Most people are going to suffer terribly as this bubble bursts... unless there is the appropriate quick action taken to prevent the tragic consequences that accompany recessions and depressions.
We need to understand that George Soros is an expert at making money for himself off bad economic times which create hardships for the working class.
Therefore Soros' solutions should not be our solutions no matter how "liberal" Mr. Soros is.
The President of the International Association of Machinists has pointed out that already, with the economic crisis just in its initial stages, union pension funds have lost billions of dollars. This money did not just evaporate into thin air... this wealth transfered hands. This wealth moved from the pension funds of the working class to the banking accounts of those Wall Street "investors" like George Soros.
In fact, this present economic crisis is the result of the same thing that is behind every capitalist economic crisis... overproduction.
Overproduction results when society can not afford to purchase the goods and services produced.
No matter what the "liberal" George Soros says, there will be only one way to avoid a major depression in this country and around the world: A massive transfer of wealth from the bankers, investors and Wall Street coupon clippers to working people along with the creation of millions of new jobs.
George Soros, in spite of his "liberalism" will not discuss this solution because it would require his wealth be transferred, too.
There is only one way to make this massive tranfer of wealth quickly enough to avoid the complete collapse of the capitalist economy: A substantial increase in the minimum wage.
The United States Department of Labor should immediately begin calculations to determine what a real living annual income is taking into consideration all factors based upon a family of four using the United Nations Universal Declaration of Human Rights and the United Nations "Millenium Statement" concerning the intent to alleviate and end poverty.
In addition, all stock, bond and commodities transactions should be steeply taxed to pay for health care, housing and education.
Military expenditures are the single biggest contributor towards exacerbating economic recessions and depressions because instead of plowing this wealth back into society it is tantamount to dumping this tremendous wealth into the ocean. When asked if the war in Iraq is contributing to the present economic mess, President Bush responded with an emphatic "NO!" As we know, Bush is a liar about everything including on this issue of military spending. In response to the question, Bush said he felt that the military spending was actually helping the economy because, in his own words, he said, "This military spending is creating some jobs and providing workers with paychecks." If we end the war, slash the military budget down to what it takes to limit troops to bases here at home instead of at expensive foreign bases all over the world, and use some of that money to begin rebuilding the damage we caused in Iraq Bush should be happy because these funds will be putting pay-checks in the pockets of many more working people.
Further, the hell with bailing out the Wall Street investment community, bailout the homeowners... use the union pension funds as seed money to establish a Federal Bank on the model of the Bank of North Dakota.
In short, anything and everything must be done to help those hurting the most because it is the moral and the right thing to do; plus, it is the only way to approach the problems associated with the collapsing capitalist economy.
When we find George Soros and his Wall Street coupon clippers cutting coupons from newspapers they are pulling out of dumpsters as they search for their meals, and taking them back to the card-board boxes they call home, then we can offer George Soros and his chums a helping hand.
Can economic catastrophe be averted? Yes--- but not likely, because it takes moral and political courage focused on the plight of working people... it takes the political will.
Such political will does not exist in this country; as yet there is no social movement to exert the kind of force required to shift from making the rich, richer which causes the poor to get poorer--- to putting people's needs before the profits of big-business and the Wall Street coupon clippers.
Alan L. Maki
Soros Sees Additional Market Declines After Reprieve
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajkPSW_domB4
By Katherine Burton
April 3 (Bloomberg) -- Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.
George Soros, Soros Fund Management chairman and billionaire investor, speaks in Berlin, Oct. 17, 2007.
``We had a good bottom,'' Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. ``This will probably not prove to be the final bottom,'' he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.
Last summer, worried about market disruptions that started with rising subprime-mortgage defaults, Soros, 77, returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects. Quantum returned an average of 30 percent a year before Soros started using outside managers in 2000 for much of his money.
He also decided to write a book, his 10th, ``The New Paradigm for Financial Markets'' (Public Affairs, 2008). Released today online, the book explains the causes of the current meltdown, a crisis he says has been in the making since 1980, and the trades he put in place this year to protect his wealth, much of it in Quantum.
Soros has bet on declines in the dollar, 10-year Treasuries and U.S. and European stocks this year. He expected foreign currencies to rise, as well as Chinese and Indian equities. The latter bet helped Quantum return 32 percent in 2007. Quantum's returns this year have ranged from up 3 percent to down 3 percent.
`Heightened Uncertainty'
The euro has climbed 7.5 percent against the dollar this year and the Japanese yen has gained 9.1 percent. These and other currencies may continue to strengthen, he said.
``There is an increasing unwillingness to hold dollars, though there's a lack of suitable alternatives,'' he said. ``It's a period of heightened uncertainty.''
Federal Reserve officials dropped their benchmark interest rate 2 percentage points this year to 2.25 percent, and Soros doesn't see that they can lower the rate much further, given the weak dollar.
``We are close to the limit,'' he said.
