Soros strikes again...

George Soros, speculator and philanthropist par excellence (and, for my money, probably the most genuinely brilliant philosopher-financier in history), was on Stephanomics with Stephanie Flanders last night. Insightful as ever, and in addition to emphasizing the reflexive relationship between credit and collateral (dealt with in Alchemy of Finance, but far more important than most people recognise), he expressed a couple of opinions that I found interesting: the first was that the UK economy was actually in a significantly worse position than Italy and Spain, but that, while they were effectively issuing bonds in a foreign currency (i.e one over which they had no unilateral authority), the UK's ability to print sterling at will has immunised it from the turmoil (though presumably not to an unlimited extent if we really muck it up). Secondly, he emphasised the inbuilt deflation bias to the ECB, in that it has a mandate to maintain price stability, but not, unlike most of its peers around the world (including the BoE and the Fed), to maintain a healthy economy or full employment. This was not a point I had really thought about since 2008, when the ECB was particularly reticient about intervening with expansionary monetary measures (though to their credit they overcame their reluctance on that occasion at least). It is worth remembering now... this is of course a legacy of the Bundesbank and the hawkish German focus on low inflation. I appreciate that the monetary history of Germany has been traumatic, particularly in 1923, but they and the ECB are letting this long shadow dictate to and destroy their present. The Germans have over-learned their lesson. Little annoyances like the now obviously mistaken rate hikes earlier this year are embarrassing for the ECB, but German/ECB intransigence about providing backstops and liquidity to weaker Eurozone members is now threatening to imperil the whole system. The German body politic needs to take a long, hard look at what is really important to them, and what the consequences of their actions are likely to be...