George Soros Says Euro In Crisis

…so is it time to short the euro? In today’s Drudge Report. Soros says that the euro is structurally unsound.
Given Soro’s commitment to himself, is it wise to assume he will be betting against the euro? How could we find out?
I have always viewed Soros as the ultimate proponent of self interest-he doesn’t care about anybody or anything (except himself)-so, should we follow his lead?

Wow! Soros, behind only Bill and Melinda Gates, may be the greatest philanthropist alive. Google it, since you didn’t seem to know it already; have lots of paper ready in your printer.

Some of that philanthropy would be for “left-wing” causes, but he’s been credited with almost-singlehandedly fostering freedom of markets and expression in emerging countries like Georgia. (Some right-wingers need to admit that “freedom” is just a talking point and that Pinochet’s Chile is a better model of their espoused modern American freedom.) Paul Volcker, Reagan’s central banker, wrote the complimentary forward in one of Soros’ books, which books certainly seem like sincere efforts toward improving the world.

“he doesn’t care about anybody or anything (except himself)”. Wow. Let me say it again: Wow!

I’m guessing that Mr. Ralph124c qualifies as what is politely called “rightist.” Greed is central to rightist philosophy, but when a successful investor donates to leftish causes, they’re accused of making their money via … greed!

“so, should we follow his lead?” Soros is a smart investor, and prefers investments that are profitable! Do you disapprove of that? The way your question is phrased, you might think that Soros is leading another of his famous “attacks on a central bank” and you’re wondering if it would be moral to join his attack; is that it? :smiley:

It might be useful to link to the article you are discussing.

Thanks astro. From reading what Soros actually wrote, it looks like the OP may have overstated the case a bit:

What Soros appears to be actually saying is that the absence of a central Treasury institution is a critical flaw in the construction of the euro system, but one which is being circumvented by makeshift temporary solutions in the short term and may be structurally fixed later on:

Soros has been making similar criticisms of the euro for over a year now:

If Soros actually does short the euro, I have no doubt we’ll hear about it.

Sounds like a very Republican stance, I take it you are a fan.

Soros is involved in currency speculation, but you can’t really fault the man for calling what he sees. Now, if he said that the Euro was fine, and then sold it short, you could call foul. Or if he keeps talking like this and starts buying euros, then you could likewise call him dishonest. But there’s no reason to think right now that Soros would profit from a Euro collapse, else why would he warn everyone else?

This is straight out of Optimal Currency Area theory, although he doesn’t focus on the other aspects of this theory. The basic idea is that for a currency zone, such as the Eurozone to work, there has to be some level of the following factors: (1) labor mobility, (2) capital mobility, (3) risk-sharing/fiscal transfer mechanisms and (4) unified fiscal policy (although the Wiki article I linked to doesn’t really stress this). There are other factors discussed in the article I’ve linked to, but the ones I’ve listed (IMO) are the biggies.

Apparently the Eurozone has bad labor mobility (although it’s never been clear to me why this is). And they don’t really have an in-place risk-sharing or fiscal transfer mechanism. They can ad-hoc these things together on a case-by-case basis, but a co-ordinated response seems (again IMO) politically difficult within the Eurozone.

And they really don’t have a coordinated fiscal policy (although they do have a coordinated monetary policy, obviously). Soros seems to be advocating for centralized fiscal policy, and I agree, this is something that will have to be implemented eventually (I don’t have access to the article right now, so I’m going based on what I’ve read in this thread).

Unwinding the Euro is a practical impossibility. It would take years and cause too much economic disruption.

ETA: to change “production” to “disruption”

Bad compared with the USA, WOOOOONDERFUL compared with the same geographical area some 15-20 years ago. The biggest problems are two: multiple languages and people not understanding the laws involved. The first one is being solved thanks to people being more and more interested in learning additional languages, the second one is getting less bad with time.

For example, I’ve seen ads in monster.es (Spain) from Italian firms asking for people with specific technical knowledge and stating “if you speak Spanish or Portuguese you don’t need to know Italian, our experience is that people with those languages have no problem communicating here.” 20 years ago, an ad like that would be unthinkable. That’s one company whose HR department knows how to use EU mobility just fine.

