Soros: Ready for slow growth

Billionaire hedge fund manager George Soros has been warning of a global financial crisis for some time now. And when The Australian’s Peter Wilson interviewed the former partner of Jim Rogers lately, he noted how Soros has been handsomely-rewarded for such foresight. Wilson wrote yesterday:

And foreseeing the biggest economic crisis since the Great Depression has certainly paid off financially. In August 2007, with the first symptoms of the credit crunch on the horizon, Soros came out of semi-retirement to reassume control of his Quantum investment fund, astutely repositioning it for the tsunami about to hit. By year’s end Quantum was up almost 32 per cent for 2007, netting Soros profits of $US2.9 billion at a time when other financiers were struggling to break even.

His fortune was estimated at $US11 billion by Forbes in September 2008 and it has grown even larger amid the spreading financial carnage. That same year, in which Hedge Fund Research estimates the hedge fund industry lost a record 18.3 per cent, Soros was up another 9 per cent.

The chairman of Soros Fund Management, whose new book The Crash of 2008 and What it Means: The New Paradigm for Financial Markets is scheduled to be released before the end of this month, shared his latest outlook for the global economy with readers of the Australian publication. From the piece:

The entire world, but especially the West, should now brace for slower economic growth, he warns, and it will be at least a decade before the US sees robust growth. One important effect will be a new wariness in China about the US economic model, Soros says. “The Chinese used to look up to the West and try to imitate the West and they have now discovered that it may not be the right thing to imitate. They now feel suddenly impelled to develop their own system and in some ways they are actually ahead of us.

“For instance, they have been using variable capital requirements as a policy tool. They changed the minimum capital requirements for banks 17 times in the past year, first raising it rapidly and then lowering it. I think we will have to learn to do the same thing.”

In any case, the Chinese government can no longer be relied on to plough money into US government debt, he warns. “They will have less money to spend because their surplus is shrinking and their exports are falling, so they will have less to dispose of, so I think that there will be a definite shift.”