Thursday, December 15, 2005

Interesting Words from an Interesting Source

Who said this?

"You have to look at the system of currency pegs--when a currency is tied to the dollar or to another hard currency. This peg may not hold, but people assume that there is a fixed relationship between the dollar and, let's say, the Thai currency or the Malaysian currency. They then exploit the difference in domestic interest rates and the international market. They borrow in dollars and they lend in the domestic currency. They make a fortune in the process, as long as the peg holds. But because of, maybe, excessive borrowing, which allows a country to maintain a trade deficit over an extended period of time, or to engage in a currency or real estate boom financed by dollars, you have over-heating, trade imbalance, and then the capital flows reverse. People want to take their money out, instead of putting it in, and you have a crisis."

He may be confused about politics, but he sure talks a good capital markets game -- and something sounds vaguely familiar...

George Soros in an interview on Frontline in the spring of 1999


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