Getting to the root of the financial crisis

When I first read the newest book of George Soros – The New Paradigm for Financial Markets – I did not realize how prophetic he was in terms of the collapse of the banking system. He published his book in May and I’ve read it in August. Few weeks later Lehman Brothers went under…

Here are some paragraphs illustrating his foresight:

“When the financial system is endangered, the authorities must cave in. Whether they like it or not, institutions engaged in the credit creation must accept the fact that they are being protected by the authorities. They must, therefore, pay a price for it.

The authorities must exercise more vigilance and control during the expansionary phase. That will undoubtedly limit the profitability of the business. The people engaged in the business will not like it and will lobby against it, but credit creation has to be a regulated business.

Regulators ought to be held accountable if they allow matters to get out of hand so that an institution has to be rescued. In recent years matters did get out of hand . The financial industry was allowed to get far too profitable and far too big.”