George Soros on the global economic crisis and the Euro

http://www.nybooks.com/articles/archives/2010/aug/19/crisis-euro/?pagination=false#

by jacobolus • 16 years ago

29 4 16 years ago

po2• 16 years ago

"Keynes taught us that budget deficits are essential for countercyclical policies in times of deflation, yet governments everywhere feel compelled to reduce them under pressure from the financial markets."

While, I think he is right, I find this statement a little like a pulled-punch. Are the markets applying pressure or is it politics and hot air from financial pundits? If the markets were applying pressure, wouldn't long term interest rates be higher? I see this more as a perception problem than anything else: people don't want any more stimulus, everything is fine now, let's get some government belt-tightening going.

jacobolus• 16 years ago

The markets (which is to say banks and financial institutions) are applying lots of political pressure. They are heavily involved (like any powerful industry) in the political machinery in every mainstream party in the main European countries (and obviously in the US as well).

I haven’t seen any evidence that pundits are driving any of these policy decisions.

I don’t know what you mean by “perception problem” – there is a real economic crisis.

po2• 16 years ago

When I said perception problem, I don't mean to say that there there isn't a problem. I totally agree about that. I think everyone who is watching is in agreement on that. I was speaking more about the debate between inflation vs. deflation. Soros is warning about deflation here but my perception of the political pressure has been that governments need to tighten in and spend less. Unemployment is on the rise but the idea that government can come in and be counter-cyclical is politically taboo.

Overall, I think this whole topic is crazy complex and one where your instincts are probably wrong. I was simply picking on a small point that I don't think the evidence shows markets are warning about inflation, it's pundits and politics that are doing that.

mark_l_watson• 16 years ago

Good read. I recently added http://feeds.feedburner.com/GeorgeSorosBlog to my reading list. I first became interested in Soros because my very conservative son in law hates him - so Soros immediately looked good :-)

Here is an interesting interview with Eric Schmidt: http://georgesorosblog.blogspot.com/2010/06/george-soros-wit...

George Soros on the global economic crisis and the Euro

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