THE MAN WHO CONTROL THE WORLD CURRENCY
George Soros
Founder and ChairmanOpen Society Foundations35th richest person in the world, and the 24th richest person in America, with a net worth estimated at US$14.2 billion Soros has given away $7 billion to various causes since 1979.
George Soros came of age in Hungary at a time when it was a battleground in the decades-long conflict between fascism and communism, the two great totalitarian ideologies of the 20th century. A personal experience of this conflict—including the violence, foreign occupation, anti-Semitism, and other forms of intolerance that went with it—as well as a personal fascination with philosophy shaped Soros’s thinking in later years and influenced his successful strategies in both finance and philanthropy.
Born in Budapest in 1930, Soros survived the Nazi occupation of Hungary during World War II as well as the postwar imposition of Stalinism in his homeland. Soros fled Communist-dominated Hungary in 1947 and made his way to England. Before graduating from the London School of Economics in 1952, Soros studied Karl Popper’s work in the philosophy of science as well as his critique of totalitarianism,The Open Society and Its Enemies, which maintains that no philosophy or ideology has the final word on the truth and that societies can only flourish when they allow for democratic governance, freedom of expression, a diverse range of opinion, and respect for individual rights.
Later, while working as a financial analyst and trader in New York, Soros adapted Popper’s thinking in developing his own application of the social theory of “reflexivity,” a set of ideas that seeks to explain how a feedback mechanism can skew how participants in a market value assets on that market. After concluding that he had more talent for trading than for philosophy, Soros began to apply his ideas on reflexivity to investing, using it to predict, among other things, the emergence of financial bubbles. In 1967, he helped establish an offshore investment fund. In 1973, he set up a private investment firm that eventually evolved into the Quantum Fund, one of the first hedge funds.
Soros’s memories of anti-Semitism in wartime Hungary prompted him, in 1979, to begin providing financial support for black students at the University of Cape Town in apartheid South Africa. In 1984, Soros created an education and culture foundation in Hungary. He later supported dissident movements in Eastern Europe’s other Communist countries, helping people to organize themselves at a time when popular organizations were banned, to voice their opinions when dissonant opinions were considered anti-state propaganda, and to promote tolerance, democratic governance, human rights, and the rule of law when a one-party dictatorship exercised a monopoly on power.
As the East bloc crumbled during the late 1980s and the Soviet empire collapsed in the early 1990s, Soros expanded his funding in an effort to help create open societies in all of the region’s countries. He demonstrated his commitment to critical thinking and democratic political development by establishing Central European University in 1991. In 1993, he founded the Open Society Institute. Over the past three decades, Soros’s philanthropy has spawned a network of foundations dedicated to promoting development of open societies in Africa, Asia, Europe, Latin America, and the United States. To date, Soros has given over $8 billion to support human rights, freedom of expression, and access to public health and education in 70 countries.
Soros's most recent book is The Soros Lectures: At the Central European University(2010). His other books include The Crash of 2008 and What it Means: The New Paradigm for Finance Markets (2009); The Age of Fallibility: Consequences of The War on Terror (2006); The Bubble of American Supremacy (2005); George Soros on Globalization (2002); Open Society: Reforming Global Capitalism (2000); The Crisis of Global Capitalism: Open Society Endangered (1998); Soros on Soros: Staying Ahead of the Curve (1995); Underwriting Democracy (1991); Opening the Soviet System (1990); and The Alchemy of Finance (1987). His essays on politics, society, and economics appear frequently in major periodicals around the world.
ADDITIONAL INFORMATION:
Business
In 1970, Soros founded Soros Fund Management with Jim Rogers. In 1973, he left Arnhold and S. Bleichroder to set up his own hedge fund with US$12 million from investors. Christoper Ink was also involved, and other partners have included Victor Niederhoffer and Stanley Druckenmiller. Rogers retired from the fund in 1980.
Initially called the Soros Fund, it was eventually renamed the Quantum Fund. In 2000, the Quantum Group of Funds was reorganized, and the flagship Quantum Endowment Fund was established. Soros Fund Management LLC is the principal advisor to the Quantum Endowment Fund. George Soros is the Chairman of Soros Fund Management. The firm's day-to-day operations are managed by Soros's two elder sons and the firm's Chief Investment Officer. The fund has assets of approximately $27 billion.[24]
In 2007, the Quantum Fund returned almost 32%, netting Soros $2.9 billion.[25]
Currency speculation
On September 16, 1992, Black Wednesday, Soros's fund sold short more than US$10 billion worth of pounds,[24] profiting from the Bank of England's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.
