This is going to sound very conspiratorial so it\’s an observation, not an insistence that this is some new found truth.
On Friday evening, as another great economic conference got under way here to debate the current crisis in the international economy, organised by the Institute for New Economic Thinking, which has liberal hedge fund king George Soros as its prime mover and shaker, Keynes\’s farewell speech seemed ominously prescient. The dragons are back. In Washington, a resurgent Republican party took the American government to within two hours of being closed down for lack of politically authorised funds as it battled for swingeing cuts in federal spending. Across the Atlantic, an army of hedge funds and investment banks forced a lame-duck Portuguese government to turn to the IMF and European Union for a multibillion euro bail out. In Britain, George Osborne championed the breathtaking speed of his budget reduction plan by saying he would not play Russian roulette with British economic sovereignty. Everywhere are the echoes of the language Keynes tried to dispel at Bretton Woods.
The general policy prescriptions from that New Institute seem to be working along the lines of a new Bretton Woods. You know, a New International Order, arrangements, things like, erm, the Euro, international instead of national currencies, management of trade balances.
One way to look at it would be the wet side of the International Great and the Good creating jobs for the International Great and the Good to do. With a bit of filling out the job applications while they\’re there.
But what rather fascinates me is the influence of George Soros in all of this. He\’s certainly a successful hedgie, and I admire him for that. Having the clarity which enables one to see the underlying economic reality (say, of the EMS and the absurdity of the UK trying to be part of it) and position oneself for the inevitable crash of the political structuring is indeed admirable. Even to cause the crash and return to economic reality by one\’s actions.
He\’s also give away great gobs of money to all sorts of good causes. I wouldn\’t say that I particularly agree with all of his causes, I certainly do agree with the aims of some of them, but it\’s his money not mine anyway.
But here\’s the bit. As a hedgie, what you really want is one way bets. Proper open and free markets don\’t offer those, at least not very often. You need a mass and collective delusion (and you have to be sharp enough to know that it is one) to get a one way bet. Which means that more of them appear in the grand plans of politicians than they do in open and free markets.
Soros\’ famous making a £billion out of the Bank of England wouldn\’t have happened, couldn\’t have happened, if the government wasn\’t trying to fix the exchange rate.
Which leads to the observation. Here we\’ve a very successful hedgie funding people into arguing for the sort of system, one with managed, politically managed, exchange rates and the like, exactly the sort of environment which offers at times the one way bets that successful hedgies make fortunes from. When the politicians try to defy the markets, it\’s those very hedgies which break the pretentions of the politicians and where the hedgies make jet plane type sums of money (umm, actually, entire airline style sized amounts).
So isn\’t that interesting? The political and economic outcome of a hedge fund manager\’s generosity is an environment in which hedge fund managers can and will make pots of moolah.
No, I\’m not paranoid enough to belive that this is the motivation for it all: just think that it\’s an interesting thing to note.