2008 marked a turning point for the global economy, introducing a financial crisis that markets have yet to fully recover from. While the damage can be attributed to many factors, financial expert George Soros sees on Bloomberg how several contributors could lead us back from the crisis we’ve been crawling away from.
While speaking at an economic forum in Sri Lanka, billionaire investor George Soros told those in attendance about the dangers of Chinese currency devaluation that might be strengthening their national economy at the expense of growth in global markets. The rush to return to positive standing with the yuan is influencing an environment not unlike that of 2008.
For the first month of 2016, stock and commodity markets have struggled to retain stability. And though the Chinese economy has seen some boost from a devalued yuan, a move away from manufacturing is beginning to show a mark. Until recently, China’s economy has thrived thanks to the goods it was able to produce at low costs to Western markets who made purchases at inflated prices. China’s unwillingness to respect the volatility of the markets, Soros said, could lead to another global recession.
As a respectable figure in the financial world, Soros’ words carry weight. His analysis of Russian and European markets were seen as such a threat by Putin that he received a national ban, but his observation of their respective leaderships were cited as accurate. And even as far back as 2011 his analysis of Greece’s debt crisis was seen was proved to be spot on.
Though he is now better known for his work as a philanthropist and facilitator of human rights causes, Soros’ bona fides come from an extensive career in banking that spans decades. This includes his personal hedge fund, valued at $27 billion, that was made possible by an education in the market that began in the 1950’s. So a prediction from Soros doesn’t come without reverberations elsewhere.
Assessments of the market suggest that now is a volatile time for investors. The Chicago Board of Options Exchange Volatility Index has moved up 13%. Many investors rely on this index to know the level of fear as it relates to the markets. The Nikkei Stock Average Volatility Index, serving much of the same functions for Japanese investors, has also risen by 43%.
Despite the markets and analysts seeming to align with Soros’ view of conditions at the moment, China’s Communist Party has unveiled plans to take place over the next four years. Among many economic plans, their currency will increase its convertibility and they will release capital controls. Stepping in line with the government, the People’s Bank of China has cut interest rates to all-time lows and plan to flush billions into the national economy.