Soros blames "Bush factor" for dollar's fall
By Elif Kaban
LONDON, June 27 (Reuters) - Billionaire investor George Soros on Thursday blamed U.S. President George W. Bush and his team for the fall in the U.S. dollar and declared: "The international financial system is coming apart at the seams."
"I think we're in fairly serious trouble. I do think we're in a crisis situation," said the Hungarian-born hedge fund king-turned-philantropist in a speech to the London Business School on Thursday evening.
"We have the Latin American crisis and we have the declining U.S. dollar, which means that the motor of the global economy is basically switched off," said Soros.
"There is a lack of confidence. That's what I call the 'Bush factor' in the economy," said the 72-year-old speculator.
Soros, whose assault on the British pound 10 years ago ejected Britain from the European exchange rate mechanism, said the dollar's recent decline had taken him by surprise.
"What worries me is that there doesn't seem to be any great desire on part of the authorities to do much. There is still a belief, particularly in the United States, that the financial markets will correct themselves. But markets cannot be left on their own. You need to correct them," said Soros.
This guy is one of the favorites among the bears. They think he's a clever fellow. I guess he thinks he knows how to correct markets, since he tries to do that himself. No, he wants the US government to intervene to support the dollar. This would precipitate the disaster that the bears expect. That's why they like him.
The dollar has seen multi-year lows against the euro amid worries about profitability, corporate chicanery and global security.
Six months ago global security concerns were the reason given for dollar strength.
It slumped to within a cent of parity with the euro on Wednesday on news of the accounting scandal at U.S. telecoms group WorldCom Inc. and sagged against major currencies on Thursday against a backdrop of news that the U.S. economy expanded at a 6.1 percent annual rate in the first quarter, the fastest in more than two years, and firmer Wall Street stocks.
There was no consequence to the dollar from these immaterial developments. The entire show is BOJ intervention and the multiplicative effect that intervention has on the amplitude of a dollar correction. As long as BOJ intervenes foreign banks will increase dollar sales. The dollar correction was inevitable because of BOJ pumping to revive a moribund Japan.
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But Soros said: "The claim that markets are always right is a false claim. What's true is that markets are often wrong, therefore you need intervention by central banks."
An incredible statement. The premise is true, but history has shown that the conclusion is blatantly false. It's just a waste of money because the currency market exceeds the resources of all the CBs put together. The only rationalization given by CBs for intervention in this era is that they think they need to slow the conversion rate of change. They think if they don't, it might cause chaos. It never does. Only concerted CB action creates chaos because it falsely props a currency preventing it from doing what it will, so that eventually when the CB gives up due to a lack of funds, the fall is far greater and disruptive. That's what Soros wants so he can feed his greed.
ANYONE AT HOME?
Soros said the "Bush factor" was to blame for a flight to liquidity in financial markets. "Everyone's going home. The Swiss banks are going home. The strengthening of the yen also clearly shows repatriation," he said.
That's pure bs. The Japs started minor repatriation a year ago, and have recently slowed in that effort although what was done didn't amount to much. If Soros wants to give the name of a selling country, he should have said China, but even in her case, the amount wasn't great. In both cases selling of US Treasuries was motivated by a desire to seek diversification, not one of repatriation. How quickly he and others forget about last year's scramble out of the yen and into the dollar due to Japan's presumed problems. If Japan has problems, they haven't been materially addressed by th sustained BOJ pumping, and so there is inevitably another round of dollar strength coming! Also, how easily Soros dismisses the war on terror and its effect on dollar strength.
"The markets are looking for leadership. Stock markets would take heart from intervention by the United States because it would show that there's somebody at home," he said.
Is he really this stupid? I've been saying as much for 20 years and have received lots of criticism from the little boy economic illiterates who dominate SI and Yahoo.
Soros declined to comment when asked by Reuters about the outlook for the ailing U.S. currency and U.S. assets.
He said the global economic downturn had exposed the weaknesses of corporate America and how the U.S. administration runs the international economic system.
How the US administration runs the international economic system? Wasn't he just saying that the US administration was failing to do that? In any event is the comment at all coherent? US admin running what? For example, the ECB doesn't give a hoot what Bush says.
He said that the collapse of U.S. oil trader Enron Corp. and the accounting scandal at WorldCom were to a large extent a "natural fallout" from the economic boom-and-bust cycle following the bull market of the 1990s and the ensuing burst.
"But the decline in the markets have gone somewhat further than what would be the natural consequences of the previous exuberance," Soros said.
"What is not the natural consequence of that boom and bust cycle is the decline in the U.S. dollar. If things had gone according to plan, the dollar ought to have been quite strong."
Huh? It's getting hard to keep up with this rate of contradiction.
"The decline in the dollar came as a surprise to me," he added.
"I attribute it to lack of confidence in the management of affairs by the United States, its unilateralism, the pursuit of national self-interests and not living up to the responsibility of being the dominant financial power in the world, not taking care of the system."
The liberals and socialists who think that they are not liberals and socialists must love this guy.
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