Billionaire investor George Soros said a major casualty from the U.S. subprime crisis will be the 60-year reign of the dollar-based credit boom, which he says will come to an end, Bloomberg News reported Wednesday. "The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency,'' Soros said in a debate today at the World Economic Forum in Davos, Switzerland, Bloomberg reported. "Now the rest of the world is increasingly unwilling to accumulate dollars.''
However, Soros was careful to point out that he believes the dollar is still the most important reserve currency in the world and will remain so, according to Bloomberg.
Economic Analysis: At the Davos forum, Soros has correctly identified many factors primarily responsible for the U.S.'s current economic ills, including: extreme-risk subprime mortgages and ill-conceived (and possibly deceptive) subprime mortgage-backed bonds, a low national savings rate, the trade deficit, and inadequate banking and lending regulations.
Still, while some shifting of credit responsibilities is normal as emerging markets like China grow and as the European Union strengthens, it's difficult to see Soros' prediction of "the end of the dollar-denominated credit expansion" occurring so long as, among other strengths, the United States retains its productive capacity, ingenuity, desire to prosper, and common sense.
Further, given the U.S.'s current economic hurdles, a cyclical credit downturn is certainly plausible. However, because the developing world needs capital, and absent the rise of some other economic power aside from the EU and China, it's hard to picture a world in which dollar-based credit did not play a substantial role in a global economic recovery.
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Why isn't Bank of America updating its shareholders on CEO situation?
Reader Comments (Page 1 of 1)
1-23-2008 @ 5:02PM
Rob said...
Of course he says that. Soros is shorting the market and dies to see
the US go into a slowdown based on the 10-year cycle he follows and
moving averages of his trading systems. Soros has very little
economic understanding and if he had to fill in Bernanke's shoes- he
will run the country into the ground. The guy is a smart trader,
lucky trader, a Jewish-Hungarian socializer. Let's not give him too
much credit and make him into a God.
Check what I wrote about him:
www.WallastonInvestments.com
Rob
1-24-2008 @ 12:57AM
say what? said...
Soros is not the only one who is trying to warn us, but Americans (and especially our politicians) don't want to hear it.
Steve Hess, Moody's lead analyst said in the Financial Times recently, "If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit". http://www.ft.com/cms/s/0/40f3a2be-bfa9-11dc-8052-0000779fd2ac.html
My town is broke, my state (California) is broke, the mythical Social Security trust fund doesn't exist (Congress left a big IOU where the money should be), and Medicare/Medicaid costs are spiraling out of control. Our ongoing international trade deficit is unsustainable. Our personal savings rate is negative.
I'm not a Soros fan, but it's hard to see how he's wrong on this one.
2-19-2008 @ 8:20AM
Juan Fernandez said...
Illegal immigrants have destroyed California.