Soros Warns of Currency War: 'More Fireworks, More Volatility'Friday, 25 Jan 2013 George Soros, one of the most outspoken critics of Germany’s proposed austerity policies to solve the European debt crisis, said the euro is here to stay and will gain as other nations seek to devalue their currencies. Soros, who made $1 billion shorting the British pound in 1992, said that while the causes of the euro crisis haven’t been solved, the acute phase of the turmoil is over. Germany will always do “the minimum” to preserve the currency, Soros said Thursday at the World Economic Forum in Davos, Switzerland. He forecast a “tense” two years for the euro region. Yields on sovereign debt of countries from Spain to Greece have
fallen since European Central Bank President Mario Draghi announced
an as-yet-untapped bond-purchase plan in September last year. “Currencies have been remarkably stable in the last few years,” Soros said. “Now there is the making of more fireworks, more volatility.” "I think the biggest danger is actually, potentially, a currency
war," Soros said. "The rest of the world follows a different recipe
from the Germans. Germans believe in austerity, and the rest of the
world believes in quantitative easing," Soros added. Japan’s Moves Bundesbank President Jens Weidmann has denied taking such steps, calling the allegations “ridiculous.” Weidmann this week criticized moves by Japan’s Prime Minister Shinzo Abe to devalue the yen, saying such measures risked “politicizing” the yen’s exchange rate. Soros said the extent to which Japan can push its currency lower will be limited by what the U.S. is willing to tolerate. The momentum is for the “euro to rise and yen to fall,” Soros said. “I generally don’t know how far things go but I can see which way they are going.” Soros said countries can only grow their way out of excessive debt and should avoid policies that lead to contractions. The U.S., the world’s largest economy, has “pretty good underlying dynamics,” he said. Soros Fortune “If the fiscal cliff and those issues are resolved, and the U.S. economy picks up, I think interest rates are likely to rise,” he said. Soros, who has a $21.2 billion fortune, according to the Bloomberg Billionaires Index, said there is “definitely” no near-term risk of credit bubbles, a topic that several delegates at the conference discussed yesterday. “There is an asset bubble in China in real estate, sustained by lending in the quasi-banking system,” he said. “The real estate market in China is rising again. That, I think, is a potential bubble because of the source of financing.”
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