Business | Economy
Soros sees US losing global clout
Billionaire George Soros said the US's status as the world's economic superpower is no longer guaranteed as the current financial crisis saps America's ability to compete with prospering China and India.
- Bloomberg
- Published: 00:31 April 6, 2008
Washington: Billionaire George Soros said the US's status as the world's economic superpower is no longer guaranteed as the current financial crisis saps America's ability to compete with prospering China and India.
Subprime mortgage defaults and resulting credit convulsions have accelerated the US's weakening position in global markets, Soros said in an interview on 'Conversations with Judy Woodruff' airing on Bloomberg Television.
"I think that you will have to somehow reconstruct the global architecture," said Soros. "China has become much more important, India, and so on. What kind of system will evolve of this I think is a very open question."
The market disruptions prompted Soros last year to resume a more active role in managing the $17 billion Quantum Endowment Fund, which provides income for his philanthropic projects.
He has bet on declines in the dollar and US and European stocks, and expects increases in foreign currencies as well as Chinese and Indian equities.
China has been "the main beneficiary of globalisation," Soros said. The Asian behemoth has allowed its undervalued currency to appreciate, which poses risks of inflation in the US as consumers buy Chinese imports.
"The price of goods at Wal-Mart is rising," and the trend probably will accelerate, said Soros, who just released a book, The New Paradigm for Financial Markets.
It was published last week as an e-book by PublicAffairs and is due to be available in hardcover in May.
Soros said the outlook for India is "very good," noting his previous experience when he "got burned" because he didn't sell at the right time. The benchmark Indian index has dropped 24 percent this year.
Russia is a less desirable market because of backsliding on the rule of law and political freedoms that normally protect shareholder rights, Soros said. "You invest at your own risk," Soros said. "I've done it and I'm not going to do it again."
Central banks are diversifying into currencies other than the dollar and into different types of investments, he said, citing sov-ereign wealth funds.
"We are close to a tipping point where, I mean, the willingness to hold dollars is definitely impaired," he said.
The US housing bubble and its effects might have been avoided with a better balance of regulation to anticipate failures in market mechanisms, Soros said.
The housing crisis adds to a "general disruption of the financial markets" that is "much more complete than any we have had so far," he said.
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