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George Soros On The World Currency System: Here's An Elephant In The Room He Keeps Ignoring
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George Soros On The World Currency System: Here's An Elephant In The Room He Keeps Ignoring

Mar 16 2014, 12:59pm CDT | by

Is it time we shorted George Soros? Judging by his latest book, The Tragedy of the European Union: Disintegration of Revival?, he certainly seems to have passed his sell-by date. While the book...

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30 weeks ago

George Soros On The World Currency System: Here's An Elephant In The Room He Keeps Ignoring

Mar 16 2014, 12:59pm CDT | by

Is it time we shorted George Soros? Judging by his latest book, The Tragedy of the European Union: Disintegration of Revival?, he certainly seems to have passed his sell-by date.

While the book makes some good points about Germany’s role in imposing gratuitous austerity on Europe, for Soros watchers these are hardly new. He has been hammering home the same message in various contexts for years.

Then there is the book’s odd and inherently repetitive structure. The book’s central element consists of transcripts of no less than four interviews he gave to the German journalist Gregor Peter Schmitz. The format’s attraction for Soros is, of course, that he saved himself months if not years of pounding at a keyboard. While at the age of 83, he can be forgiven for shirking the dolors of real authorship,  the problem is the interview format rarely holds a reader’s interest for long. In this  case frankly it quickly becomes almost unreadably tedious.

As for the rest of the book, it includes a preface by Anatole Kaletsky,  as well as an introduction by Schmitz. Plenty of scope for repetition there. Kaletsky happens to be the chairman of Soros’s Institute for New Thinking but, all talk of novel thinking to the contrary, he is a conventional thinker who has evidently not provided much of a whetstone to Soros’s razor. (In an article headed  ”Britain doesn’t have to make things to boom” in 2004, he made the standard conventional and highly mistaken argument for postindustrialism. Britain’s current account deficit has multiplied nearly three-fold since then and at 4.4 percent of GDP is the highest of any major industrial nation.)

To cap it all Soros adds as an appendix an essay on his favorite theme, “reflexivity.” He uses the term to refer to the self-fulfilling prophecy effect that often takes hold as a market rises or falls. The concept’s value is that it blows away the so-called efficient market hypothesis that for decades has ruled among economic theoreticians. While Soros has earned a place in the history of economics for his contributions on reflexivity, this essay adds little to what he has already written in previous books.

For me the key thing is what Soros does not say. Although his central theme is that Germany bears the lion’s share of the blame for the euro crisis, he fails to notice the obvious: Germany has little interest in a strong euro. Quite the reverse. As a nation that has been assiduously boosting its exports since the 1870s, Germany has a long history of keeping its currency as low as possible. As the Germans see their national interest, anything that keeps the euro low is all to good.

Pace Soros, therefore, there is little mystery about the fact that the Germans have consistently done no more than the bare minimum to ward off bankruptcy in the so-called peripheral eurozone states, Spain, Portugal, Greece, and Ireland. If these nations did not have problems, other problems would have had to have been invented.

As it is German exporters like Volkswagen, SAP, Siemens, and Fresenius Medical Care have been laughing all the way to  the bank. This in turn has done wonders in saving Deutsche Bank and other German banks from the worst  strains affecting the major banks of the United States and Britain.

Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999).

Source: Forbes Business


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