Soros in England

boddhisatva kbevans at panix.com
Mon Dec 14 20:12:15 PST 1998


To whom...,

Soros is just playing the game that all industries eventually play: they compromise, make nice and spend money to influence politicians. The only difference is that we are not used to seeing this from the finance community. U.S. Treasury secretary Rubin is cut from the same die, he's just a little more sober.

As for the Tobin tax and the virtues of slowing down "hot money", I think there are none and it is a fool's errand. Slowing the money down will simply limit credit creation if it even can be done. The problem is not the speed of the money. The problem is inefficiency in standards of openness, financial soundness, and general agreement as to how to conduct monetary policy across different markets. Banks, small groups of punters and politicians are able to create real deformities in the value of a currency that are then pounced on. Also, small countries currently have no place to turn to to get credit to wait out speculators. In addition, lenders or leverage to speculators are clearly violating good banking practice without getting nailed for it.

If you think of the reasons that Thailand's currency is more vulnerable than Germany's (aside from the obvious disparity in nominal value) and England's currency was more valuable when Soros went after it than it is now, it becomes obvious that speculators only do their dirty work where they *can*. The sharp reversal in the trend of a devaluing yen, even in the face of a fairly steady downward trend in fundamentals, shows that speculators can't hold out forever. They have to unwind trades eventually.

The problem with "cooling" the money is that this money really represents the vanguard of something that's positive (ultimately). Loan swaps on a huge scale are a reality. Those have to be hedged somewhere, or at least they should be. The currency markets are the place to do that. Loan swaps are positive because they value risk against risk across borders in a way that is more realistic than any other I can think of. Swapping, syndication and securitization smooth out and rationalize credit risk. Even now it means that Korean industrialists can't run their chaebols as political cliques if they need real money from real banks. It may mean even come to mean that there will be more competition for so-called sub-prime credit, helping consumers avoid usurious rates.

I think for Marxists it's very tempting to go back to the idea of autarky, but that is not reality. I think we chould deal with the fact of globalized money/capital and decide that it's better than the shooting form of imperialism if nothing else.

peace



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