Posted on 02/21/2009 11:37:14 PM PST by TigerLikesRooster
George Soros finally gets it
February 21, 2009 – 1:56 pm
Three weeks ago, the positively schizophrenic Op-Ed page for the WSJ published yet another piece by a big financial brain proposing a “solution” to the financial crisis. While the editorial page itself is so rigidly ideological as to be useless, the op-ed page publishes stuff all over the map. The only common attribute seems to be a big-name byline. Once in a while you’ll get a thoughtful, nuanced and hard-hitting piece by Shelby Steele or Judy Shelton, for instance; occasionally, one of the big names will actually say something intelligent AND non-conventional (Dick Armey). More often, however, it publishes tripe masquerading as erudition. Glenn Hubbard claiming low-interest mortgages will solve the housing crisis; Martin Feldstein—the Republican’s answer to Paul Krugman—saying “defense spending would be great stimulus;” and Soros talking up his “side pocket” solution:
The trick [to solving the bank crisis] is not to remove the toxic assets from the banks’ balance sheets but instead put them into a “side pocket,” as hedge funds are doing with their illiquid assets. The appropriate amount of capital — equity and unsecured debentures — would be sequestered in the side pocket.
This would cleanse bank balance sheets and transform them into good banks but leave them undercapitalized. The same $1 trillion that is now destined to fund the bad bank could then be used to infuse capital into the good banks.
Though he says it isn’t an off-balance sheet solution, Soros’s “side-pocket” gimmick sounds an awful lot like similar plans (mostly failures) dating back to 2007. Remember Hank Paulson’s Master Liquidity Enhancement Conduit (the “Super-SIV”). That one never got off the ground. And neither did TARP 1.0, which was supposed to use taxpayer funds to buy bad assets. Instead TARP money was diverted into purchases of preferred equity. Soros might object to my comparing his solution to these other failures. Okay. How about Lehman’s plan to carve out bad assets into a new real estate entity? The company was bankrupt inside of a week.
Soros, who published the above on February 4th, is a veritable financial genius, so I have to assume he’s just not paying attention: the reason all of these off-balance sheet gimmicks are non-starters is because the losses are just too big. The “appropriate amount of capital” is so high it simply doesn’t exist. With the whole economy up to its eyeballs in debt, and suffering from a classic debt-deflationary spiral, the value of “toxic assets” is already in the trillions and continues to grow.
Soros appears to be suffering the illiquidity delusion. He seems to be in the camp that says if we can just “unclog” bank balance sheets then we’ll get credit “flowing again.” But the problem isn’t a lack of liquidity, it’s insolvency. A gangrenous leg can’t be “fixed” with blood transfusions. The only “solution” is amputation.
Anyway, only three weeks after arguing “side-pockets” were the magic bullet, Soros now sounds downright despondent. Reuters:
Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.
Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.
He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.
“We witnessed the collapse of the financial system,” Soros said at a Columbia University dinner. “It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.”
Three weeks ago George thought all we needed was a little financial engineering. Now he sees “no prospect” of resolution and says we’re falling like the Soviet Union. What changed? My guess is that George finally started to think outside the box; he put his big brain to work thinking about the very foundation of our economic system and realized it’s broken.
Why highlight this particular flip-flop with a blog post? I think it’s emblematic, and not in a good way.
I continue to be struck by the level of ignorance among our captains of industry, our leading politicians, our financial elite and, most ominously, our economic “experts.” Few appear to recognize the depth of the crisis we face. Most still aren’t prepared to ask the hard, fundamental questions about our economic system. Anyone who mentions the gold standard, for instance, is treated as a novelty. Nevermind that fractional reserve banking—or perhaps our central bankers’ management of it—is the most important contributing factor to the crisis..
The problem, I think, is that so many of our leaders are tied immovably to legacy ways of doing business. A man will make himself believe most anything if his salary depends on it. Lots of salaries are at risk, so lots of heels are digging themselves in.
Anyway, as I’ve argued for awhile, the only way to “solve” the crisis is to let asset prices fall. And that means the balance sheets on which those assets currently reside need to recognize substantial losses. Call it the “Fight Club” solution*—everyone goes back to $0. This would be highly painful for ALL Americans. But it would be most painful for those with the most to lose…
Ping!
George Soros has Mad Cow disease and Irritable Bowel Syndrome of the mouth.
If there is an anti-Christ out there, he should be able to publicly hang this guy at the Lafayette Park. The present crop of sorry bunch of self-styled globalists, including Kissinger and Brzezinski, won't cut it.
George is a bumbling publicity-hogging do-gooder with big mouth. His talent is far short of qualifying as serious contender for the ‘anti-Christ’ title.
If there is an anti-Christ out there, he should be able to publicly hang this guy at the Lafayette Park. The present crop of sorry bunch of self-styled globalists, including Kissinger and Brzezinski, won’t cut it.
____________________
Right on!
Call me ethnocentric/xenopphobic, yet I really wish Soros would take his sorry arse back to Hungary for good and, moreover, slit his filthy wrists.
For that matter he can take Warren Buffett, too, back to his homosexual love nest and they can do what they will with eachother. I hate them passionately.
From Soros’ 60 Minutes Interview wherein he described how he assisted Nazis during the genocide:
KROFT: Went out, in fact, and helped in the confiscation of property from the Jews.
Mr. SOROS: Yes. That’s right. Yes.
KROFT: I mean, that’s–that sounds like an experience that would send lots of people to the psychiatric couch for many, many years. Was it difficult?
Mr. SOROS: Not–not at all. Not at all. Maybe as a child you don’t–you don’t see the connection. But it was–it created no–no problem at all.
KROFT: No feeling of guilt?
Mr. SOROS: No.
George Soros is an EVIL Sonofabitch.
FUBO
George Soros is an EVIL Sonofabitch.
FUBO
And I’m NOT sorry for the double post.
I don’t know what to make of this. Soros always comes off as being too clever for his own good. I think maybe it’s just sleight-of-hand.
He wouldn’t be the first person to get rich by bamboozling the public. JMO
The only reason he changed his mind is that Obama says it is a crises, so he said the same thing!
Soros is an evil idiot, “And that’s the doubble death”.
I mean, it’s one thing to be a billionaire capitalist funding left wing internet/media, which by the way, makes him, by default, an idiot.
The evil comes when he has influence, that he recives(OWNS) media attention. That alone should certify him as the sociopath that he is. I could just as eaisly say things that are part half truth and half BS fitting Soros’s distorted world view, but then again I’m not evil.
Deport Soros anyone?
“Gets it” or is positioned to benefit if his advice is taken?
Soros was/is a National Socialist.
Anyone get it? National Socialist? He pulls the strings for this bunch of criminals in the White House today.
I wonder why the hell any self repecting Jew would look up to this bastard and vote for the crime wave that he got in this government. It is sad..but someone told me that the Jews would sell their lives for money.
The only thing that I can think of that would make Soros change his mind is that his pocketbook is being picked. A plan, play, movement, position that he had planned has gone south on him.
He thought he was in control...Master of the Universe.
Ditto!!! Had a great feeling there for a moment!!
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