Billionaire Philanthropist George Soros, like us, sees today's developments as emblematic of a ballooning bubble.
This from Reuters, (all bold highlights mine)
``The man who ‘broke’ the Bank of England (and who is still able to earn a cool $3.3 bln in a year) said the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned.
``Soros, who worked as a porter to pay for his studies at the London School of Economics after emigrating from Hungary, warned us to heed the lesson that modern economics had got it wrong and that markets are not inherently stable.
“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods,” he told a meeting hosted by The Economist at the City of London’s modern and impressive Haberdashers’ Hall.
``“Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble.
“We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
``One crumb of comfort could be the 10-year period between the 1998 Asian crisis and the 2008 credit crisis. If the pattern is repeated, it should at least mean we have another 8 years to go before the next crash…"
My comment:
Mr. Soros appears betwixt in suggesting that markets are inherently unstable and that stability "needs to the objective of public policy" and of "added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
To rephrase Mr. Soros' comment:
"The objective of public policy" has been to add "leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount" and this has resulted to "inherent market instability".
After all, "sovereign credit" and "national debt" have NOT been incurred by the private sector, i.e. the markets, but by governments as contingent policies.
So this essentially should straighten up the apparent confused definition by Mr. Soros on the causality of the boom-bust cycle.
Besides, one more point of Mr. Soros' disorientation of bubbles is that the "borrowing and spending" which he warns of, is essentially mainstream ideology shaped by government policies.
Point is: whether it is Austrian Business cycle, Hyman Minsky or Charles Kindleberger's model, every apparent actions seems to allude the next boom bust cycle.
Moreover, I doubt if the issue at hand will take 8 years to unravel.
This would greatly depend on the acceleration phase of this bubble phenomenon considering today's rescue has been unprecedented in scale.
Put differently past patterns may rhyme but on a much shorter phase.
Moral of the story: there is no philosophers' stone, we cannot spend our way to prosperity.
This from Reuters, (all bold highlights mine)
``The man who ‘broke’ the Bank of England (and who is still able to earn a cool $3.3 bln in a year) said the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned.
``Soros, who worked as a porter to pay for his studies at the London School of Economics after emigrating from Hungary, warned us to heed the lesson that modern economics had got it wrong and that markets are not inherently stable.
“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods,” he told a meeting hosted by The Economist at the City of London’s modern and impressive Haberdashers’ Hall.
``“Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble.
“We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
``One crumb of comfort could be the 10-year period between the 1998 Asian crisis and the 2008 credit crisis. If the pattern is repeated, it should at least mean we have another 8 years to go before the next crash…"
My comment:
Mr. Soros appears betwixt in suggesting that markets are inherently unstable and that stability "needs to the objective of public policy" and of "added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
To rephrase Mr. Soros' comment:
"The objective of public policy" has been to add "leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount" and this has resulted to "inherent market instability".
After all, "sovereign credit" and "national debt" have NOT been incurred by the private sector, i.e. the markets, but by governments as contingent policies.
So this essentially should straighten up the apparent confused definition by Mr. Soros on the causality of the boom-bust cycle.
Besides, one more point of Mr. Soros' disorientation of bubbles is that the "borrowing and spending" which he warns of, is essentially mainstream ideology shaped by government policies.
Point is: whether it is Austrian Business cycle, Hyman Minsky or Charles Kindleberger's model, every apparent actions seems to allude the next boom bust cycle.
Moreover, I doubt if the issue at hand will take 8 years to unravel.
This would greatly depend on the acceleration phase of this bubble phenomenon considering today's rescue has been unprecedented in scale.
Put differently past patterns may rhyme but on a much shorter phase.
Moral of the story: there is no philosophers' stone, we cannot spend our way to prosperity.
No comments:
Post a Comment