Finally, the Bank withdrew the currency from the European Exchange Rate Mechanism, devaluing the pound sterling, earning Soros an estimated US$1.1 billion. He was dubbed "the man who broke the Bank of England."[26] In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.
On Monday, October 26, 1992, The Times quoted Soros as saying: "Our total position by Black Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when Norman Lamont said just before the devaluation that he would borrow nearly $15 billion to defend sterling, we were amused because that was about how much we wanted to sell."
Stanley Druckenmiller, who traded under Soros, originally saw the weakness in the pound. "Soros' contribution was pushing him to take a gigantic position."[27][28]
In 1997, during the Asian financial crisis, the Prime Minister of Malaysia Mahathir bin Mohamad accused Soros of using the wealth under his control to punish the Association of Southeast Asian Nations (ASEAN) for welcoming Myanmar as a member. Following on a history of antisemitic remarks, Mahathir made specific reference to Soros's Jewish background ("It is a Jew who triggered the currency plunge" [29]) and implied Soros was orchestrating the crash as part of a larger Jewish conspiracy. Nine years later, in 2006, Mahathir apologized and withdrew the accusations.[30] In 1998's The Crisis of Global Capitalism: Open Society Endangered Soros explained his role in the crisis as follows:
The financial crisis that originated in Thailand in 1997 was particularly unnerving because of its scope and severity.... By the beginning of 1997, it was clear to Soros Fund Management that the discrepancy between the trade account and the capital account was becoming untenable. We sold short the Thai baht and the Malaysian ringgit early in 1997 with maturities ranging from six months to a year. (That is, we entered into contracts to deliver at future dates Thai Baht and Malaysian ringgit that we did not currently hold.) Subsequently Prime Minister Mahathir of Malaysia accused me of causing the crisis, a wholly unfounded accusation. We were not sellers of the currency during or several months before the crisis; on the contrary, we were buyers when the currencies began to decline – we were purchasing ringgits to realize the profits on our earlier speculation. (Much too soon, as it turned out. We left most of the potential gain on the table because we were afraid that Mahathir would impose capital controls. He did so, but much later.)[31]
The nominal U.S. dollar Gross domestic product (GDP) of the ASEAN fell by US$9.2 billion in 1997 and US$218.2 billion (31.7%) in 1998.
Public predictions
Soros' book, The New Paradigm for Financial Markets (May 2008), described a "superbubble" that had built up over the past 25 years and was ready to collapse. This was the third in a series of books he has written that have predicted disaster. As he states:
I have a record of crying wolf... I did it first in The Alchemy of Finance (in 1987), then in The Crisis of Global Capitalism (in 1998) and now in this book. So it's three books predicting disaster. (After) the boy cried wolf three times... the wolf really came.[32]
He ascribes his own success to being able to recognize when his predictions are wrong.
I'm only rich because I know when I'm wrong... I basically have survived by recognizing my mistakes. I very often used to get backaches due to the fact that I was wrong. Whenever you are wrong you have to fight or [take] flight. When [I] make the decision, the backache goes away.[32]
In February 2009, George Soros said the world financial system had effectively disintegrated, adding that there was no prospect of a near-term resolution to the crisis.[33] "We witnessed the collapse of the financial system[...]It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."
Insider trading conviction
In 1988, he was asked to join a takeover attempt of the French bank Société Générale. He declined to participate in the bid but later bought a number of shares in the company. French authorities began an investigation in 1989, and in 2002 a French court ruled that it was insider trading, a felony conviction as defined under French securities laws, and fined him $2.3 million, which was the amount that he made using the insider information.
Punitive damages were not sought because of the delay in bringing the case to trial. Soros denied any wrongdoing and said news of the takeover was public knowledge.[34]
His insider trading conviction was upheld by the highest court in France on June 14, 2006.[35] In December, 2006 he appealed to the European Court of Human Rights, claiming that the 14-year delay in bringing the case to trial precluded a fair hearing.[36]
