'Our view of markets is wrong'

When it comes to the investment superstars here at Davos, there probably is no one greater in name and fame and fortune than George Soros.

He shot to worldwide attention by betting against the British bank back in the 1990s.

He became known as the man who broke the Bank of England. Soros is also the founder and chairman of a network of foundations that promote - among other things, democracy and good governance.

He has donated considerable sums in an effort to see President [George W.] Bush defeated in the 2004 presidential race.

He had more luck in backing Barack Obama in 2008. He is just about to bring out an electronic book called The Crash of 2008.

He has some particularly strong views about not only what caused the crash this year, but the way we get out of it.

He spoke to CNN's Richard Quest.

George Soros: This is a crisis that originated in the financial system. This is not some extraneous shock like the oil cartel being formed or dissolved or something.

This is something generated by the financial system itself.

And there is something fundamentally wrong with the prevailing view about financial markets.

That view is that markets tend towards equilibrium, disturbances come from the outside, and the deviations are random.

And that's false, because markets have moods.

They always mis-price assets. And sometimes in various ways the mis-pricing of assets can influence or change the fundamentals that these prices are supposed to reflect.

So you have a two-way feedback between mis-pricing and the real economy, or the fortunes of companies or countries.

And that two-way connection introduces an element of uncertainty that has been left out of account.

So there is a false paradigm on which this entire financial structure - the global financial system was based. And it has collapsed.

Quest: You, in recent writings you have taken Alan Greenspan to task, but at the same time, you both are on the same page when you admit that there was a failing of understanding in how markets were going to react.

Yes. And I have discussed this with Alan Greenspan six months ago, and again just last week.

And six months ago he said, well, you know, occasionally markets get it wrong and you have a crisis.

And then we have to pick up the pieces. But the price we have to pay for that is relatively small compared to the benefits of financial innovation.

That was his position. And six months ago he could still reasonably argue this.

Today he cannot, and he knows that.

Are there opportunities for investors in this environment?

Look, there are tremendous imbalances in the market.

Therefore you have opportunities. But there are tremendous swings in the market.

There is tremendous volatility because the uncertainty is very high. And volatility and uncertainty go together.

And therefore you have to be extremely nimble to catch those opportunities. And on the whole I would say very, very few people can take advantage of it.

And for the bulk of the people, the great bulk, this is a period of wealth destruction.

So if you can preserve your wealth, you are ahead.