For an example on the other side, I’m from Spain; I’ve been self-employed for two years. Several times in the last ten years I’ve found myself being denied positions in another country within the “mobility area” because “the lawyer said it is very difficult for a Spaniard to get a work permit for (Italy/France).” It 's not very difficult, you morons, it’s impossible for the same reason it is impossible for someone from Texas to get a work permit for California. Since setting up shop as self-employed, I’ve kept running into people who do not understand that hiring me does not mean hiring “an employee,” it means hiring “the services of a company”, therefore laws like “any employees of Dutch companies must be residents of Holland” do not apply (plus I’m not entirely convinced those people were reading the law correctly or, again, believing a lawyer who kept his books in his rectum).

And the third one?

ETA: Oh, it was an editing ghost. Nevermind.

Yeah, I found a way to scrunch the “original” last two of three into second of two :slight_smile: and I think it’s clearer than my original.

I would imagine it is partly to do with not having a common language. Many Eurozone citizens speak multiple languages, but many do not.

Well, the multiple languages thing is the obvious point to jump to, but I have a few questions about this as an explanation:

  1. As pointed out, many Europeans speak multiple languages. I have traveled in Europe before (although not extensively), and I’ve only rarely had problems with people not being able to understand English or figure me out if I’m speaking Spanish. I’m curious as to how widespread the lack of multiple-language speaking really is.

  2. I can certainly see language being a problem is specialized white-collar jobs (such as law, and I think the French still conduct a lot of their science in French, right?). But for lower skilled work, I’m unclear as to how this should be a barrier. In the US, a good chunk of our low-skilled labor force is comprised of people who have a marginal grasp of English, so I think it should be possible to have labor mobility in the low-end sector in Europe.

  3. Both China and India have unified currencies, and they also have a multiple language problem. I don’t know how the Chinese deal with it, but traditionally, in India, the educational system has required learning 2-3 languages with fluency in at least two. Most people who pass through this system become fluent in their native language as well as either Hindi or English (but, of course, in some areas, very few people have formal schooling, so their labor mobility will be restricted).

So, I have to ask how the educational systems in Europe are structured. Given the pervasiveness of English as the language of international business, I would have thought that most European schools would provide English educational classes. Is this not correct? If they did or are starting to, then perhaps English can function as a “lingua franca” so to speak?

  1. In the age of the internet, there are all sorts of new ways to achieve labor mobility or reduce the need for labor mobility (perhaps that’s a criticism of Optimal Currency Area theory, though). I am failing to understand why countries haven’t been able to take advantage of the internet to enhance their labor mobility regardless of language barriers.

  2. In the US, traditionally, there have been ethnic enclaves, where people could live while they assimilated into the English speaking culture. So, you would have services, government and private, provided to people in their native language while they were integrating. This sort of thing was common in India for a long time as well. Do European countries have similar types of enclaves or services?

So, those are my thoughts. I’m not familiar with how day-to-day life functions in Europe, but given my experience with the US and India, I hope I’ve been able to explain my perplexity at the mobility issue. But perhaps culture or regulations are different in Europe, so I’m willing to be enlightened.

Nava has brought up an interesting non-language issue which I hadn’t considered before. I thought that there was full legal labor mobility in the Eurozone, but from reading his/her post, I am gathering that either there isn’t or people are applying the law incorrectly.

This. To work in another European country you really need to be fluent in the resident language, unless you want to clean offices or pick fruit. I’ve worked with many many Europeans here in London and they all have two things in common - they’re ambitious, so have got of their arses and made the brave move to a foreign country to further their careers, and they all speak pretty immaculate english.

I think his premise is sound.

But if he was going to short the euro I suspect he’d be using gold, not USD.

There’s a big difference between being able to take an order in a restaurant and being able to conduct bsuiness meetings in english. What’s more, the locals you encounter through tourism are likely to have more grasp of english than someone working in a small town who never comes across a tourist.

