Enterprising Investor Forum

George Soros: current situation, part 1 Tuesday, April 22, 2008

This is the first part of a very interesting speech by George Soros on the current situation and the HOWs and the WHYs of the current economic situation: the credit crunch and market fundamentals.

He talks about false conceptions in the market and on products that went from triple A rating to worthless in just a matter of months. He explains bubbles and how misinterpretations of trends lead to a initially self reinforcing but ultimately defeating boom-bust processes.

Downsides in the bubbles are always more brutal that the upside potential and it is very important to understand the dynamics at work in order to be able to deal with them. Furthermore, when these bubbles burst, they expose and highlight all of the other weaknesses in the system that had been overlooked during the boom period.

Tomorrow, we will look at the second part of this speech.