Soros on the crisis

George Soros’ recent speech on the eurozone is available here.

30 replies on “Soros on the crisis”

Elderfield has resigned. I suppose it will be a while before a local gets that job again.

I am tired and it’s hard to get this right but let me try.
The reason Soros likes the idea of Eurobonds is that it makes him money. It doesn’t save the Euro or Europe – it increases the number of taxpayers paying bondholders. It replace governments as the primary recipients of tax receipts with banks (private banks).
The problem is not the Euro or Europe – the problem is greedy bankers

“Eurobonds will save us!” Gee whiz! But salvation requires that G word – growth. So, lets all grow together then. Ah! But therein lies the rub. Growth needs cash – and we’re broke. So who has some spare cash lying around? Yes, I thought so. Not to worry. Something will turn up.

The more I think about the current economic mess and the well meaning (but dopey) ideas being advanced to extract us – the more I realize that some folk’s grounding straps are no longer connected to ground (were they ever?). I’m in a world of delusional virtuality!

Soros is at least correct in one aspect. Its an intractable mess. We need to hit the RESET button. Its like bailing out with a duff parachute – it may open, but it may not. The alternative is to remain with the aircraft until it crashes. Is that 50/50 chance better than the 100% chance of obliteration?


“I suppose it will be a while before a local gets that job again.”

I’m game. I’d do anything to get back home and be with my family….. even that job. I am coming home this weekend so will be available for interview Friday-Sunday.

I am also looking for tickets for the Heineken cup final. I managed to get some pretty crap terrace tickets to the Amlin cup final (in the hope Leinster might make it) OK but is seems you can only buy a Heineken cup final ticket from the usual ticket sales outlets if you buy either a hospitality package with it or book a hotel for at least a couple of nights – both very expensive options on top of the ticket price. Is this another example of rip-off Ireland? I’ve never had a problem buying a ticket for the final without all that crap attached to it when it’s been played outside of Ireland…… I guess there’s always the possibility of buying some from a disappointed Munster fan when they get stuffed by Claremont in the semis.

oooh I think I should apply too. (If PR Guy doesn’t get there first).

Ordering bankers to obey me would be great fun. I’d have to consider my wardrobe – would a black leather skirt be just a tad OTT? Riding crop anyone?

I’ll keep an eye out for those tickets. But the price will be your identity.


PR Guy, Carey; take a hike! No senior financial post in this country should ever go to an Irish man, woman, or Kerryman again.

We’d be well able to do the job right; we just wouldn’t.

Soros is right when he says austerity is not working. Martin O’Neill gets sacked after losing a few matches but General Kitchener style economic carnage is above performance management assessment.

I don’t this ‘lets forgive and forget’, surely to God there was an understanding that discipline by member countries was essential in a currency union for all the risks that Soros mentions and have come to pass? No responsibility means no memory and history will repeat itself, even with the best designed Eurobond.

Austerity isn’t working to improve things today, the results will be seen in the future. It is having the effect of teaching the collective plebs that there is no such thing as a free lunch, in my opinion the movement to live within our means should have been accelerated. Once the correction is made then the debt overhang can be gradually reduced and the reduced interest spent on productive initiatives or less tax.

This is a very significant contribution by Soros, even if it repeats the basic argument that he has been making for some time and on which there is already a broad spectrum of agreement i.e. the issue of bonds with joint and several liability is the open goal through which Germany has to be persuaded to kick the ball.

It may be noted that the SPD hinted tentatively at such a development in August last but ringed around with conditions that made it implausible i.e. treaty change and a referendum in Germany. Any arrangement would also have to be subject to strict conditionality.

A layman’s reading of the ECJ judgement in the Pringle case would suggest that there are, in fact, few if any impediments of an institutional nature which would prevent a decision.

It may also be noted that the Austrian chancellor commented some months ago that he thought that Merkel might eventually drop her opposition to the ESM being granted a banking licence.

There seems little prospect of real movement (unless the German economy stops motoring!).

@ Eureka

if u dont want banks to own debt, dont run deficits. Its genuinely that simple. See how the economy fares then.

The EU was meant to be a voluntary association of equal states but the crisis has turned it into a hierarchy with Germany and other creditors in charge and the heavily indebted countries relegated to second-class status. 

Was this ever the case? Soros himself knows that size matters and when there are payers and supplicants, the power balance is seldom equal.

That is not of course central to the problem of avoiding everyone going down with the ship.

If Germany decided to quit, it wouldn’t be alone and it would be interesting which path would France choose.

The biggest obstacle to eurobonds, is the fear that a after a general election a government would reject central demands. Could it happen?

A country like Italy would be too big to fail.

‚ā¨2tn in debt and no chance of a bailin as a default would be internal.

It’s more practical to think of a process that would ultimately lead to mutualisation.

Soros says structural reforms would be necessary but countries don’t like external demands.

@ Michael

Maybe the ordinary people who are doing most of the heavy lifting might be amenable to sticks such as structural reform if there were a few carrots thrown in and if they though the leaders knew what they were doing. It is very hard to sell nihilism to people. Even Ciaran O Hagan can’t seem to manage it.

@ seafóid

I agree with you that cuts made by insiders that lack fairness are not going to get wide public support. People need to have hope but few have credible answers.

