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Soros pointed out that Japan's unprecedented scale of quantitative easing (QE) is a risky experiment: accelerated growth may push up interest rates and lose the ability to continue to pay debts. Japanese Prime Minister Shinzo Abe can take risks and is not willing to let Japan die. Judging from the enthusiasm of public opinion, ordinary Japanese people will also actively support Abe.
He warned that the EU is heading for the long-term stagflation that Japan is trying to shake off. This trend has a high risk. Member states may have lost the “lost decade†and even longer losses like Japan’s past, but the EU is not a true national alliance. It may be easy to be like this. Lost and destroyed.
The euro, designed with the Deutsche Mark as a template, has a fatal flaw.
The EU has created a common central bank but no common finance department. This means that no member state can control the government bonds that the euro sells, and these debts are subject to default risk.
Therefore, after the financial crisis broke out in 2008, many member states fell into a predicament of over-indebtedness. The risk premium made the euro zone always have a gap between creditor countries and debtor countries.
If member states issue euro bonds, it may overcome this weakness.
Regrettably, German Chancellor Merkel ruled out the possibility of euro bonds, which reflects the dramatic changes in Germany's attitude toward European integration.
Before the reunification of Germany and Germany, Germany was the main driving force of integration. Today, after measuring the cost of unification, German taxpayers decided to avoid the trouble of paying for European debtors.
After the financial crisis broke out in 2008, Merkel insisted that each member state should manage its financial institutions and should fully repay government debt.
But Germany did not realize that this was a serious mistake made by France after the re-enactment of the First World War. At the time, French Prime Minister Aristide Briand insisted that the defeated Germany would pay indemnity, and the Nazi party headed by Hitler took the opportunity to gain momentum in Germany.
Merkel’s policy is a great opportunity for extremist movements in other parts of Europe.
The current mechanism for managing lending in the Eurozone will continue, as Germany will always invest as little as possible to ensure the existence of the euro, and the market and European institutions will punish any member state that challenges the loan arrangement.
Despite this, the most serious period of the financial crisis has passed. European financial institutions have realized that austerity will be counterproductive and no longer imposes fiscal controls on member states.
The debtor countries have thus gained some breathing space, and even without any growth prospects, the financial market has stabilized.
Looking ahead, Soros expects that the crisis will come from politics.
Start with Europe.
In fact, such crises are already evident because the EU has become “selfishâ€, too concerned about internal affairs and unable to fully respond to external threats from Syria or Ukraine.
But the EU's prospects for doing so are worse than hopeless. The resurgence of Russia's threat may subvert the current situation and lead to the disintegration of the EU.
The financial crisis has transformed the EU by 180 degrees, and it is no longer the "fantasy thing" that inspires everyone's enthusiasm.
The member states originally sacrificed part of their sovereign voluntary alliance for the common good, and they were equal. Because a eurozone crisis has become a relationship between creditor countries and debtor countries, neither voluntary nor equal.
In fact, the euro may also cause the EU to collectively destroy.
Look at the United States.
Unlike Europe, the United States is the most powerful economy in the developed world. The development of shale energy has given the US a major competitive advantage in the manufacturing industry, and the advantages of the petrochemical industry are particularly obvious.
Banks and households in the United States have made progress in deleveraging. QE has pushed up the value of assets. The housing market has improved and the unemployment rate in the construction industry is declining.
The negative impact of automatic reductions on government finances will also disappear.
What is even more surprising is that the political polarization in the United States has shown signs of reversal.
The political system of the two parties has been functioning for 200 years, because both parties have to compete for the middle power in the general election.
The alliance between religious standardism and market fundamentalism took the Republican position and later joined the neoconservative forces, which pushed the Republican Party to the extreme right.
In order to fight for the middle power, the Democratic Party is also trying to catch up with the changes in the situation. The two parties colluded to re-divide the sphere of influence in Congress.
Therefore, the activist-led party primaries have achieved a higher priority than the general election. This made the US political circles bid farewell to polarization.
In the end, the Tea Party forces in the Republican Party played a fire.
After the closure of the federal government last year, the old Republican army began to fight back, which should lead to a resurgence of the bipartisan system.
The biggest uncertainty in the world today is not the euro, but the future direction of China.
Supporting the rapid growth of China's growth model in the past has lost momentum.
This model depends on the financial repression of Chinese households, with the aim of promoting export and investment growth.
The household sector’s contribution to GDP has shrunk to 35%, and household savings are no longer able to provide sufficient funding for the current growth model.
This has led to an increase in various domestic debt financing.
China's financial environment is somewhat different from the mainstream environment in the United States before the 2008 financial crisis.
But there are also some obvious differences between the two.
The US financial market usually dominates politics, and the main force of China's state-owned banks and economies is government-controlled state-owned enterprises.
The People's Bank of China understands the dangers and started taking action to control debt growth in 2012.
It is not until the debt growth declines that a real threat of depression begins, that the Chinese ruling party begins to use the highest power.
In July 2013, the Chinese leadership decided to support the resumption of production of domestic steel companies, and the People's Bank of China also relaxed loans to help. The economic situation began to improve.
In November, the Third Plenary Session of the 18th CPC Central Committee launched the ambitious reform goal. These developments have become the main reason for the recent improvement in the global outlook.
Compared with structural reforms, China’s leadership is more focused on economic growth, and it’s true.
Because structural reforms must be combined with fiscal austerity, this will cause the economy to fall into a chaotic situation of deflation.
China’s current policy has unresolved contradictions: the resumption of production in the steel industry will also reinvigorate the large-scale increase in debt, which is unlikely to last for more than a few years.
How and when to resolve this contradiction will have a profound impact on China and the world.
The successful transformation of China is likely to require political and economic reforms.
If it fails, the credibility of China’s political leaders will decline, and internal control will be strengthened, and military conflicts may occur outside.
In addition, Soros also mentioned another big unresolved issue: reasonable global management.
The lack of consensus among the five permanent members of the United Nations will exacerbate the humanitarian disaster suffered by countries like Syria, not to mention removing obstacles to global warming.
But compared with the Chinese puzzles that have emerged in the next few years, it is still unclear whether the global lack of management will continue.
Soros talks about the global economy: the uncertainty is China
At the end of 2013, legendary investor George Soros believes that the global economy has two major characteristics. First, the world's most influential economies have brought positive positive energy to the world, with the exception of the Eurozone. Second, all the global economic issues that are emerging are political.