October 10, 2008
In the week since President Bush signed into law a $700 billion plan to buy the bad mortgages dragging down banks, the federal government announced several new financial interventions and signaled that more will come.
The new strategies reflect the realization that what many believed to be a US mortgage crisis has metastasized into a serious threat to financial markets around the world. Each day brings news of another move into the financial sector by central governments, even in countries who thought they had no connection to the US housing market.
Exactly how the deflation of an American real estate bubble triggered a near collapse of the world economy will be the subject of books for years to come. Successful financier George Soros, however, may be among a small group that saw the crisis coming before it happened.
Most commentators agree that the freezing of credit, tied to a lack of confidence in the economy among banks, investors and consumers alike are key problems threatening to push the world into a recession. The near-daily, sweeping interventions improvised by governments in the United States and across the globe are attempts to halt the break-down of the financial system and restore the faith needed for credit to start moving again.
Burst of the Super Bubble?
In his new book, THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS, George Soros explains the credit crisis through the lens of his conception of financial markets and human affairs, a theory he calls "reflexivity." What we are seeing, according to Soros, is not just the deflation of the housing bubble, but that of a much bigger "super-bubble" twenty-five years in the making. Based on too much credit and too little regulation, the super-bubble has supported an unsustainable world order, where the United States consumes more than it produces.
In his interview with Bill Moyers, Soros lays out several short-term prescriptions for dealing with the crisis, one of which directly injecting cash into banks in exchange for a share of the company was authorized in the $700 billion bailout, and is being considered by the US Treasury.
But along with stopping the slide into more dire financial straights, Soros also has a vision for a post super-bubble world. For Soros, this unraveling, though inevitable, need not cause too much despair. Consumption has been the motor of our economy for 25 years, he explains, and now that motor is gone. But we can create a new motor to deal with one of the main aspects of our over-consumption problem energy. Combating global warming will require a huge amount of effort the amount of change and development that can restart an economy. Soros goes on to explain:
I think we all have to consume less. We will consume less because we will have to. And rather than being unemployed, let's keep employment up. We'd use it for dealing with global warming. That, I think, is the way that this could work in the right way.
Soros was born in Budapest, Hungary, in 1930. His father was taken prisoner during World War I and eventually fled from captivity in Russia to reunite with his family in Budapest. Soros was thirteen years old when Hitler's Wehrmacht seized Hungary and began deporting the country's Jews to extermination camps. In 1946, as the Soviet Union was taking control of the country, Soros attended a conference in the West and defected. He emigrated in 1947 to England, supported himself by working as a railroad porter and a restaurant waiter, graduated in 1952 from the London School of Economics, and obtained an entry-level position with an investment bank.
In 1956, Soros immigrated to the United States, working as a trader and analyst until 1963. During that time, he developed his own theory of markets called 'reflexivity', which he has laid out in his recent books THE ALCHEMY OF FINANCE and THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS. In 1967 he helped establish an offshore investment fund; and in 1973 he set up a private investment firm that eventually evolved into the Quantum Fund, one of the first hedge funds, through which he accumulated a vast fortune.
Soros is a self-described student of Karl Popper, and strong opponent of totalitarianism. He has devoted much time to philanthropy among other projects, founding the Open Society Institute in 1993 and, after 2001, to US domestic politics, donating millions of dollars to Democratic candidates and liberal 527 organizations and earning political enmity in the process.
Soros has published numerous books, including THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS; THE AGE OF FALLIBILITY: CONSEQUENCES OF THE WAR ON TERROR (Public Affairs, 2006); THE BUBBLE OF AMERICAN SUPREMACY (2005); GEORGE SOROS ON GLOBALIZATION (2002); OPEN SOCIETY: REFORMING GLOBAL CAPITALISM (2000); THE CRISIS OF GLOBAL CAPITALISM: OPEN SOCIETY ENDANGERED (1998); SOROS ON SOROS: STAYING AHEAD OF THE CURVE (1995); UNDERWRITING DEMOCRACY (1991); OPENING THE SOVIET SYSTEM (1990); and THE ALCHEMY OF FINANCE (1987). His essays on politics, society, and economics appear frequently in major periodicals around the world.
Guest photo by Robin Holland
Kevin Phillips on BAD MONEY
Bill Moyers sits down with former Nixon White House strategist and political and economic critic Kevin Phillips, whose latest book BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM explores the role that the crumbling financial sector played in the now-fragile American economy. (September 19, 2008)
Winners and Losers
NEW YORK TIMES business and financial columnists Gretchen Morgenson and Floyd Norris discuss who wins and who loses in the financial turmoil. (September 19, 2008)
Facing up to the Economy
Bill Moyers talks with economist Dean Baker and journalist Bob Herbert about the economic challenges facing the government and the populace. (August 8, 2008)
THE JOURNAL travels to ground zero of the mortgage meltdown Cleveland, Ohio. Correspondent Rick Karr takes viewers to Slavic Village, one of the hardest hit neighborhoods in the nation when it comes to the spate of foreclosures caused by the subprime mortgage crisis. (July 18, 2008)
Investment industry giant John Bogle says that as more and more money managers take control over corporations on Wall Street, Main Street is paying the price.
