A Level Gaze

A Level Gaze

"What effect must it have on a nation if it learns no foreign languages? Probably much the same as that which a total withdrawal from society has upon an individual."
--G.C. Lichtenberg

Monday, February 02, 2004

Republicans: Soros to Receive Blame for Bad Economy

This floater being put up by Jon Dougherty at Newsmax is sure to be a major item on Republican spin point lists within the week, and will remain in play through the election.

The billionaire's zeal to unseat Bush has caught the notice of top policy-makers in Washington who worry that Soros would not need to risk his whole fortune to cause mischief.

Here's the real worry: Could the master currency trader manipulate the financial markets to create a panic, collapsing the stock market or the U.S. dollar on the eve of the November election?

The thought of such a scenario – dubbed a "Financial October Surprise" – has some worried.

This is GOP disingenuousness at its sharpest, and has the potential to shield Bush from any electoral fallout arising from any sudden economic calamities. Those of us on the left need to study hard on this one, and make sure we're all knowledgeable enough on the subject to call it for the bullshit it is. It's always easier to understand world events in terms of single actors like Saddam and Osama (and, soon, George) than as the product of complex and unpredictable systems. If this Soros-sabotages-the-economy meme gets widespread traction among swing voters, it will be very difficult to get them to pay attention while we attempt to talk them through the mind-numbing arithmetic of tax policy and health-care accounting. However, if we can enunciate sharply, and in few words why this very idea is bogus, the issue could be nipped in the bud.

Soros already has the reputation of being a market-buster. A lot of semi-knowledgable people (journalists) have hazy recollections of a time when he single-handedly wrecked Britain's currency exchange rate mechanism with the Deutchmark through canny trading. It's a gross oversimplification that ignores the fact that even uniquely savvy financiers such as Soros cannot reverse gravity. At the time, the pound was obviously highly overvalued, and the British government was propping it up with £4 billion of its foreign exchange reserves and cripplingly high interest rates. Soros saw this was unsustainable, and proved instrumental in popping the bubble. The U.K. is better off today because of it.

If Soros convinces enough people he's right, the markets could move in response, but, as even (god help me) Don Luskin says, ""First and foremost, the speculators have to be right." In other words, Soros cannot push a market in a direction it wasn't going to go in anyway. Even if it has help, if the dollar plummets and interest rates rise, it will be because of massive trade and budget deficits, not because of the machinations of a transplanted Hungarian financier and his paltry $7 billion.

The whole point is that Soros made money in the currency markets because he was right. Again and again, he put his own money where his mouth was, and came out ahead. When he says something, people listen, because he knows what he's talking about. If he says the economy is screwed, there's probably something to it. We need to help the public understand that there's a difference between pointing out that something is wrong and making it wrong in the first place.

posted by David at 2/02/2004 12:37:00 PM ::

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