George Soros Calls G20: "Make or Break"

AIG, Barack Obama, Ben Bernanke, CDS, Europe, Fed, G20, George Soros, IMF, Larry Summers, Special Drawing Rights, Tim Geithner, Treasury, UK, World Financial Crisis
By Joe Lynam

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Billionaire investor Gorge Soros has said the G20 summit will be a “make or break” event for the world’s economy.

In a BBC interview, Mr Soros said the international financial system had collapsed because it was flawed and it had to be restructured.

Mr Soros say it may be the last chance to prevent a full-scale depression.

He said the G20 meeting had to come up with concrete solutions to help the developing world in particular, which had been been worst hit.

‘Depression’

Mr Soros warned that any attempt to pull economies out of recession had to be done co-operatively.

He said: “The G20 meeting is make or break because unless they do something for developing world there will be serious collapse in that part of the world.

“I’m using phrase depression because unless we take the right measures we’re liable to end up there.

If countries start doing it [engineering a new financial world order] bilaterally instead of multilaterally, the system will fall apart and we’ll end up in depression.”

He also said the rebuilding meant the previous economic system had to be scrapped.

The International financial system has collapsed and cannot be restored in its current form ”
George Soros

“I don’t think we’ll ever be back to where we came from. It should be recognised that the last 25 years were an aberration and we cannot go back there. We have to reconstruct the financial system from its foundations up.”

Mr Soros said regulators and the financial sector shared the blame for the meltdown, as they “participated in this crazy boom built on false premises on the belief that markets are self-regulating and should be left alone”.

Mr Soros also warned the UK economy was in a deep recession “which is going to be a lasting one”.

He added: “The International financial system has collapsed and cannot be restored in its current form. It will have to be restructured because it was flawed and collapsed under its own weight.”

In May last year, Mr Soros was interviewed by the BBC’s business editor Robert Peston and said he was worried about the US and UK’s ability to deal with the downturn because of their reliance on credit.

Mr Soros urged wealthy nations to give their allocations of the IMF’s internal currency, called Special Drawing Rights, to poorer ones because developing countries were not in a position to bail out their own failing banks.

George Soros famously made his name – and $1bn – when he bet that sterling would have to withdraw from the European Exchange Rate Mechanism in 1992. He’s also said to have accurately predicted and profited from the Asian financial crisis in 1997.

The 78-year-old Hungarian is one of the largest aid donors in Africa, having donated around $6bn to his favourite causes.

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Stiglitz Calls Bad Bank Idea "Cash For Trash"

Bad Bank, Barack Obama, Columbia University, Davos, George Soros, Good Bank, Jamie Dimon, Joseph Stiglitz, JPMorgan Chase & Co, National Debt, Stimulus Package, Tim Geithner

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Feb. 1 (Bloomberg) — Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.

Obama’s administration is moving closer to buying the illiquid assets currently clogging bank’s balance sheets and preventing them from boosting lending, people familiar with the matter said this week.

That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said yesterday in a panel discussion at the World Economic Forum in Davos, Switzerland. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”

Stiglitz, a professor at Columbia University in New York and a former adviser to President Bill Clinton, says the plan would leave taxpayers paying for years of excess lending by banks. It would also deprive the government of money that would have been better spent shoring up Social Security, he said.

Whether a bad bank would accelerate an end to the financial crisis split delegates attending the Davos talks. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said such an operation would help if “executed well.” Billionaire investor George Soros said in an interview that “it’s not the measure that would turn the situation around and enable banks to lend.”

Obama Plan

Obama said yesterday he’s readying a plan to unlock credit markets and lower mortgage rates. Under the initiative, the government would buy some tainted securities and insure the banks against losses on the rest.

“Soon my Treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” Obama said in his weekly radio address.

Stiglitz drew criticism from panel participant Angel Gurria, head of the Organization for Economic Cooperation and Development, who says a bad bank is necessary for lending to resume.

“I agree about the moral, ethical fallout, but you’ve got to face the music and someone has to take the loss,” said Gurria, Mexico’s former finance minister. “It’s the only way to jumpstart the economy.”

Bank losses worldwide from toxic U.S.-originated assets may double to $2.2 trillion, the International Monetary Fund said in a report released Jan. 28.

John Monks, general secretary of the European Trade Union Confederation, told the same audience that governments are getting “close to straining the patience of the public and voters” by repeatedly extending lifelines to banks.

Philippines President Gloria Arroyo urged Obama to make a quick decision on his plan.

“We want Americans to do something,” she said at the session, which was called “Rebooting the Global Economy.” “We can discuss what to do but the worst thing is to do nothing.”