George Soros (Soros Fund Management Founder) – Perpetual Bonds, ECFR Council Meeting (Jun 2020)

Chapters

Abstract

Revolutionary Moments and Economic Innovation: A Comprehensive Look at Soros’ Insights and the EU’s Financial Strategies

In a pivotal moment of history, akin to the fall of the Berlin Wall, George Soros, a prominent figure known for his far-sightedness and commitment to underdogs, addresses the transformative changes shaping our world. Soros, during his insightful address, delves into the intricacies of a revolutionary era, marked by the rise of artificial intelligence, climate change, and globalization. He underscores the imperative of adaptability and global cooperation. In tandem, the European Union grapples with its economic challenges, proposing innovative financial solutions like Special Drawing Rights (SDRs) and perpetual bonds, which hold historical significance and present potential in addressing the EU’s economic and climate crises.

Soros’ Revolutionary Perspective:

George Soros equates the current epoch to historical revolutions, asserting that we are amidst transformative changes. His recognition of the unprecedented nature of this era stems from various global developments, notably AI, climate change, and globalization, reshaping our societies and economies. Soros encourages embracing this change with open-mindedness and adaptability, essential for navigating these challenges.

Identifying the Underlying Causes:

Soros attributes this revolutionary moment to the confluence of various factors, emphasizing the pivotal role of AI, climate change, and global interconnectedness. He highlights the need for a deep understanding of these causes to effectively respond and capitalize on the opportunities they present.

Embracing a Global Perspective:

Underlining the need for international cooperation, Soros advocates for a global approach to tackle the era’s challenges. He stresses that no single country can address these issues alone, emphasizing the importance of collective action and collaboration.

Crisis Recognition and COVID-19 Impact:

Soros identified early signs of global crises, like the assassination of Iranian General Soleimani in January 2020, and the ensuing COVID-19 pandemic. These events, according to Soros, underscore the unpredictability of future developments and the need for effective crisis management strategies.

Role of Open Society Foundations:

Soros expresses confidence in the Open Society Foundations’ capability to strategize for global improvement, highlighting their importance in addressing contemporary challenges.

Special Drawing Rights (SDRs):

SDRs, created by the IMF to supplement member countries’ reserves, offer a lifeline to financially burdened countries. Soros proposes that rich countries donate their SDR allocations to poorer nations, a move that could significantly alleviate financial stresses in less affluent regions.

Perpetual Bonds:

Soros introduces perpetual bonds as a cost-effective funding solution for the EU. These bonds, requiring only annual interest payments, provide an efficient way to raise funds without increasing long-term debt burdens. Soros suggests their issuance to support the EU’s financial stability.

Introduction of Perpetual Bonds and Their Benefits:

Perpetual bonds, a centuries-old financial instrument, emerge as a viable solution for the EU’s economic crisis. They offer a steady interest income without the need for repayment, providing financial support without adding to EU members’ debt.

Addressing Objections and Ensuring Proper Use:

Despite objections from some EU member states, Soros argues for the responsible and judicious use of perpetual bonds. He suggests strict guidelines and oversight to prevent misuse, emphasizing their role as a temporary measure for extraordinary situations.

Chancellor Merkel’s Role and Climate Change Initiatives:

Chancellor Merkel’s support for EU recovery plans and perpetual bonds highlights her political influence. The proposal for additional consuls to fund climate initiatives showcases the EU’s commitment to tackling both economic and environmental challenges.

Accelerating the Use of Consols in the European Union:

The European Union has the opportunity to employ consols, a financial instrument that can attract investors, allow the European Central Bank to invest, and provide funds to those in need. This innovative approach would provide equitable support and assist those affected by the COVID-19 pandemic.

Dismissal of Perpetual Bonds:

The confusion between perpetual bonds and corona bonds led to the rejection of perpetual bonds. However, perpetual bonds are distinct from corona bonds, as they reduce debt burden instead of increasing it.

Historical Use of Consols:

Consols, also known as perpetual bonds, have been used for centuries in countries like the UK, US, and Netherlands. The Netherlands, despite being the current strongest opponent of their use, issued perpetual bonds in 1648 to repair a dike, and the bonds remain outstanding.

Legal and Moral Objections:

Legal objections may arise due to TFEU regulations, but they could be overcome as the authors were unaware of consols. Moral objections may arise from German-speaking people due to the double meaning of the word “Schuld” as debt and guilt.

Preventing Abuse of Consols:

To prevent abuse, consols should be designated as a temporary measure.

Reasons for Hostility Towards Consols:

The commission was unaware of perpetual bonds when it proposed a recovery plan, focusing attention on budget distribution rather than generation. Member states and interest groups are preoccupied with budget funds, delaying the realization that the budget cannot generate the needed amount.

Urgency of Consols:

Consols are an indispensable financial instrument, but their recognition may come too late. The German presidency starting on July 1st should accelerate the process to provide much-needed financial support.

Overcoming Challenges with Consuls:

Consuls can assist the EU in addressing climate change and the economic impact of COVID-19. By providing additional funds and ensuring proper monitoring, the EU can meet the expectations of its citizens and demonstrate its ability to tackle major challenges.



George Soros’ address and the EU’s financial strategies represent a multifaceted response to the contemporary revolutionary era. Soros’ insights into the causes and responses to global changes, combined with the EU’s innovative financial solutions, underscore the need for adaptability, cooperation, and responsible governance in navigating these transformative times. This approach, integrating historical wisdom with modern financial instruments, offers a blueprint for addressing current and future global challenges.

Notes by: Rogue_Atom