Skidding out of control: ‘We do not understand financial markets’

Billionaire financier George Soros said that the established theory of how markets functioned “had collapsed.”

DAVOS: Billionaire financier George Soros told the World Economic Forum in Davos on Saturday that financial markets were still poorly understood despite moves to limit more complex products after the crisis. 

Soros told a packed audience of the world’s business and political elite in the Swiss ski resort that the established theory of how markets functioned “had collapsed.”

“The unfortunate fact is that ... we have not actually got a proper understanding of how financial markets operate,” said Soros, who made his fortune, estimated by Forbes Magazine at some $19 billion, gambling on the markets.

“Now we have introduced synthetic instruments, invented derivatives where we do not fully understand the effect they have,” added the 82-year-old, referring to complex financial products. Reflecting on the measures taken to steer out of crisis, Soros said that injecting more credit into the economy had stabilised the markets, but the priority now was to steer the economy back to growth.

Published in The Express Tribune, January 27^th, 2013.

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