Thursday January 21, 6:34 pm Eastern Time
FOCUS-"Asset bubble" threat to world
economy-Soros
(Adds further quotes from Soros)
PARIS, Jan 21 (Reuters) - George Soros, the hedge fund head who made
his fortune on the financial markets, said on Thursday that an ''asset
bubble'' in countries like the United States was the next major threat to an
already shaky world economy.
Soros said financial crisis over the past two years had hurt the emerging market economies while bringing major gains
such as low commodity and import prices and negligable inflation to the established capitalist economies.
''So far the crisis has affected the periphery of the capitalist system negatively and the centre positively,'' the billionaire
Hungarian-American financier said.
''Today American consumers are...spending more than they are earning. This is a wonderful world but it cannot last
forever,'' he said via satellite link to a conference on the prospects for the global economy.
''I see the development of an asset bubble as the next major threat to the system,'' he said, pointing to the abrupt collapse
in property and asset prices in Japan in the early 1990s, which has left the world's second largest economy fighting to
pull out of recession.
Soros said that the instability and turmoil which battered economies across Asia over the last two years before striking
Russia in August and swirling on to Latin America illustrated the dangers of ''free market fundamentalism.''
The economy had changed dramatically in the past 40 years, with the end of capital controls creating a globalised market
which operated without any supra-national political guidance.
''You have political systems which are national and financial markets which are global,'' Soros said.
Cross-border financial organisations set up after World War Two, like the International Monetary Fund, were no longer
suited to the times and the IMF should be turned from a crisis-fighter into a crisis prevention agency, Soros said.
Countries currently turned to the IMF for help when they were already in trouble. The IMF should be allowed to act like
an international central bank, with a pre-emptive say on economic policy in those countries which could ultimately turn to
it as a lender of last resort, he said.
Sound economic policies were fundamental but there were also cases where the balance tipped in favour of lenders and
against indebted countries which were in fact pursuing the right economic policy, he said.
The free market ideology did not work without guidance.
''Communism was said the have a scientific basis, with Marx. (Free) market fundamentalism also has a supposedly
scientific basis. I think it is false,'' he said, adding the belief that markets were perfect was a ''false and dangerous
ideology.'' |