And a good chunk of lower skilled work in the UK (and other European countries) is done by people having barely a grasp of english, but these tend to be people coming from poor economies with low employment rates and pay - the influx of workers from Eastern Europe is huge, but a cleaning job in London is no more appealing to an italian than a cleaning job in Milan, so why would they come?

Yes, they do, but studying english at school doesn’t mean you’re going to be fluent enough to get a business job in a foreign country. I studied French for years at school, but my language skills can get me through a vacation in Paris but that’s about it.

Can you explain how the internet increases labour mobility if you can’t speak the language? I’m not sure I get your point.

Certainly do in the UK, where we’ve had immigration from non-english speakers for decades (particularly the Indian sub-continent). There’s also increasing services to cope with the large influx of East Europeans who don’t speak the language, but you need strong demand in order to provide the services. There’s something like 300 languages spoken in London, you can’t provide for them all.

Soros talks his own book. In other words, he takes a position and then talks it up. People pile in and he makes money. Ok, that’s a little simplistic.

He did this in 1992 with the Bank of England. Please note, he was a small player but definately vocal and his " marketing" helped break the pound. Swiss Bank Corp, where I worked and knew some of the big swinging dick traders that made the same trade, probably had 100x bigger position.

I wouldn’t go that far. English is the working language of academia within Europe.

Fair enough. But, I would like to see some stats, because I’ve been in small towns and I didn’t have a problem with English (I’ve never been to Eastern Europe, though, which I assume, because of historical events, would have a greater problem with English fluency).

Because it pays more? I know that’s a glib answer, but that’s the key to labor mobility. People move where they can make the most money, and that influx in labor puts downward pressure on the wages until an equilibrium is reached. For example, my reading leads me to believe that Spain experience inflation across all sectors during the boom. Here in the US, if there’s a boom and corresponding wage inflation, there’s a lot of people who will move. If you’re cleaning bathrooms in Milan, and you can make 1.5 times that cleaning bathrooms in Spain, that should be a pretty big incentive to move. I’m not understanding why that didn’t happen.

There’s a difference between studying English and becoming fluent in English. As I stated earlier, if you go through the traditional Indian schooling system, you become fluent in at least 2 languages. I went through the American schooling system and I was fluent in Spanish when I graduated high school, and that was twenty years ago, and I can still converse in Spanish. Certainly enough to work in most jobs in a Spanish speaking country. Not enough to be a lawyer in Spain or an architect, but I already acknowledge that I could see how language was a barrier to high-skilled jobs.

Well, maybe I should have said telecommunications generally combined with software advancements. So, for example, I’m fluent in Tamil. If I wanted to hire someone to clean my house, I could hire someone who only spoke Tamil. And I could use the internet to find them.

On a larger scale, I could imagine setting up a call center to handle calls from all of Europe in a centralized location (if it made business sense). So, there I would use software capabilities to provide general dealings with the staff, and have people who were fluent in multiple languages at key positions to keep an eye on things. That’s the kind of thing I’m thinking about.

But I’m not talking about all the other immigration. You know you are going to get immigration from the Eurozone. What mechanisms do countries have to deal with Eurozone immigration? That’s a fairly limited number, so the 300 number is not relevant to this discussion.

My guess is that for lowly paid jobs that just isn’t enough of a differential (in absolute terms) to uproot yourself. Enough of an incentive for people from very poor countries, but not for people from another Eurozone country. Of course that applies much less to highly paid professionals and academics.

Where you live isn’t just a rational matter of income and cost of living. For example, many people take decades to feel at home again after moving within Germany, to another region where people talk funny and have curious manners. So there is much less moving from depressed to thriving regions within Germany than what would result from people being rational, rootless economic actors.

I suppose, but we have similar downward pressures on labor mobility in the US. I don’t think someone from, say, the South, would feel very at home in the Midwest/Great Lakes, but we had significant migration from the South to the Midwest/Great Lakes after WWII.

I don’t know what the answer is, but if the Eurozone wants to keep going forward, they’re going to have to figure out a way to increase labor mobility.