Nearly eight years after stock markets across the world virtually collapsed in unison, billionaire financier George Soros remains concerned that the world could be looking at a nightmarish replay of those circumstances.
Back on January 7, Soros indicated the China’s continuing economic hiccups are the cornerstone of such thinking on his part. Citing the twin problems of currency devaluation and the struggle to uncover a new way to grow their massive economy on nybooks, Soros indicated that the country’s ability to adjust to such concerns will help determine if what he considers a crisis develops into a full-blown economic disaster as it did in 2008.
At the time Soros uttered those words, the calendar year had gotten off to such a volatile start that more than $2.5 trillion had been lost in just the first few days. Those losses continued for a while longer, but have since eased up.
Still, a litmus test for many tends to be the various volatility indexes across world economic markets. All of them were showing great concern, since higher levels of what’s known as the fear gauge make all investors uneasy. That sort of mentality then trickles down into the entire economy.
The fact that China is currently the world’s second largest economy (behind the United States), is a factor that automatically raises their stature in financial markets. That means that their massive population and the world that depends on their trading capabilities have to thrive in some fashion to prevent negative economic factors from reverberating around the globe.
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China’s main issue has been a slowing down of its manufacturing sector, which has resulted in the Communist Party government taking marginal steps to address the problem by trying to push a more service-based economy and greater consumption. Putting billions of dollars into this sector and also slashing interest rates were their responses, with Soros focusing more on the latter approach to make his point.
Soros believes with China still attempting to develop its entire massive country, the rural areas need positive interest rates to have the opportunity to reach their potential. This is also true of other countries that have teetering economies.
The comments by Soros about the dangers of not handling such matters hearken back to 2011, when he was part of a Washington-based panel that discussed the European economic crisis that was then enveloping that continent. More specifically, he spoke of Greece’s disastrous economy giving off the same warning signs that he saw three years earlier.
Of course, with 65 years of experience in the world of high finance, Soros’ words tend to draw much more attention than the pronouncements of others. That’s because he correctly predicted in 1992 that a devaluation of the pound was how the United Kingdom would react during another era of economic turmoil.
Such thinking helped him earn approximately $1 billion on his investment, which only added to his massive fortune, which is estimated by Bloomberg to be roughly $27.3 billion.