Soros proposes way to fund to fight global warming

Reuters

"I've found a way for someone else to pay ... to mobilize reserves that are lying idle," Soros told Reuters on the sidelines of the December 7-18 conference that will end with a summit of 110 world leaders meant to agree a new climate pact.

Hungarian-born Soros said green loans to poor nations backed by International Monetary Fund gold reserves could total $100 billion.

"This $100-billion fund I think could just turn this conference from failure to success," he said, admitting there were several legal and practical hurdles to unlocking the cash.

From Soros' email annoucement:

In September 2009, the IMF distributed to its members $283 billion worth of SDRs, or Special Drawing Rights. SDRs are an arcane financial instrument but essentially they constitute additional foreign exchange. They can be used only by converting them into one of four currencies, at which point they begin to carry interest at the combined treasury bill rate of those currencies. At present the interest rate is less than one half of one percent. Of the $283 billion, more than $150 billion went to the 15 largest developed economies. These SDRs will sit largely untouched in the reserve accounts of these countries, which don't really need any additional reserves.

I propose that the developed countries--in addition to establishing a fast start fund of $10 billion a year--should band together and lend $100 billion dollars worth of these SDRs for 25 years to a special green fund serving the developing world. The fund would jump-start forestry, land-use, and agricultural projects. These are the areas that offer the greatest scope for reducing carbon emissions and could produce substantial returns from carbon markets. The returns such projects can generate go beyond reducing carbon; there will be non-carbon related returns from land use projects, the potential to create more sustainable rural livelihoods, enable higher and more resilient agriculture yields and create rural employment.

This is a simple and practical idea. There is a precedent for it. The United Kingdom and France each recently lent $2 billion worth of SDRs to a special fund at the IMF to support concessionary lending to the poorest countries. At that point the IMF assumed responsibility for the principal and interest on the SDRs. The same could be done in this case.

I am very curious about what it must be like to handle a major figure like Soros and one of my life's ambitions is to meet Michael Vachon.

George Soros on the current financial crisis

In his article in the Financial Times George Soros suggests, amongst other things, that:

Recipient countries would pay the IMF interest at a very low rate, equivalent to the composite average treasury bill rate of all convertible currencies. They would have free use of their own allocations but would be supervised in how the borrowed allocations were used to ensure they were well spent.

I am not sure that the IMF has such a good record on identifying to proper allocation of funds that they are the best judges of such a task. I would rather depend upon the country's leadership, who might or might not know what they are doing, but have a better record than the IMF.

In his article in the Wall Street Journal Soros suggests that credit default swaps are "toxic instruments whose use ought to be strictly regulated." Surely if credit default swaps are actually toxic they should be abolished, rather than merely regulated.

Soros will be speaking at tomorrow's Looking Towards the London G-20 Global Growth Summit event, so I will be interested to hear what he has to say.

Soros' book, The Age of Fallibility: The Consequences of the War on Terror, is filled with insight and highly recommended.

George Soros is half right

Paulson cannot be allowed a blank cheque

By George Soros

The bill submitted to Congress even had language in it that would exempt the secretary’s decisions from review by any court or administrative agency – the ultimate fulfillment of the Bush administration’s dream of a unitary executive.

Mr Paulson’s record does not inspire the confidence necessary to give him discretion over $700bn. His actions last week brought on the crisis that makes rescue necessary. On Monday he allowed Lehman Brothers to fail and refused to make government funds available to save AIG.

In my opinion, the management of Lehman Brothers and AIG are responsible for the failure of their companies. It will be a very good thing if it is made clear that there is no such animal as too big to fail. In my never-was-humble-opinion nothing else will serve to cure the hubris that played such a large role in the present debacle.

Soros' book, The Age of Fallibility: The Consequences of the War on Terror, is filled with insight and highly recommended.

Edit -
Soros proposes an alternative plan, I am not sure I like it; but it is certainly superior to what the Senate passed last night.

A state of wealth destruction

That is how George Soros characterized our economy in his interview on the NewsHour. Judging from the interview, Soros shares my view that regulations exist for a reason and that regulatory authorities need to be willing to act. In particular, they need to enforce margin requirements in the early stages of a bubble.

Soros has a new book out, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. It sounds promising. His book, Age of Fallibility: Consequences of the War on Terror, is well worth reading.

George Soros on our times

The worst market crisis in 60 years

The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years.

However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

The Levy Institute has been saying much the same.

I highly recommend Soros' book, Age of Fallibility: Consequences of the War on Terror.