Soros Predicts 'Stop-Go' Economy, Higher Rates

[one...two...tree 2,762]

By: Reuters

Billionaire investor George Soros Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.

Soros, one of the world's most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy. "As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said.

Rising U.S. Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.

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"The idea of self-correcting markets is a misconception," he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.

"You cannot prevent bubbles from forming but prevent them from self-reinforcement," Soros said. Soros, who has retired from active fund management, acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.

"The regulators will always be wrong," he said. "They should interfere as little as possible."

Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.

By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent "super bubble."

Soros cautioned that the U.S. government may be making some serious missteps in dealing with the current credit crunch and recession. Massive stimulus spending and bank bailouts have pumped up the U.S. government's own balance sheet.

http://www.cnbc.com//id/31662112

[mawilson 2,133]

Billionaire investor George Soros Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.

It's certainly possible. At the moment, it looks like the Federal Reserve is going to do whatever

is necessary to keep the rates low, and that unfortunately means monetizing the debt, which

of course is inflationary in nature.

They have a few tricks up their sleeves to make it less inflationary - for example, the Fed can

buy "toxic assets" from a bank, but instead of paying cash (which the bank could then go out

and lend), it sells the bank some Treasury bills (in effect, forcing the bank to buy their debt.)

[one...two...tree 2,762]

Billionaire investor George Soros Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.

It's certainly possible. At the moment, it looks like the Federal Reserve is going to do whatever

is necessary to keep the rates low, and that unfortunately means monetizing the debt, which

of course is inflationary in nature.

They have a few tricks up their sleeves to make it less inflationary - for example, the Fed can

buy "toxic assets" from a bank, but instead of paying cash (which the bank could then go out

and lend), it sells the bank some Treasury bills (in effect, forcing the bank to buy their debt.)

interesting

[w¡n9Nµ7 §£@¥€r 123]

Billionaire investor George Soros Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.

It's certainly possible. At the moment, it looks like the Federal Reserve is going to do whatever

is necessary to keep the rates low, and that unfortunately means monetizing the debt, which

of course is inflationary in nature.

They have a few tricks up their sleeves to make it less inflationary - for example, the Fed can

buy "toxic assets" from a bank, but instead of paying cash (which the bank could then go out

and lend), it sells the bank some Treasury bills (in effect, forcing the bank to buy their debt.)

interesting

Were you scratching your chin with your index finger as you said that?

[Hilarious Clinton 452]

Not to worry. We'll just print more money. Of course Obama will insist on recycled paper.