US Banks 'Basically Insolvent' says George Soros
The U.S. economy is in for a "lasting slowdown" and could face a Japan-style period of relatively low growth coupled with high inflation, billionaire investor George Soros said on Monday. Soros, speaking to Reuters Financial Television, also warned that rescuing U.S. banks could turn them into "zombies" that draw the lifeblood of the economy, prolonging the economic slowdown. "I don't expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown," Soros said, adding that in 2010 there might be "something" in terms of U.S. growth.
Soros also said the U.S. dollar is under selling pressure and may eventually be replaced as a world reserve currency, possibly by the IMF's Special Drawing Rights, a synthetic currency basket comprised of dollars, euros, yen and sterling. "I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries," said Soros, whose famous bet against the British pound earned his Quantum Fund $1 billion in 1992. "Being the main issuer of international currency, the US been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end."
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