(2008-01-31) Soros Credit Crisis

George Soros believes we're facing the end of a "60-year superboom" fueled by Cheap Credit (Debt Financing). Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy... Globalization allowed the US to suck up the savings of the rest of the world and consume more than it produced (Trade Deficit)... The super-boom got out of hand when the new products (derivatives) became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility. He doesn't see problems hitting the rest of the world, but rather a strengthening of others like China.

Andrew Leonard questions the China issue a bit.