George Soros, provides perspective on Europe’s banking crisis, U.S. debt and when he expects to see a spike in interest rates, with CNBC’s Maria Bartiromo. The euro is transforming the European Union into something very different, he says. He also warns of a coming currency war.
Video and computer generated transcript below:
he, of course, a mysterious and powerful billionaire who you no known for supporting liberal causes but he dwand notoriety for leading a run on the british pound back in the 1990s, and that trade reaped him a cool billion dollars. back then a billion was still a lot of money. maria now in davos with george soros. thanks so much, bill, and i am here right now with billionaire investor and lead foundation head, george soros here with me in davos. george, always nice to see you. nice to see you as always. thanks so much for joining us. let me begin on europe.europe seems to have taken to the back pages of the newspaper, not front and center more. is that a reflect crop in your view that things have improved? where are we in the debt crisis in europe? well, i think germany has done what was necessary allow — to make it clear that the euro is here to stay, and that’s been a tremendous relief for the markets. so calm has returned. the european banking system, the interbank market, has revived so there’s a general sense of let’s say almost euphoria that the crisis is over. i think that is somewhat premature. because the fundamental internal inconsistencies in the dis-tim have not been addressed, and actually, therefore, you face political dangers. the euro is transforming the european union into something very different from the original conception which was a voluntary association of equal states, and instead of that, the financial created a two-class system where the euro, the creditors and debtors and the creditors are in charge. the political situation i think is going to get worse. i think the next year, next two years perhaps, are going to be very cuffy if the european union survives forever. i don’t think europe can live politically with are a situation where there’s are a center, namely germany, and countries like italy and spain are condemned to perpetual inferiority. i think the biggest danger isthat it’s actually potentially a currency war because the rest ofthe world follows a different recipe from the germans. germans believe in austerity, and — and the rest of the world believes in quantitative easing. right. making money, throwing more and more money. at money. at the crisis, and actually that works.now japan which has suffered from deflation now for a decadehas also switched to quantitative easing, and that is now bringing down or has already brought down the yen, the value of the yen. i’m glad you mentioned japan because we’re timely seeing some ease-up on the japanese yen. is that sustain schnabl does that continue? certainly a determinant. this governor has to go to minimum wage it happen. everywhere you look around the world there’s austerity and debt. we’re all trying to rep in the debt, each in the united states. would you say we need to get our arms around the debt in the u.s., rein things in, cut back, or do you agree that the way you feel about europe, no austerity, this is not the approach, applies to the united states as well? no, i think it applies to the united states because when you have unemployed resources, putting those resources to work the is really the first objective, and — and you to re-establish growth for shrinking the debt. and so i think the policy basically pioneered by bernanke is actually the right policy.you’re not worried about the fact that the federal reserve has expanded its balance sheet so much, the ecb expanding its balance sheet so so much. is there a down side risk there?there is a down side risk because once the economy gets going, then interest rates are going to take a big leap because this is a delicate two-phase maneuver where first you throw more money at the economy and as the economy picks up, you have to take that money out. you are expecting that once we see a change in interest rates, that it happens fast, it happens furious. when would you expect a spike in interest rates? as soon as there’s clear signs of pickup in the economy. let me ask you, i know you’re a press conference. you’re speaking later on this week about drug policy. why is this topic one for you?the war on drugs has done much more damage than the drugs themselves. and we need a different approach. i think it’s also gaining ground in america because of the financial crisis where putting non violent offenders in prison is very expensive. in california, you’re spending more on the prison system than on the education system. i find that totally unacceptable. that’s amazing. so i think there’s change in the wind. george, good to have you on the program. thanks very much.