George Soros – New World Order For Financial Markets
In a recent article titled The Game Changer, Mr. Soros argues that government intervention is required to stabilize the financial markets and economic turmoil around the world.
It can be done â€“ by creating money to offset the contraction of credit, recapitalising the banking system and writing off or down the accumulated debt in an orderly manner. They require radical and unorthodox policy measures.
The government is already using radical policies in an attempt to stimulate the economy by opening up credit, modifying mortgages and bailing out too-big-to-fail instutions. It seems that whatever has been done thus far is simply not enough. Perhaps it would have been best to let insolvent institutions that made bad decisions just go under. Unfortunately, we are past this, and government intervention is the name of the game. I believe that the Game Changer may have been when the Fed and Treasury stepped in back in October 2008 to save failing institutions like Lehman and AIG.
Finally, the international financial system must be reformed. Far from providing a level playing field, the current system favours the countries in control of the international financial institutions, notably the US, to the detriment of nations at the periphery. The periphery countries have been subject to the market discipline dictated by the Washington consensus but the US was exempt from it.
Mr. Soros is indicating that the game has changed in such a way now, that we must no longer think about just saving the US, but periphery economies as well. We need a coordinated global solution that would involve all of the major economic powers. A new world order in the financial markets. This would truly be a paradigm shift in how the US operates. With President Obama at the helm, we may very well see an easing of some of our isolationist tendencies, and start considering what the rest of the world needs, as well. Mr. Soros calls for international trade financing, global financial market regulation and coordinated banking regulations around the world.
There is no way to escape from a far-from-equilibrium situation â€“ global deflation and depression â€“ except by first inducing its opposite and then reducing it.
One interesting point Mr. Soros makes, is that when we have a situation as severe as the current international crisis, whatever is causing the bottoming out can be corrected by doing exactly the opposite, even to an extreme level. He recommends that we put a price floor on the cost of a barrel of oil at $70. this would subsequently have an effect on heating oil and natural gas as well, causing our prices at the pump and to hear our homes, to rise.Â It would be similar in effect to what happened in mid-2008. When the price of gas topped $4 per gallon, we saw an increase in economic activity in the alternative energy sector,Â Hybrid vehicles being one beneficiary. The point is, that price controls on certain sectors will force new sectors to come to market, becoming a new engine for a global economy – in this case, alternative energy. These types of policies can also be used to implement price controls in other market sectors, like agriculture and real estate, for example. Be forewarned that we may soon see unexplicable and unnaturally occuring Â price increases or a lack of price decreases in certain sectors.
Note that Mr. Soros is an advisor to President Obama and a very influential figure in the democratic party. That being said, we should consider the idea that this plan may already be in the works.
Yes, you can let this upset you and give you another reason to hate the government because ofÂ higher gas prices and energy costs to run your home. Or, perhaps you can also plan on a way to profit and ensure some financial success as a result.
Take a close look at the US (and global) energy sectors, including Oil commodity ETFs, natural gas ETFs, and especially Alternative Energy ETFs if you think these types of policies may be a factor in the near future.
Perhaps we can’t control the outcome of the (un)naturally occuring environment around us, but maybe we can use Mr. Soros’ theory of reflexivity Â to help us benefit in unforseen ways.
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Date: January 28th, 2009
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