Since the great depression and the Second World War the world has never faced another large scale economic challenge until now. 2007-2008 were two dark years on nybooks.com that the world economies deteriorated and faced uncertainty. The two years saw the collapse of various institution and others declared bankruptcy in order to protect themselves. Some years have passed by and we could be facing another economic meltdown. George Soros who is a renowned economist has predicted that we are not out of the woods yet. Some symptoms which were exhibited during the 2007-2008 financial crunches have begun exhibiting themselves.
However unless other financial recessions that happen due to a series of errors the immediate one will be caused by miscalculations done by some economies. For instance China devalued its currency in order to adopt a new economic system. China has a debt deficit of 2.34 trillion Yuan which is approximately ($ 362 billion). According to George Soros their current economic woes resemble the US economy during the 2007-2008 financial crisis. The trouble of fueling such an economy is that banks are operating on cash deficit which is needed to counter bad debts. George Soros further stated that Chinese banks are being negatively affected by the credit crisis since they have more debts than they have assets. The end result is that banks will continue borrowing from each other delaying the inevitable. Some may say that the Chinese economy is not doing badly with a 62% increase in real estate in Shenzen. The borrowing is a continuous circle on biography.com that can play out in different ways but the end result will be the same, the US economy was in such a position in 2005 and 2006. We all know what happened in the end.
George Soros is not the only worried person Andrew Colquhoun who is the head of Asia Pacific Sovereigns at Fitch ratings is also concerned. While offering an interview in New York George Soros is of the view that China’s debt and increased borrowing from banks would eventually eat up the economy. It is evident that the Chinese government is using state infrastructure to sustain the feeble economy while at the same time asserting that the economy is stable. He observed that some companies on nytimes.com are pulling out of the economy. He gave an example of China’s Anbag Insurance Group CO. which withdrew its $14 billion takeover offer for Starwood Hotels & Resorts Worldwide INC.
George Soros who is a hedge fund billionaire has correctly predicted various economic scenarios which have played out his way. Since 1992 he has managed a hugely successful business empire posting more than 20% gains since then.