“It is better to do nothing than to keep losing money” is the sagacious advice from the legendary investor George Soros to those thinking of making a fast buck through financial markets.
“Unfortunately, this is the time to play safe. Markets are far from equilibrium situation,” he said during a conversation with Professor Reuben Abraham at the Indian School of Business (ISB), covering a range of issues from reforms in Myanmar to the role of religion in an open society.
Mr. Abraham is the executive director of the Centre for Emerging Market Solutions (CEMS), ISB.
Mr. Soros, who made his billions by investing in stocks, said the situation was extremely difficult to predict.
On the eurozone crisis, he observed that there was a need to overcome the acute financial crisis that was gripping Euro by developing a strategy. There were certain inadequacies when Euro was set up and the authors knew about it. There was currency union but not political union. However, there were also flaws in the design of which the authors were not aware.
He said there was a lack of recognition that financial markets could generate imbalances. What happened in Europe was reminiscent of the ‘Great Depression'. It was a replay of the same scenario in a different context. If the common currency broke down, then it would then lead to break-up of European Union. Euro crisis was more serious and more threatening to world prosperity than crash of 2008.
Replying to a question, he described China as the emerging power. He was having a great hope for China. As it develops economically, it would also develop economically and would have profound influence on the history of mankind. India was also in the same category but was a democracy. And that has its drawbacks. It would not be so easy to develop infrastructure and roads. “It is a messier situation in many ways,” he added.
Giving his take on philanthropy, he said philanthropy could not take the place of government especially in areas like education and health. “We certainly are aware of what we can do is peanuts compared to what government is not doing”. To push the government to do the right thing was more valuable”. He was quite impressed by Indian philanthropists.
On how to tackle the ever increasing consumer and government debts in the global financial system, Mr. Soros said globally the expansion of credit leverage helped governments. “But the question is how much that is too much. It is a puzzle for which I don't have the answer,” he added.