Soros Says U.S. Slowdown Bigger Than What Bernanke Sees

Investing and Trading Journal
Friday November 9, 2007

Billionaire investor George Soros, speaking at New York University on Tuesday, said that the coming U.S. slowdown will be far worse than the Federal Reserve Chairman Ben Bernanke expects.

“We have borrowed an awful lot of money and now the bill is coming to us”, Soros said, according to Reuters.

“I think we are definitely in for a slowdown that I think will be a bigger slowdown than Bernanke is seeing”, he added.

The Fed just cut rates by 25 basis points, hard on the heels of a surprisingly large mid-September cut of 50 basis points.

The moves are seen as an effort to stave off the effects of hundreds of billions in bank write-downs tied to subprime mortgages. The current estimate of the cost of those write-downs, including international banks, is $1 trillion, according to Pimco’s Bill Gross.

Soros joins a chorus of influential voices who predict that the economic contraction ahead will be worse than widely believed, among them investor Jim Rogers - with whom he ran the Quantum Fund in the 1970s, Warren Buffett and former Fed chief Alan Greenspan.

The U.S. economy is “on the verge of a very serious economic correction”, Soros said.

Soros also intimated that China is clearly the “winner” in terms of its financial relationship to the world’s largest economy, a point recently echoed by Rogers. But, Soros said, a correction in China would be due within a decade.

Separately, Greenspan said on Tuesday that home inventories have to come down drastically to assure stability in the United States.

“The critical issue on the whole subprime and by extension, the international financial system rests very narrowly on getting rid of probably 200,000 to 300,000 excess units in inventory”, Greenspan said in a videoconference to a Tokyo audience, from Washington, D.C.