Multibillionaires have an important advantage over the rest of humanity: they can be careless with their use of words and still be taken seriously. George Soros, perhaps the most articulate of this remarkable group of people, has recently offered some prognoses on the world economy. But his predictions have been much too pessimistic, partly because he has been slapdash with his vocabulary.
According to separate newspaper reports repeated over several weeks, Soros regards the present “financial crisis” as “the worst since the Great Depression” of the 1930s. In his view, stock markets must expect another period of weakness, while banks and other financial institutions face a prolonged retrenchment. Bankers have taken too many risks and must now accept tighter regulation. In his words, “the current crisis is the culmination of a super-boom” in dollar credit expansion “that has lasted more than 60 years” and cannot go on forever.
But in what way is the current “financial crisis” the worst since the Great Depression? If share prices are taken to be key, the current bear market is a mild affair compared with the ghastly mid-1970s. From peak to trough, US share prices fell more than 40 per cent in those years. So far, none of the mainstream indices for the American stock market is down more than 15 per cent.