previous crises but marks the end of an era. The system to date had been based on the false assumption that markets can independently regain their equilibrium and that the system is self-correcting," Soros told Reuters Sunday, adding that economic regulation should strive to control market bubbles.
Further, without those new international regulations, "globalization will fall apart," and possibly lead to a new era of "state capitalism" similar to China's form of capitalism, Soros said, Bloomberg News reported. Soros, who just returned from China, added that the world's third-largest economy is "growing in strength" because the country was relatively unaffected by the crisis.
Meanwhile, the dollar's rebound continued Monday amid talk of additional 'green shoots' of GDP growth appearing in the U.S. and globally, and on sentiment regarding progress relating to the credit crunch. The dollar strengthened about one cent versus the euro and British pound, to $1.3847 and $1.6391, respectively.
Still supports U.S. intervention
Soros also re-affirmed his support for credit market intervention measures undertaken by the U.S. government, Reuters reported. However, since the public measures could risk increasing the rate of inflation, he said the state must diminish it role once the credit system has been restored.
Soros is perhaps best known for one of the most cunning and successful short-term plays in investment fund history. On September 16, 1992 Soros sold short more than $10 billion of the British pound, after the Bank of England failed to raise interest rates. Soros' profit on the ensuing fall in the pound: about $1.1 billion.
Economic Analysis: Put Soros' comments amount to a mini green shoot. His comments reflect confidence in global credit markets, and that stance is enough to nudge institutional investor psychology toward more normal capital movements, which will further loosen credit markets. Moreover, Soros' comments carry added weight because of his recent superior performance, despite the financial crisis: his $21 billion Quantum Endowment Fund, a hedge fund, rose eight percent in 2008, compared to an average hedge fund decline of about 20 percent.
What may prove to be the key actions that checked the financial crisis? The U.S. Federal Reserve's interventions in AIG (AIG) and Citigroup (C), and the G-20's funding of $250 billion in special drawing rights for countries in need but which weren't able to print currency to stimulate their economies.