Soros Is Partly Right

Soros Says ‘We Have Just Entered Act II’ of Crisis (Update2)

The video link is here:

June 10 (Bloomberg) -- Billionaire investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession.

“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.

Concern that Europe’s sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.

When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.


Some readers have expressed the thought that I am exaggerating when I stated in an earlier post that this is the end of the financial system as we know it (TEOTFSAWKI). Interestingly, George Soros appears to agree with at least some aspects of my assessment.
While I am not a fan of Soros, as I feel he exercises undue financial and political influence, and is a Fabian Socialist based on his publicly expressed opinions, he seems to express the need for deleveraging and increasing bank capital requirements which are good ideas, in my view.

As Soros points out, bubbles tend to be asymmetrical, that is a long gradual build up during the boom and then sudden collapse during a bust. With the advent of both central banking and worldwide fiat currencies, we have set ourselves up for a super collapse following the super bubble that built up between 1979 and 2008.

This is why I so strongly feel that gold is one of the few areas that can resist the next downturn. Nearly all other asset classes seem mispriced, in my view.

Once governments begin deleveraging in earnest, deflation will kick in with some force.


  1. I think the first and most important thing you need to do is look for both sides of the story. You have surrounded yourself with way too many bears, you keep digging/looking for stories to convince yourself while the matter of fact is you have lost plain sight of how to take advantage of the market.

    Just a thought!

  2. Walter,

    You could be right, I am in the company of many bears. When one looks at the sovereign debt issue alone, I find it difficult to be bullish on much, except gold and cash.


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