George Soros: Three Steps to End the Depression
George Soros: Only Three Financial Policies
To strengthen the economy in Europe (and America?), George Soros offers sage advice.
At a forum Charting A New Growth Path meeting during the IMF-World Bank meetings in Washington D.C., George Soros urged Europe to create a common Treasury, recapitalize its banks, and protect vulnerable states may reverse the world depression. He noted policymakers have lost control of the economic crisis: financial markets are forcing the world into a depression.
The Chairman of Soros Fund Management made a fortune during the 1992 sterling crisis. He said the most important task is to erect safeguards against contagion from a possible Greek default.
In an article for Financial Times, Soros wrote, Since a euro zone treaty establishing a common Treasury would take a long time to conclude, in the interim the member states have to appeal to the ECB (European Central Bank) to fill the vacuum. Both the banks and bonds of countries such as Italy and Spain need to be protected … To relieve the pressure on the government bonds of countries such as Italy, the ECB would lower its discount rate.
Soros said the ECB could then encourage countries to finance themselves with Treasury bills bought by banks. At some point in time, financial institutions could stage re-discounts the T-Bills in a central bank. He suggested allowing countries to refinance debt for about 1% per year year during this emergency period.
He said, Neither the ECB nor the EFSF (European Financial Stabilization Facility) would buy any more bonds in the market, and that
the EFSF should oversee guaranteeing and recapitalizing banks. These institutions who would then need to maintain credit flows under guidance and monitoring from the ECB.
These measures would allow Greece to default without causing a global meltdown. That does mean that Greece would be forced in default… How Greece fared would be up to the Greeks.
However, he said only public demand for his plan would make it happen, given likely resistance from banks and national governments.
Mad Mike’s America thanks Reuters
How could Soros’ ideas apply to the faltering American economy?