Finance & Business World

Billionaire hedge-fund manager George Soros called on the world’s leaders to create “global regulations” to ensure stability as the world emerges from the financial crisis.

“We need to establish proper regulation because the system we allowed to develop for the last 25 years did collapse,” Soros said today during a video link with a conference in Yalta, southern Ukraine. “The authorities need to agree on that, but whether they will be able to do that is an open question.”

President Barack Obama and other Group of 20 leaders meeting in Pittsburgh are uniting behind a plan to force banks to tie compensation more closely to risk and to tighten capital requirements, while they agreed to maintain stimulus measures to spur the global economy amid the worst financial crisis in more than six decades, according to officials from G-20 governments.

The regulatory “should not be led particularly by the U.S., but it is very important to bring China into it,” Soros said. He criticized the Obama administration on bank bailouts.

“That was a mistake,” Soros said. “More radical recapitalization should have been done even if that would have meant that the state would take temporary control of the banking system,” Soros said. “But Obama felt that it would not be accepted and decided they would not do it.”

Soros said he expects the U.S. economy to show “very slow” expansion over the next several years even after the government injected “tremendous amount of money” into the economy to renew growth.

‘Better Balance’

“Next year or the year after, there will be a drop, but it will not be severe,” Soros predicted faxless cash advance. “China has resources to sustain its economy and it will drive the global economy. Europe will be in better balance” than the U.S., “but I cannot see growth there either. Brazil will show good growth,” he said.

U.S. gross domestic product shrank at a 1 percent annual rate in the second quarter, less than the 1.5 percent decline projected by economists in a Bloomberg survey. The drop in GDP was the fourth in a row, the U.S.’s longest contraction since quarterly records began in 1947. The world’s largest economy has shrunk 3.9 percent since last year’s second quarter, marking the deepest recession since the Great Depression.

Withdrawing stimulus measures from the economy “will be a very risky operation,” Soros said. “I do not think we will see run-away inflation, but the fear will increase interest rates and cause slow growth.”

Derivatives Markets

Soros also said that derivatives markets should be under more control. “Some derivatives carry tremendous risks and they cause systemic risks,” he said. “This is why I think that some kinds of instruments need to be licensed and some instruments should be banned.”

He said the U.S. dollar likely will retain its position as a reserve currency.

“Clearly, the dollar has lost its dominant position as the most desirable and widely used reserve currency, but there is no alternative to the dollar,” said Soros. “There is general reluctance now to hold currencies, there is a flight toward commodities or real assets.”

Source