Friday, April 11, 2008
Soros: Money and Credit Are NOT The Same Thing
George Soros is talking up a storm coincidental to his latest book, on Bloomberg, Charlie Rose, etc. Essential points are:
- He is not irrelevant.
- US is fucked. Fed mis-managed. CBs should target asset prices (duh!). BOTH Euro and Housing Prices are o/v.
- Money and Credit Are NOT The Same Thing! (remember he's talking to a wide non-financial audience...)
- Monetarist views of the world are insufficient insofar as simply throttling money supply, doesn't stop the market's potential expansion of credit liquidity.
- The 25-year "Superbubble" in Credit is ending. Admits he said this in '94, '98, and '02 but THIS time is really IS ending, and he's right.
- "Commodities" are the last manifestation of this, and are experiencing a bubble themselves as the result of investors' collective [temporary] flight from currencies to "things".
- The answer? In addition to money, the mechanisms of Credit itself must be limited. This means leverage must be throttled in what's granted by markets, non-banks, institutionally (Basel II), and in aggregate. Oh, yes, and governments should be proactive when confronted with [frequent] market failures.
- The current US Administration is LAME LAME LAME.
- Moreover, for it to be effective, such universal limitations must (in a globalized world) be coordinated and implemented internationally.
- All that said, authorities took correct action on Bear, should cut rates and should provide copious liquidity during until crunch subsides, and should use taxpayer funds to smooth adjustment of housing dislocation.
How is he positioned? Since his core portfolio investments are inherently "long", he says his macro positions - in an attempt to limit loss of/to capital - are decidedly "short"...