Davos 2013: Soros says financial markets still not understood

George Soros Mr Soros quipped that "go-stop" was better than "no go at all"

The world still does not fully understand how financial markets work, according to investor George Soros.

Speaking at the World Economic Forum in Davos, Mr Soros, who made his billions betting on the markets, said the established theory had "collapsed".

He also warned that Germany was "out of tune with the rest of the world" when it came to handling the euro crisis.

He said there was a risk of a credit bubble forming, which was "the big, unresolved issue".

"It should be possible to withdraw the additional credit [injected by authorities] as the economy gets going but it hasn't been done yet. And therefore there's a fear this could result in runaway inflation," he said, adding that this fear was particularly strong in Germany.

Growth priority

In a wide-ranging discussion, Mr Soros said: "The established theory has collapsed but we haven't actually got a proper understanding of how financial markets operate.

"We have introduced synthetic instruments, invented derivatives where we don't fully understand the effect they have."

He also said that the response of authorities to inject liquidity into the economy had stabilised the markets, but the priority now should be to steer the economy back to growth.

"The first phase of the manoeuvre is pretty well complete, but the second phase we haven't yet started," he said.

But he added: "We are facing a period of go-stop, which is far superior to no go at all."

More on This Story

From other news sites

The BBC is not responsible for the content of external Internet sites

More Business stories


Features & Analysis

Elsewhere on the BBC

  • Audi R8Need for speed

    Audi unveils its fastest production car ever - ahead of its Geneva debut


  • A robot holding a table legClick Watch

    The robots who build flat-pack furniture - teaching machines to work collaboratively

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.