Markets can influence the events that they anticipate.
Interpretation
Markets can shape reality based on their expectations and predictions.
This quote by George Soros highlights the idea that financial markets are not just passive reflections of economic conditions, but rather active participants that can drive real-world events based on their anticipations and beliefs. When investors collectively foresee certain outcomes, their actions can create a self-fulfilling prophecy, impacting the economy and influencing events significantly.
In practice
In a finance seminar discussion, this quote can emphasize the role of market psychology.
The securitisation of mortgages added a new dimension of systemic risk. Financial engineers claimed they were reducing risks through geographic diversification: in fact they were increasing them by creating an agency problem. The agents were more interested in maximising fee income than in protecting the interests of bondholders. That is the verity that was ignored by regulators and market participants alike.
The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the present regime.
Regulating and taxing marijuana would simultaneously save taxpayers billions of dollars in enforcement and incarceration costs, while providing many billions of dollars in revenue annually.
We are the most powerful nation on earth. No external power, no terrorist organization can defeat us. But we can defeat ourselves by getting caught in a quagmire.
My foundations support people in the country who care about an open society. It's their work that I'm supporting. So it's not me doing it. But I can empower them. I can support them, and I can help them.
The criminalization of marijuana did not prevent marijuana from becoming the most widely used illegal substance in the United States and many other countries. But it did result in extensive costs and negative consequences.
The focus of our public discourse has been on how American companies are competing with Japanese, German, and other foreign companies. What this allows us to ignore is how each of those American companies is really in competition with the families of the workers. That's the real competition.
China adopted a capitalist system in the 1980s, and they went from a 60% poverty rate to 10%.
Beneath the surface, unnoticed by many, an even deeper force was at workβthe rise of creativity as a fundamental economic driver, and the rise of a new social class, the Creative Class.
Long-term economic growth depends mainly on nonmonetary factors such as population growth and workforce participation, the skills and aptitudes of our workforce, the tools at their disposal, and the pace of technological advance. Fiscal and regulatory policies can have important effects on these factors.
Adam Smith's 'invisible hand' is not above sudden, disturbing, movements. Since its inception, capitalism has known slumps and recessions, bubble and froth; no one has yet dis-invented the business cycle, and probably no one will; and what Schumpeter famously called the 'gales of creative destruction' still roar mightily from time to time. To lament these things is ultimately to lament the bracing blast of freedom itself.
An economy can survive with 10% of the population insolation. It can't survive when 50% of the population is in isolation.
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