George Soros warning of zombie banks sucking the economy dry, the IMF estimating toxic debts could reach $4Tn, and Morgan Stanley warning the bear is not over.
– Ilene
George Soros warns ‘zombie’ banks could suck lifeblood out of economy
By Julia Kollewe in the Guardian.co.uk
• IMF estimates toxic debts could spiral to $4tn
• Morgan Stanley warns bear market not over
[George Soros thinks the US economy will not recover until next year at the earliest. Photograph: Suzanne Plunkett/AP]
Billionaire investor George Soros has warned that bailing out banks could turn them into "zombies" that suck the lifeblood of the American economy, which he predicted is in for a "lasting slowdown".
He also cautioned that the recent rise in global stockmarkets is a "bear market rally because we have not yet turned the economy around".
His gloomy verdict weighed on Asian stockmarkets today, alongside a report that the International Monetary Fund now estimates that the toxic debts racked up by banks and insurers could spiral to $4tn (£2.7tn).
Tokyo’s Nikkei index edged down 0.3% to 8832.85 while Hong Kong’s Hang Seng fell 1.1% and Singapore’s Straits Times index was down 2.1%. However, the FTSE 100 index in London rose 33 points to 4027.15 in early trading.
Soros said he does not expect the US economy to recover until next year at the earliest.
"The recovery will look like an inverted square root sign," he said. "You hit bottom and you automatically rebound some, but then you don’t come out of it in a V-shaped recovery or anything like that. You settle down, step down."
His comments last night came after Morgan Stanley warned the bear market was not over. Its much followed strategy team led by Teun Draaisma moved its recommendation on equities from neutral to underweight…
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