George Soros Compares the World Economic Challenge to the 2008 Meltdown

George Soros, a world billionaire valued at about $27.3 billion has sounded a warning to investors to take caution of the investment decisions they make in the year 2016. He added that the current crisis bears similarities to the economic environment in 2008, which nearly led to a global meltdown.
According to Soros,China’s struggles in a bid to find a new growth model as well as its currency devaluation are some of the reasons for the economic crisis, as they are transferring problems to the rest of the world. It is becoming increasingly difficult for the developing world to return to positive interest rates thus exhibiting more similarities to the 2008 crisis.
A sinking yuan, caused by China’s shift towards consumption and services from investment and manufacturing is causing concern in regards to the strength of China’s economy. A plunge in Chinese equities is causing deepened losses in the Asian market.
According to Bloomberg, measures of volatility are on the rise. The fear gauge is up by 13 percent, the Nikkei Stock Average Volatility Index, which is responsible for gauging the protection cost on Japanese shares is up by 43 percent in 2016. Additionally, the Merrill Lynch index which keeps track of anticipated price swings affecting Treasury bonds, registered a 5,7 percent rise.
Analyses are showing that the weakening Chinese economy is causing ripples all over the Asian markets. The China’s Communist Party has however pledged to ensure the Yuan’s convertibility increases by 2020, resulting in gradual dismantling of capital controls. The world’s second-largest economy is still showing signs of weakness, despite the People’s Bank of China cutting its interest rates to record lows. Even after authorities have pumped billions of dollars into the economy, it is yet to show signs of recovery.
George Soros in his article to also faults the European Union for failing to evade the looming economic crisis. He condemns the European authorities for the way they handle crises in the region. Their act of simply postponing the problem instead of dealing with it head-on is not helping the global economy. Currently, the European Union is facing five crises including the Russian aggression against Ukraine. Soros advises that it would make more sense if the European Union would unite on one front and tackle these issues as a block. For instance, the Ukrainian revolution he says is a blessing in disguise, and if well handled, it could change Ukraine for the better and strengthen the European Union economy, thus reduce the risk of the current crisis resembling that of 2008.
George Soros’ hedge fund gained an average of 20% annually between 1969 and 2011. Soros has built a reputation for his investing prowess, making him a force to reckon with in the financial market. As a result, serious investors are taking his words seriously and following his advice.