Maravi

(TALKZIMBABWE) Soros warns world markets will fall again

Soros warns world markets will fall again
This Is Money
Mon, 13 Oct 2008 03:38:00 +0000
George Soros

BILLIONAIRE investor George Soros said the financial crisis is the worst since the Great Depression and the markets will fall once more this year after a brief rebound, it was reported today.

“We had a good bottom,” Soros told Bloomberg News, referring to Wall Street's rally following JPMorgan Chase's deal to buy beleaguered Bear Stearns.

“This will probably not prove to be the final bottom,” he predicted, adding the rebound may last anywhere from six weeks to three months as the US moves closer to a recession.

Soros said he recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.

He also said banks must control their own borrowing and curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.

His words re-state the warning he gave in January, in an article in the Financial Times.

Then, he said that although the financial crisis resembles other crises since the end of the Second World War, “There is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency.

“The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.”

He criticized the tendency of authorities to intervene in the economy and markets - as the US Fed did during the market turmoil earlier this year. This "moral hazard" encouraged more borrowing and expansion and led to widespread belief in "market fundamentalism" in the Eighties - "regulations have been progressively relaxed until they have practically disappeared".

“The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves.

“Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.”

thisismoney.co.uk

Labels: FINANCIAL CRISIS, GEORGE SOROS

posted by MrK @ 2:54 PM