Surrounded by the world’s richest one percent in Davos, Switzerland, currency speculator and admitted President Obama backer George Soros told Reuters yesterday that he is buying up Italian sovereign debt as fast as he can because he believes Europe would never let Italy default:
Soros: I was not responsible for that because I am no longer active in actually running the porfolio.
Freeland: But I bet the called you up and got your advice.
Soros: If I ran the portfolio, I would have a much larger position in Italian bonds because if you are facing a period of deflation and you can get a yield of 6 percent on ten-year Italian bonds, that’s a fantastic yield which is not going to stay up there the moment things settle down. I think its a speculation, but a very attractive one….
Freeland: It sounds as if you are ruling out the possibility of an Italian default.
Soros: Well I think that it can be avoided. And if it were not avoided it would be the end of Europe. And it could have very negative consequences all around.
The only reason Italian bonds are giving a 6 percent yield is because of what is supposed to be the very real risk that Italy could default on them. That would make them all worthless resulting in huge losses for Soros. But Soros, and Obama stimulus-designer and former-MF Global CEO Jon Corzine before him, are betting that Europe, with the help of the United States funded International Monetary Fund, would never let Italy default. They are essentially making a quick buck on the belief that the man they put into office will bail them out in the event their investment goes south.
In his State of the Union address, Obama promised, “no more bailouts, no more handouts” and declared “it’s time to apply the same rules from top to bottom.” But as Soros’ investment strategy shows, Obama’s biggest financial backers don’t believe him. More importantly, Obama’s pro-bailout policies are at the root of the income inequality problem he said he wants to fight.
Income inequality in the United States is largely driven by high-income growth in the financial sector. As Soros and Corzine show, much of this growth is not based on providing real financial services to consumers, but on profiteering on government bailout bets.
