George Soros is worried about the outlook for the global economy and concerned that large market shifts may be at hand. The billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments. The Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold mines.
The reason? Soros thinks that levels of debt in China resemble the borrowing craze in the U.S. just before the housing bubble burst and the economy fell into severe recession. The concern is that greater economic turmoil abroad could hurt the economies of the rest of the world. (adapted from an article in the Wall Street Journal)
Soros has done this before and there has not been a global disaster. But who has the courage to bet against him? Is this the fault of capitalism itself, simple miscalculation, stupid greed, or incompetent government? In any case, best be prepared for another roller- coaster ride. Immediately, for those banking with HSBC Bank, which has a big exposure in China, make sure all your eggs are spread around a bit, if you have any in that basket. Otherwise, try to msintain your ataraxia – if you can.
Oh swell! 🙁
I think part of the problem is that China is a dictatorship, but one in a more precarious position than Beijing would like to admit. They cannot claim any legitimacy on the basis of a popular mandate or dedication to any values system; the CCP stopped being Communist following the death of Mao and unlike Imperial China, it has never been Confucian. The only thing justifying one party rule in an increasingly pluralistic world is extraordinarily high rates of growth and corresponding poverty reductions. But in order to achieve this, China has had to borrow vast amounts of money to fund often poor-quality infrastructure programs. This is an unsustainable model for running a country that will inevitably end in catastrophe: the effects will be severely felt throughout the world, and there’s almost nothing we can do to prevent it or insulate ourselves from the coming collapse. Sorry to be a pessimist; the silver lining here is perhaps the economic crisis will lead to a democratic China.