This excerpt is from "The Sovereign Debt Problem" by George Soros, written 10/5/2010. In summary, Soros argues that we are in fact in a deflationary environment in the U.S. and more fiscal stimulas is necessary, and a continued reduction in the consumer spending variable contributing to Gross Domestic Product. The continued stimulus which will counter increasing unemployment is in growth to infrastructure in a form of Government Investment Spending. This is a rational argument that I support. In fact, recently the U.S. Government borrowed money from the capital markets at the lowest rates in history. It is the opportune time for the U.S. government to invest this borrowed capital in bridges, increased energy efficiencies, high speed rail, electric energy infrastructure (see Bloomberg, ZipCar implementation in the city of New York), and other infrastructure investments which will increase employment in the U.S.
"The obvious solution is to draw a distinction in the budget between investments and current consumption and increase the former while reducing the latter. But that seems unattainable in the current political environment. A large majority of the population is convinced that the government is incapable of efficiently managing an investment program aimed at improving the physical and human infrastructure. Again, this belief is not without justification: a quarter of a century of agitation calling the government bad has resulted in bad government. But the argument that stimulus spending is inevitably wasted is patently false: the New Deal produced the Tennessee Valley Authority and the Triborough Bridge." George Soros, 10/5/2010
For more information, read Soros' complete essay.
I think he's right. A lot of people dislike him, however, I think he is one of the smartest minds in the world. A lot of people think he is self-serving. I don't think so. He once said, he has a harder time giving away money to worthy causes than he does making it. I think he is truly the "Babe Ruth" of the hedge fund industry and largely does not get the credit he deserves for his good works. Yes, some are controversial, however, his money, his right to decide where/how to donate it. With respect to his comments above, I agree 100%. I think he is spot on. If he were President, I think the country will be a lot better off.
ReplyDeleteJust my 2c. Neal
Soros is not a passive commentator - he has both philanthropic goals and aggressive trading objectives. His firm has made lots of $$ shorting currencies of countries in difficulties. I'd be wary his advice to the US to increase debt and public spending compliments his trading strategy. This doesn't make his advice wrong, but it's not for free.
ReplyDeleteI'm not sure I understand why there's so much opposition to Soros and his Open Society Institute. I read criticism that he's a communist and all kinds of crazy stuff, but everything I read about the OSI demonstrates that it just supports largely democratic and philanthropic efforts. In fact, it was created to move away from communism and toward more democratic efforts. Whenever I've heard him talk, he sounds more rational than most politicians. I've heard him speak and I always learn a ton from him. I personally had a Hungarian friend who was able to attend our graduate school, Brandeis IBS, because of Soros' foundation; he received a full scholarship from Soros. I've know people who have worked for him and they always have kind things to say.
ReplyDeleteHe's an 80 year, wise old man with $10 billion (after giving away $7 billion).
This doesn't sound like a man with an ulterior motive to me.
I've actually never heard of Soros until this blog post, but what he says about increasing economic stimulus (by investing in upgrading infrastructure) and reducing consumption makes sense to me.
ReplyDeleteHowever, the Fed is instead expected to increase fiscal stimulus by resuming quantitative easing at its next policy-setting meeting in November, in which the Fed will go on a controlled asset buying spree in an attempt to give banks more money (therefore increasing lending, hopefully). As a natural side-effect of quantitative easing, we can probably expect to see increased inflation.
Soros is a visionary whose ideas and principles for a better society reflect a time when most politicians still believed their purpose was to serve the people. Of course, there were different philosophies held by the two political parties regarding the "correct" agenda to be pursued at any given time. However, after all the haggling some bi-partisan agreement was reached, and there was progress. Sadly, today, politicians no longer serve the people. They serve themselves, their campaign contributors, and PAC's. The misguided purpose driving their decisions has created a government that is incapable of trust or noble action.
ReplyDeleteVery well said, Paul!
ReplyDeleteOne result of living in this hyper-partisan world fed real-time by the so-called impartial “news” outlets (yes, I’m referring to Fox “News”), social media, email and text messaging is that any idea proposed by someone leaning one way on the political spectrum is immediately attacked and dismissed by those leaning a different way, without any serious consideration of the merits of that idea. That increased infrastructure spending is such an imperative on at least two critical levels – the infrastructure in the whole country is crumbling, which diminishes our ability to compete and costs us uncounted billions of dollars in lost productivity, and people desperately need the jobs that would be created – is irrelevant to those who despise George Soros (and Barack Obama); the soundness of the idea, and the discussion it should generate, get lost in all the partisan noise. I am coming to the conclusion that our country – at every level – has become ungovernable. There is no longer a reasoned and reasonable conversation over the directions in which we should go; it is all about personal attacks, vitriol and superficial nonsense designed to inflame passions and avoid the real debate. It wasn’t that long ago that the tone of the conversation was civil, and the ultimate goal to find the a compromise, whatever the issue. Those days seem to be gone, and if we can’t change the tone, I think we’re going to be wandering around in the wilderness without a compass for a long, long time.
ReplyDeleteBravo! I love it! Whatever happened to the idea coming first, and then figuring out the agenda to support the idea?
ReplyDeleteHow did things get all turned around?
There is a problem with this. US has already a monster debt problem that is dependent upon international US Debt buyers. How can the U.S. spend more if they are already deeply underwater and they will not exit from this situation easily? Furthermore, with this high government debt level, if GDP starts moving higher, interest rates should move higher too and the already high GDP/debt rate will move even higher. US is in a real difficult situation (as most of the european countries) and when BRIC slows their consumption, their GDP will go down into the abysse. Then we will see this debt level explode even more.
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