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Complexity: the Game of Hot Potatoes

George Soros thinks our current financial situation is more severe than the Great Depression, and similar to the demise of the Soviet Union. Well that’s certainly not good news. I’m a lay person. I haven’t the slightest clue how they made the financial system so complicated.

We’re having a credit crisis, which means credit is tight, because banks have gaping holes in their balance sheets, and dare not lend out anymore money, or can’t, because they are over-leveraged. The bailout is meant to ‘solve’ this problem. But I think the hole is too big to be covered with even bailout money, and credit is still going to be tight. So why doesn’t the government give credit directly to borrowers through another agency? If they do so, they still have chance of getting their money back, with interest!

This question was brought up in Singapore before, and the answer given was that Governments aren’t set up to assess individuals for loans, and that banks had a better set up for that. Uh … yeah, which is why banks are need bailouts now, cause they know what they are doing.

It seems to be like a global game of ‘hot potatoes’. The US government is dishing out billions of dollars that they don’t have. Me thinks that at the end of the day, countries (like China) who bought US treasuries will end up stuck with the ‘hot potatoes’, which have no value.

Now if only there were a RESET button … …

Soros sees no bottom for world financial “collapse”

NEW YORK (Reuters) – Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

“We witnessed the collapse of the financial system,” Soros said at a Columbia University dinner. “It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.”

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

“I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world,” Volcker said.

(Reporting by Pedro Nicolaci da Costa and Juan Lagorio; Editing by Gary Hill)

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