At an event hosted by The Economist magazine last night, George Soros warned investors that the methods used to resolve the 2008 financial crisis are no different than the methods that helped cause the crisis to begin with. Soros says we are blowing inevitable bubbles that will have similar dire results:
“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods….Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble….We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”
We’ve been saying this for well over a year, but of course, politicians choose to do what keeps them in office and not necessarily what is best for the long-term health of the country. The bright side to all of this is that bubbles take a long time to form so hop in the front cart and put your hands up in the air. This rollercoaster might be the biggest and best one yet! Just don’t tell Ben Bernanke. He might ruin all the fun.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.