Thursday, April 15, 2010

Soros Warns Those Throwing Money Into the Stock Market: We are Facing A Big Bubble and Bigger Boom and Bust

When George Soros speaks, many people pay attention. At a meeting hosted by The Economist, he had a big warming for those throwing money into the stock market, as per story on Reuters.

He said that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis.

He says that the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned.

He warned to heed the lesson that modern economics had got it wrong and that markets are not inherently stable.

“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods”

“Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble. We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”

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