George Soros | Charlie Rose | 1998 | Summary and Q&A

Transcript

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Summary

In this video, George Soros discusses the origin of his book, "The Crisis of Global Capitalism," and his concerns about the economic crisis. He talks about the concept of an open society and how his foundation works towards fostering open societies around the world. Soros explains his view on the dangers of excessive reliance on market values and the instability of financial markets. He shares his theory of reflexivity and how it differs from the prevailing wisdom of market equilibrium. Soros also discusses the role of capitalism and unstable markets in contributing to the global economic crisis. He suggests reevaluating the mission of the International Monetary Fund (IMF) and developing a new system for controlling market excesses. He addresses the need to dampen the flow of capital and advocates for a burden-sharing approach between lenders and borrowers in times of crisis. Soros shares his thoughts on the role of the IMF and the Federal Reserve in stabilizing economies. He discusses the current state of the global economy, potential recessions, and the future of the stock market. Finally, Soros reflects on what he wants to be remembered for and his ongoing work towards refining solutions.

Questions & Answers

Q: What is the concept of an open society?

Soros explains that the concept of an open society recognizes that nobody has a monopoly of the truth and all views are fallible. It involves having a democratic government, market economy, and critical thinking, allowing for continuous improvement and avoiding the imposition of ideologies on people by force.

Q: How did the collapse of closed societies not lead to the creation of open societies?

Soros mentions that the collapse of closed societies did not automatically lead to open societies because something was missing. He realized that open society is not only threatened by totalitarian regimes but also by an excessive reliance on market values. He acknowledges that open societies have deficiencies and need to be constantly improved.

Q: What dangers does an excessive reliance on market values pose to open societies?

Soros believes that market values should not enter into spheres of society where they don't belong. He thinks it's wrong to allow market values to overshadow human values or intrinsic values. While financial markets, particularly the financial market, are unstable, his concerns extend beyond financial instability to the potential impact on society as a whole.

Q: What made Soros conclude that capitalism had dangers and contributed to the economic crisis?

Soros clarifies that he is not opposed to capitalism, but believes it can be improved to make it more viable. He identifies the free flow of capital as a factor that contributed to the economic crisis. The inherent instability of capital flows and the boom-bust nature of financial markets played a significant role. The regulatory system in place, including the actions of the IMF and monetary authorities, exacerbated the problem.

Q: What does Soros think needs to be done to address the dangers of capitalism?

Soros suggests recognizing how the system works and reshaping the mechanisms for controlling market excesses. He believes that a new Bretton Woods framework is necessary for a world characterized by the free flow of capital. However, before achieving this, there needs to be a comprehensive understanding of the current situation and the development of a concept for the new system. Soros admits that he has a stronger ability to analyze the problem than to provide solutions.

Q: How can the flow of capital rushing towards economic opportunities be dampened?

Soros proposes the use of official guarantees to regulate the flow of capital. By providing support or injecting money when there is a lack of available capital, it can be withdrawn when the market is becoming overheated. This withdrawal of support signals to the market that it needs to correct itself. Additionally, when there is a bust, borrowers and lenders should both bear the burden of the adjustment, spreading the responsibility between them.

Q: What does Soros think should have been done in response to the economic crisis, particularly in countries with excessive debt?

Soros believes that countries with excessive debt should have undergone some debt-equity reorganization through a moratorium and imposing conditions on lenders. He cites examples like Korea and Thailand who would have benefited from such reorganization instead of receiving more loans. By changing the relationship between equity and debt, an effective solution can be achieved.

Q: What is Soros's opinion on the IMF's role in preserving the financial system?

Soros has both criticism and respect for the IMF. He understands that their primary task is to preserve the financial system by ensuring that countries meet their obligations. However, he feels that their interventions and regulatory system often have a negative effect on economies, leading to punitive interest rates and potential recessions. He believes that a balance needs to be struck between stabilizing the financial system and safeguarding the real economies.

Q: Does Soros think the global economic crisis is under control?

Soros states that the panic phase of the global economic crisis is behind us, but the after-effects are still being felt. Many countries are in recession, and the world economy could potentially slip into a broader recession. He acknowledges that the situation is still uncertain and caveats his judgment by saying it can change as events unfold.

Q: What is Soros's view on the future of the stock market?

Soros personally believes that we are currently in a bear market due to the pressure on margins and an expected decline in investments. If the market experiences a significant decline, it is more likely to lead to a recession. However, he cautions that leaving the market too early can result in missed profits as the final phases of a bull market can be highly lucrative.

Q: What does Soros want to be remembered for?

Apart from his family, Soros feels that his book, "The Crisis of Global Capitalism," is one of his most significant contributions. The book reflects the ideas he always wanted to share and have read by others. He acknowledges that refining solutions and working towards their realization is an ongoing process, and he wants to continue making contributions in that regard.

Takeaways

George Soros believes in the concept of an open society, where critical thinking, democratic government, and market economy prevail. He identifies dangers in the excessive reliance on market values and the instability of financial markets. Soros suggests reevaluating the role of institutions like the IMF and advocates for controlling market excesses through a burden-sharing approach between lenders and borrowers. The global economic crisis, although no longer in its panic phase, continues to have after-effects, particularly on real economies. Soros emphasizes the need for a comprehensive understanding of the current situation and the development of a new system. He personally believes that we are in a bear market and advises either being cautious or seeking other avenues for investment. Soros continues to refine his solutions and hopes to be remembered for his contributions to philosophy and the quest for improving society.