Billionaire investor George Soros recently told Bloomberg: “The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.” See article by Zoe Schneeweiss and Andrew MacAskill (“Soros Say ‘We Have Just Entered Act II’ of Crisis”).
With Europe’s fiscal crisis and pressure everywhere to curb budget deficits that may push the global economy back into recession, the situation is “eerily” reminiscent of the 1930s according to Soros.
Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp. Concern that this could spread sent the euro to a four-year low against the dollar on June 7 and wiped out more than $4 trillion from global stock markets at one point this year, according to the article.
“When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros was quoted as saying.
Soros also commented on the problem of credit default swaps, which aim to protect bondholders against the risk of a default. He described them as dangerous and a “license to kill,” and added further that they should be banned unless there is an insurable interest ? meaning that purchasers should not be allowed to speculate in them.
It should be noted that Soros is not merely an observer of financial folly but a speculator who seeks to capitalize on it, and he may (or may not) be in a position to profit if the financial markets go down. As the article noted, Soros became famous in the 1990s when he reportedly made $1 billion correctly betting against the British pound. He also speculated that Germany’s mark would appreciate after the collapse of the Berlin Wall in 1989 and that Japanese stocks would start to fall in the same year. His firm, Soros Fund Management LLC, manages about $25 billion, according to the article.