(September 28, 2007)
An American Recession?
Veteran market watcher Robert Kuttner and Wall Street insider William H. Donaldson give their read of the current economic landscape and discuss the risks of the deregulation of the financial industry. (October 12, 2007)
Financial columnist Gretchen Morgenson on the SEC, the mortgage crisis and other matters fiscal. (June 29, 2007)
The Downturn on the Homefront
Sociologist Katherine Newman on the global markets' effect on kitchen table issues. (January 25, 2008)
"Recapitalise the banking system"
By George Soros, FT.com, October 2, 2008.
"The Perilous Price of Oil"
By George Soros, THE NEW YORK REVIEW OF BOOKS, October 23, 2008.
"Paulson cannot be allowed a blank cheque"
By George Soros, FT.com, September 24, 2008.
"He Foresaw the End of an Era"
By John Cassidy, THE NEW YORK REVIEW OF BOOKS, October 23, 2008.
"Part 1: George Soros interviewed by Neil Cavuto, FOX NEWS"
"Part 2: George Soros interviewed by Neil Cavuto, FOX NEWS"
"Soros Explains The Credit Crisis"
By Michael Maiello, FORBES.COM, May 27, 2008.
"A successful prophet of the markets, "
by John Authers, FT.COM, September 23, 2007.
"The Financial Crisis: An Interview with George Soros"
By George Soros, Judy Woodruff, THE NEW YORK REVIEW OF BOOKS, May 15, 2008.
"What Is a Green-Collar Job, Exactly?"
By Bryan Walsh, TIME MAGAZINE, Monday, May 26, 2008.
"The Green-Collar Solution"
By Thomas Friedman, THE NEW YORK TIMES, October 17, 2007.
"Rise of the green collar worker"
By Sam Eaton, MARKETPLACE, August 3, 2007.
The Financial Crisis
NPR: PLANET MONEY
NATIONAL PUBLIC RADIO blog and podcast covering financial news.
"IMF: World economy to slow sharply, led by US "
By Jeannine Aversa, THE ASSOCIATED PRESS, October 8, 2008.
"The Monster That Ate Wall Street "
An article on the origins of 'credit default swaps.' By Matthew Philips, NEWSWEEK, October 6, 2008.
"Fed Announces Plan to Buy Short-Term Debt "
By Edmund L. Andrews and Michael M. Grynbaum, THE NEW YORK TIMES, October 7, 2008.
"Fed Gives A.I.G. $37.8 Billion Loan "
By Barry Meier, THE NEW YORK TIMES, October 8, 2008.
"Central Banks Coordinate Global Cut in Interest Rates "
By Carter Dougherty And Edmund L. Andrews, THE NEW YORK TIMES, October 8, 2008.
"Paulson Says U.S. to Use All `Authorities' in Crisis "
By Simon Kennedy and Rebecca Christie, BLOOMBERG.COM, October 8, 2008.
NEW YORK TIMES Topics: Credit Crisis - Bailout Plan
FRONTLINE: The Long Demise of Glass-Steagall
"Lehman's Demise Triggered Cash Crunch Around Globe"
By Carrick Mollenkamp and Mark Whitehouse in London, Jon Hilsenrath in Washington and Ianthe Jeanne Dugan in New York, the WALL STREET JOURNAL, SEPTEMBER 29, 2008.
"As Credit Crisis Spiraled, Alarm Led to Action, "
By Joe Nocera, THE NEW YORK TIMES, October 1, 2008.
"Rescue's Supporters Failed to Connect With Public "
By John D. Mckinnon and Sarah Lueck, THE WALL STREET JOURNAL, October 1, 2008.
Interactive Map of House votes
This NEW YORK TIMES graphic illustrates who voted yes and no on the Emergency Economic Stabilization Act of 2008.
"How bailout deal will impact next president"
By Gail Russell Chaddock, THE CHRISTIAN SCIENCE MONITOR, September 28, 2008.
Charlie Rose interviews Warren Buffett
Warren Buffett joined Charlie Rose October 1, 2008, to make the case for a bailout.
Published October 10, 2008
Bill Moyers talks with one of the world's most successful investors George Soros about the global capital meltdown, how he saw it coming, and what can be done now.
Bill Moyers checks in with JOURNAL contributor and director of the Annenberg Public Policy Center Kathleen Hall Jamieson on how dirty politics will play out in this final stretch to the election.
THE IRAQ WAR VOTE, SIX YEARS LATER
In this web exclusive essay, on the sixth anniversary of the congressional vote to grant President George W. Bush the power to invade Iraq, Bill Moyers looks back to October 2002 and the Senate debate over the rush to war.
>Check out: BOOGIE MAN: THE LEE ATWATER STORY
Stefan Forbes new film documents the career of Republican party strategist Lee Atwater.
DEEPENING THE AMERICAN DREAM
Is the American Dream in danger during our financial downturn? Or is the American Dream now about something new? Our guests and our viewers speak out.
MOYERS ON 2008
Add your voice to our election year map. Plus, get perspective on pressing election-year issues from JOURNAL guests.