On Wednesday afternoon, CNBC’s Maria Bartiromo interviewed George Soros.
Soros is a noted investor and former hedge fund manager. He is often cited for his “breaking” of the Bank of England (BoE) back in 1992, when he effectively forced the BoE to devalue the pound sterling and made a billion dollars in the process.
During the interview, Soros addressed the ongoing crisis in the eurozone and the current state of the U.S. economy.
Soros was particularly bearish on the prospects for the eurozone, although he did not believe that the current crisis would force the monetary union to collapse.
According to Soros, it was possible for the eurozone to remain intact even if some countries had to leave.
“I think you could have two or three of the small countries leave the euro provided it is prepared or done in an orderly way,” Soros explained. “If it were to occur unprepared, it could disrupt the global financial system.”
Soros went on to suggest that an orderly exit by some of the weaker countries might be an ideal outcome.
“The countries (that exit) then have the genuine choice…of making the internal adjustments, (and) taking the pain,” Soros stated.
When questioned by Bartiromo on this, Soros expressed his belief that this policy would not affect the euro.
On the Greeks, Soros did not think that a default was imminent, as some market commentators have suggested in recent days. Rather, Soros sees the month of December as a more likely date for a default, should one come to pass.
“I’m pretty sure that the Greeks will pass whatever law the troika asks for in order to get the next tranche (of the loan)…the climax won’t come in September because they are not prepared for it. They have to create this EFSF…it is not yet in existence, they want to bring it in. Then in December, if at that time Greece has not delivered, then it may not get the next tranche,” Soros said.
Still, Soros’ comments on the severity of the situation were quite sobering.
“It is a more dangerous situation (than the Lehman collapse). I think the authorities…will do whatever it takes to hold the system together,” Soros explained. “The alternative is just too terrible to contemplate.”
As for the American economy, Soros stated the U.S. economy was already in another recession, although the U.S. dollar may be likely to remain a safe haven despite the economic problems in the U.S.
The U.S. dollar rallied Wednesday night, and continued to trade upward Thursday morning. The U.S. dollar regained parity with the Canadian dollar on Wednesday, while the EUR/USD pair dropped below the $1.35 level.
Should Soros’ predictions prove accurate, the U.S. dollar could strengthen going forward. Of course, if eurozone policymakers take his advice and orchestrate an orderly exit of some of the troubled nations, the euro may stabilize or even appreciate in the coming months.
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