Hard News: Theories, please ...
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excerpt from an article written by George Soros, published by FT
Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism.
Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves.
Nevertheless, market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit.Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced.
[emphasis is mine]
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Great article- seldom has it been put so succinctly: living beyond one's means- nation or individual- ends sometime and ends badly. I wonder where Mr Soros has been putting his billions!
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I wonder where Mr Soros has been putting his billions!
Well, as long as Mr. Soros never feels inclined to to do to the New Zealand dollar what he did to the pound, I can't much care.
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