George Soros recently said that some weaker economies (read: Greece, and maybe Spain and Portugal and/or Ireland) will probably have to exit the Euro.His opinion on the currency is valuable because he’s a billionaire investor, but mainly because he made the most famous currency bet in the world: shorting the British pound in 1992.
This weekend, Soros explained that bet and also how hedge funds affect currencies.
In an interview with BBC Mundo, he makes clear that he’s not worried that hedge funds will singlehandedly crush the Euro, and neither should you be.
Prompted by BBC Mundo’s statement that “Funds like yours right now are deciding whether to invest in the Euro, which could have enormous consequences for the lives of Europeans,” Soros told the network:
Some hedge funds do much harm, and to some extent, some of our activities have undoubtedly affected currencies, but even when I was at the peak of my success that represented a tiny part of our action in the markets.
If I had gone against the market, instead of guessing where the market going, my action would not have for example led to the collapse of the pound sterling.
Although I believe the man who caused the bankruptcy of the Bank of England was not really [me]. Market was the one who did it.
I guess where the market was going and was an important element of it because I gave him momentum. But I did not cause the bankruptcy of the Bank of England.
Is there an ethical dimension to hedge funds’ [playing God in the markets]? (Note that the word-for-word translation of the question is: Do their actions have an ethical dimension?)
At first, no. Because the fact that I buy certain action, as an anonymous participant in the market, did not influence the price of that action.
When I had known, I was treated like a guru, if I said something about the gold, for example, markets were following me. Then I influenced the markets. It began to have an ethical dimension.
This greatly complicated my life and it became much more difficult to run the fund.
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