The international markets in mid-January 2016 received a hard blow when stocks plunged in the top two World’s largest economies, United States and China. Nine days before the economic downturn, Bloomberg Business reported news that George Soros predicts the global markets are headed towards a crisis. He warned investors in Sri Lanka at an economic forum to be careful in such unstable markets. Soros makes his economic forecasts based on three important factors: China’s decreased value of currency; China inability to develop an effective new growth model; and challenged positive interest rates. George Soros has analyzed the trends of the economy globally and managed investments for nearly 50 years.
The decreased value of yuan in China has an influence on international currency over the world, as well as stock and the commodity market. Soros believes there are challenges with positive interest rates internationally because the present economic situation is similar to 2008. He questions the stability of the economy in China, for the country is focusing on consumption and services, rather than investment and manufacturing. In January of this year, the value of global equities decreased by approximately $2.5 trillion. Equities have suffered in Asia as equity trading stopped in China.
George Soros said when he observes the current financial markets, there is a severe challenge similar to the 2008 crisis. Is it possible that China may face similar financial crisis as the United States in 2008? The U.S. financial crisis resulted in a 31.8 percent decrease in housing prices and an increase in the unemployment rate two years after the crisis. According to the Financial Crisis Inquiry Report issued by the U.S. Financial Crisis Inquiry Commission on January 2011, one of the main reasons for the 2008 financial crisis is negligence on behalf of the Finance Captains & Public Stewards of U.S. Financial System to inquire, recognize, and manage the risks within the system. Other reasons included the lack of mortgage lending standards; failure of financial institutions to examine mortgage securities; corporate governance failures; and extreme borrowing.
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Soros raised strong points about the international market concerning the economy in China. The second largest economy today is still weak due to the cut in interest rates, losses in equities, and sluggish manufacturing industry. George Soros is the Founder and Chairman of hedge fund firm, Soros Fund Management, LLC. The firm was founded in 1970 and has a net worth of over $27 billion, according to Bloomberg Billionaires Index. In 1979, George founded the Open Society Foundations. He provided scholarships to black students at the University of Cape Town in South Africa and revolutionists of Eastern Europe.