In the FT today, President Hollande is compared with the well- meaning locksmith Louis XVI — unexceptional people in exceptional times.

The European Commission warns in a report today that France needs to address problems. Germany is moving towards a retirement age of 67 — one of these little things which can put the kiabosh on eurobonds.

Even Poland, which has had some positive economic news in recent times, has to deal with malcontents — some dangerous according to the FT:

There is a nostalgia in Poland for when the country was ruled by the communists ‚Äď not from old apparatchiks, but rather from the nationalist right yearning for a time when they could do battle against a clearly defined evil. And with Moscow-backed communists in short supply, the evil to be battled is Donald Tusk, the centrist prime minister, and his generally effective if uncharismatic government.

Don’t blame the euro!

If we broke up the euro and we got the commercial banks to create punts in line with debt and cancel said punts of of existence through debt repayments nothing would change in principal.

However if we updated the banking system to the digital era and got the central banks to create some digital money as well as cash for governments we could solve many of our financial and social problems.

Excellent article by Soros.

The juxtaposition of the impending scenarios of Italy (or perhaps Spain) leaving the euro versus Germany leaving the euro is instructive.

Italy leaving would cause world wide chaos. Germany leaving would cause difficulties for Germany in the short term but would probably resolve the crisis and leave everybody else better off.

So which direction will Germany allow the world to choose?

Joschka Fischer said last July: “was von der deutschen Kanzlerin komme sei zu wenig und komme zu spaet” English: Merkel’s contribution tends to be too little too late”

Procrastination and the role of personality in the unfolding of the crisis would make a cracking economics PhD.

@ MH

“It‚Äôs more practical to think of a process that would ultimately lead to mutualisation.”

Absolutely! This seems to me to be the path on which the EA is embarked. It has a variety of different strands which, hopefully, will add up to a solution.


Absolutely! This seems to me to be the path on which the EA is embarked. It has a variety of different strands which, hopefully, will add up to a solution.

What are you basing this hope on other than personal political conviction?

There have been three consecutive years of failure and worsening economic indicators for the Eurozone under the current economic policy set and recent evidence of the Deutsche bloc moving to scupper any kind of mutualization of debt. It is no longer credible to argue that the current path is a beneficial one economically, other than in a zero sum way for the Deustche bloc.

Relatedly The Guardian has a revealing opinion piece from a German journalist on Merkel:

On Europe Angela Merkel sees no choice but to press on

The upshot of the piece is that Merkel truly, really, genuinely, believes that she is doing the right thing for Europe (she has “strong political convictions”, dontcha know) and she is not for turning. There is no alternative to ordoliberal self belief. Germans (of the right) are sick and tired of being told that bending Europe to their will is somehow wrong when their determination is strong and virtuous and the German model is clearly the superior one. The comments are more of the same.

Now in the reality based community the general opinion is that you need to have a basis other that strong personal belief for following a course of action (gold bug inflected austerity) with poor theoretical underpinnings and bad empirical results, even if you really truly believe it is the right thing to do. Intensity of self belief should not be the basis for policy making influence.

Yet that is where we are, Eurozone economic policy is effectively the prisoner of German dogma.

I suppose that one helpful development has been that the European Commission has been revealed as impotent other than as a tool of German policy. This has narrowed down the reasons for the prolongation of the European component of the global financial crisis to the excessive influence of Germany in European policy making and the ideological dominance of conservatism in Germany.

@ Bond
We’ve gone through this before.
I think the following:
1: Sovereign states are not competent enough to take on debt. They are generally run by incompetent narcissists with no financial training. The shareholders are born intk their shareholding. They are only allowed choose the directors every 4 years. The shareholders have unlimited liability.
2: States should run their services from the taxes they collect and not borrow
3: The need to borrow to roll over debt is not needed if there is no need for debt in the first place.
4: The current momentum is towards protracted economic contraction

Just thoughts

Soros has displayed good judgement for decades. He has put considerable effort into his speech on the EZ. This is far from the usual self serving claptrap emanating from London and NY.

His proposal at the very least deserves serious consideration. I am particulalrly taken by his statement that an EZ without Germany would have a better credit rating than $US, YJap, Pound Brit.

I am still thinking about DOCM’s observation during the Cyprus pantomime about the market dog not barking. The dog seems to have become partial to winalot laced with morphine.
There is another dog in wall st mainlining fed heroin.

Austerity is destoying our economies.

Deficit spending is actually the way that governments issue more money into the economy, but if you prevent that economies will just starve in a lack of money desease.

Will should grow our economies not starve them.

Soros looks after Soros.
This is a “so you think you’re so great Germany… well they’d manage without you you know…now how about those Eurononds” kind of speech

The dogs in Cyprus are too shocked to bark, those that are still alive, but the resident rottweiler’s showed all their teeth at Cyprus.
The market dogs are more like hyenas. They just move on to the next meal.

Germany’s Plan is tough love an misery for the Periphery for as long as it takes for us to start being German. They think they are doing God’s (the Bundesbank) work.
How we develop a high end industrial base and ween ourselves off debt is our own problem. Is it not obvious that they are demanding we live by their rules?

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