New York Federal Reserve Bank President Timothy Geithner said today capital markets are still ``substantially impaired'' and policy makers and financial industry leaders must ``act forcefully'' to stem the crisis.
As for his wagers on developing markets, Soros hasn't abandoned his holdings in India, even with the 22 percent drop in the benchmark Indian index this year.
``The fundamentals remain good,'' he said. He is less certain about what will happen to Chinese H shares, which trade in Hong Kong. They've fallen 18.5 percent this year.
Credit-Default Swaps
Credit default swaps -- a way to bet on the creditworthiness of a company -- may be the next crisis area because the market is unregulated, and it's impossible to know whether counterparties can meet their obligations in the event of a bond default. The market has a notional value of about $45 trillion -- or about half the total wealth of U.S. households.
Soros recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.
The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power, Soros said. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent.
Avoiding a `Super-Bubble'
These leaders, Soros said, believed that markets are self- correcting, meaning that if prices get out of whack, they will eventually revert to historical norms. Instead, this laissez- faire attitude created the current housing bubble, which in turn led to the seizing up of credit markets and the demise of Bear Stearns, Soros said.
To avoid a super-bubble in the future, Soros said banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.
Asked if such moves would make it impossible to achieve returns like those of his pre-2000 days, Soros laughed.
``Since I'm designing these regulations, they would not hurt me,'' he said. ``We made direction bets but we haven't used leverage'' like the $25-to-$1 borrowing that brought down John Meriwether's Long-Term Capital Management LLC in 1998.
To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net
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The false belief at the heart of the financial turmoil
http://www.ft.com/cms/s/0/ca1fac78-0116-11dd-a0c5-000077b07658.html?nclick_check=1
By George Soros
Published: April 3 2008
The proposal from Hank Paulson, US Treasury secretary, for reorganising government regulation of financial institutions misses the point. We need new thinking, not a reshuffling of regulatory agencies. The Federal Reserve has long had authority to issue rules for the mortgage industry but failed to exercise it. For the past 25 years or so the financial authorities andinstitutions they regulate have been guided by market fundamentalism: the belief that markets tend towards equilibrium and that deviations from it occur in a random manner. 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 believemarkets are self-correcting.
Regulators ought to have known better because it was their intervention that prevented the financial system from unravelling on several occasions. Their success has reinforced the misconception that markets are selfcorrecting. That in turn allowed a bubble of excessive credit to develop, which extended through the entire financial system. When the subprime mortgage crisis erupted it revealed all the weak points. Authorities, caught unawares, responded to each new disruption only after it occurred. They lacked the ability to foresee them because they were in the thrall of the market fundamentalist fallacy. They need a new paradigm. Market participants cannot base their decisions on knowledge, or what economists call rational expectations. There is a two-way, reflexive interaction between the participants' biased views and misconceptions and the real state of affairs. Instead of random deviations, reflexivity may give rise to initially self-reinforcing but eventually self-defeating boom-bust sequences or bubbles.
Instead of reshuffling regulatory agencies, the authorities ought to prepare for the next shoes to drop. I shall mention only two. There is an esoteric financial instrument called credit default swaps. The notional amount of CDS contracts outstanding is roughly $45,000bn (£23,000bn). To put it into perspective, that is about equal to half the total US household wealth and about five times the national debt. The market is totally unregulated and those who hold the contracts do not know whether their counterparties have adequately protected themselves. If and when defaults occur, some of the counterparties are likely to prove unable to fulfil their obligations. This prospect hangs over the financial markets like a sword of Damocles that is bound to fall, but only after some defaults have occurred. That must have played a role in the Fed's decision not to allow Bear Stearns to fail. One possible solution is to establish a clearing house or exchange with a sound capital structure and strict margin requirements to which all existing and future contracts would have to be submitted. That would do more good in clearing the air than a grand regulatory reorganisation.
The other issue is rising foreclosures. About 40 per cent of the 6m subprime loans outstanding will default in the next two years. The defaults of option-adjustable-rate mortgages and other mortgages subject to rate reset will be of the same order of magnitude but occur over a longer period. With single family home sales running at an annual rate of 600,000, foreclosures will overwhelm the market and cause prices to overshoot on the downside. This will swell the number of homeowners with negative equity who may be tempted to turn in their keys. The fall in house prices will become practically bottomless until the government intervenes. Cutting foreclosures should be a priority but the measures so far are public relations exercises.
The Bush administration has resisted using taxpayers' money because of its market fundamentalist ideology. Apart from a bipartisan fiscal stimulus, it has left the conduct of policy largely to the Fed. Yet taxpayers' money will be needed to reduce foreclosures. Two proposals by Democrats in Congress strike a balance between the right to foreclosure and discouraging the exercise of that right. One would modify the bankruptcy laws allowing judges to modify the terms of mortgages on principal residences. Another would provide Federal Housing Administration guarantees that would enable mortgage holders to be paid off at 85 per cent of the current appraised value. These proposals will not solve the housing crisis, but go to the heart of the issue. They should be given serious consideration.
