When George Soros talks, people listen. He’s the investor who still holds the record for making more money in a single day’s trading than anyone. He pocketed $1 billion betting against the British pound on “Black Wednesday” in 1992, when sterling lost 20 percent of its value in less than 24 hours and crashed out of the European exchange-rate mechanism. In the UK they call him “the man who broke the Bank of England.”
Soros knows a thing or two about destabilization and “far from equilibrium” situations. He’s been on the giving and receiving ends of both. From surviving the Nazi occupation of Hungary during World War II, to single-handedly crashing the currencies of entire nations, the experience he brings to the table should not be ignored.
Mr. Soros knows what he’s talking about. He is connected to all of the major players on all levels – economic, financial, political – you name it. If there’s anyone who knows what’s coming our way next, it’s George Soros.
In a recent Newsweek interview, this is what he had to say about the immediate future of the United States:
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros says.“We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression.”
He is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots in the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.
“We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system,” he says.
Soros’s warning is based as much on his own extraordinary personal history as on his gut instinct for market booms and busts. “I did survive a personally much more threatening situation, so it is emotional, as well as rational,” he acknowledges. Soros was just 13 when Nazi soldiers invaded and occupied his native Hungary in March 1944.
In only eight weeks, almost half a million Hungarian Jews were deported, many to Auschwitz. He saw bodies of Jews, and the Christians who helped them, swinging from lampposts, their skulls crushed. He survived, thanks to his father, Tivadar, who managed to secure false identities for his family. Later, he watched as Russian forces ousted the Nazis and a new totalitarian ideology, communism, replaced fascism. As life got tougher during the postwar Soviet occupation, Soros managed to emigrate, first to London, then to New York.
Soros draws on his past to argue that the global economic crisis is as significant, and unpredictable, as the end of communism. “The collapse of the Soviet system was a pretty extraordinary event, and we are currently experiencing something similar in the developed world, without fully realizing what’s happening.”
To Soros, the spectacular debunking of the credo of efficient markets—the notion that markets are rational and can regulate themselves to avert disaster — “is comparable to the collapse of Marxism as a political system. The prevailing interpretation has turned out to be very misleading. It assumes perfect knowledge, which is very far removed from reality. We need to move from the Age of Reason to the Age of Fallibility in order to have a proper understanding of the problems.”
Understanding, he says, is key. “Unrestrained competition can drive people into actions that they would otherwise regret. The tragedy of our current situation is the unintended consequence of imperfect understanding. A lot of the evil in the world is actually not intentional. A lot of people in the financial system did a lot of damage without intending to.” Still, Soros believes the West is struggling to cope with the consequences of evil in the financial world just as former Eastern bloc countries struggled with it politically. Is he really saying that the financial whizzes behind our economic meltdown were not just wrong, but evil? “That’s correct.”
To many, the idea of Soros lecturing the world on “evil” is, well, rich. Here, after all, is an investor who proved—and profited hugely from—the now much-derided notion that the market, or in his case a single investor, is more powerful than sovereign governments. He broke the Bank of England, destroyed the Conservative Party’s reputation for economic competence, and reduced the value of the pound in British consumers’ pockets by one fifth in a single day. Soros the currency speculator has been condemned as “unnecessary, unproductive, immoral.” Mahathir Mohamad, former prime minister of Malaysia, once called him “criminal” and “a moron.”
In the U.S., where the right still has not forgiven him for agitating against President George W. Bush and the “war on terror” after 9/11, which he described as “pernicious,” Soros predicts that economic and social divisions will deepen. As anger rises, riots in the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully.“It’s already started,”
The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”