According to this article soros expresses that the current financial crisis is the result of the effect of all the other minor financial crisis’s that the US economy has experienced in the past sixty years, which came as a result of the weakening of the dollar in the financial market over the other strong currencies. It was anticipated to be happening because financial market operated in such a way that investors over borrowed loans from banks to invest in the housing sector hoping that the market would regulate itself according to the forces of demand and supply and be able to get good returns.
The economy instead suffered a shortage of cash as a result of the over borrowing and the interventions by the Federal Reserve did not work as had worked well before. The borrowers of the loans are now not able to pay them back the loans leaving the banks strained with the effects of bad loans that the other financial assets are greatly affected. Banks and other financial institutions have closed down their operations and some gone bankrupt as the cost of borrowing becomes unbearable.
What matters most as of this moment as suggested by Soros is to be able to deal with the political situation in a way that the economy will not be compromised. There is need to establish policies that will be able to redeem the lenders in the economy from total collapse. The banks should be helped out of the liquidity problems by the government being recommended to use the Swedish model of dealing with a financial crisis. The model recommends that the banks as the basis point of recovering the economy from collapse.
In most of his articles and one of his best selling book the “paradigm for financial markets” soros has criticized the systems of British and US authorities in the bureaucratic procedures that they which take too long to react to situations of urgency like this crisis that results to many effects on the economies. Word count 335 References George soros: worst financial crisis in 60 years marks end of an era. 15th December 2008 1st financial times article.