As the whole world is concerned about the global slowdown and the leaders of various countries work to weather the recent crisis that sent stocks into a steep decline, billionaire investor George Soros blames the turmoil on the faith in market forces. He believes that “the notion that markets are self-correcting is what led to the massive expansion of debt financing that culminated in sub-prime mortgages that epitomized the easy-money mentality at the root of the disaster.” He added that that this whole notion is built on false conceptions. According to Soros, it is this belief that became the dominant creed and this then led to the globalization of markets, the deregulation of markets and the increased use of leverage and all the financial engineering.
I think Soros’ opinion is a very extreme one. I feel like its not so simple to question the whole concept of markets being self-correcting. I would like to believe that the markets are what have the power and that it is the market forces of demand and supply that guide the economy. I wonder what everyone else has to say about Soros’ stand.
1 comment:
I believe that any economist has to acknowledge that there are flaws in the market, maybe not in its inherent design but certainly in its implementation. There will never be a situation where a completly free market exists, and so I feel that what I see as economists blind faith in the market is irrelevant considering the reality of the economy. We must come to question the allocations of the market that exist as we see them today instead of basing everything on an idealistic world of equilibriums.
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