As the U.S. economy worsens, protests such as those carried out by the Occupy Wall Street movement will turn ugly, breaking down into waves of violent unrest across the nation, says billionaire financier George Soros.
"It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States," Soros tells Newsweek.
Unrest in the United States will serve as one of many symptoms of a worsening global economy, which makes wealth preservation a priority over getting rich.
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"At times like these, survival is the most important thing," Soros tells Newsweek.
"I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career," says Soros, made famous by betting against the pound in 1992 and pocketing $1 billion in the process, he said.
"We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse," he said.
"The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system."
European policymakers have no choice but to keep all the currency zone alive in its present form.
A messy default and exit from the block from even one country would send major shockwaves across the world.
"The euro must survive because the alternative — a breakup — would cause a meltdown that Europe, the world, can’t afford," says Soros, who owns $2 billion in European government debt he bought from MF Global, the securities firm run by former Goldman Sachs chief John Corzine that went bankrupt in October.
"The collapse of the Soviet system was a pretty extraordinary event, and we are currently experiencing something similar in the developed world, without fully realizing what’s happening."
At the heart of the global uncertainty lie countries like Greece and Italy, who are carrying such hefty debt burdens that many fear they will default and abandon the euro as its currency, which would roil financial systems worldwide similar to the Lehman Brothers collapse in 2008.
While some see default as inevitable, avoiding a messy one while allowing Greece to stay in the currency zone is the best option.
Others point out that they aren't hoping for a best-case scenario out of the crisis and just want to avoid total disaster.
European policymakers owe the world just that.
"It's not that the market needs Europe completely solved," says John Gerspach, Citigroup's chief financial officer, according to The Telegraph.
"It's just that they need assurance it won't be a complete disaster." Until then, investors are likely to avoid risk, Gerspach says.
While Soros agrees that a Greek default is likely, a messy one needs to be avoided at all costs.
"If you have a disorderly collapse of the euro, you have the danger of a revival of the political conflicts that have torn Europe apart over the centuries — an extreme form of nationalism, which manifests itself in xenophobia, the exclusion of foreigners and ethnic groups," Soros says.
"In Hitler’s time, that was focused on the Jews. Today, you have that with the Gypsies, the Roma, which is a small minority, and also, of course, Muslim immigrants."
Soros adds he's staying out of U.S politics despite his arguably well-known Democratic tendencies — and donations.
"I would prefer not to be involved in party politics. It’s only because I felt that the Bush administration was misleading the country that I became involved," Soros says.
"I was very hopeful of a new beginning with Obama, and I’ve been somewhat disappointed. I remain a supporter of the Democratic Party, but I’m fully aware of their shortcomings."
Can Obama be re-elected?
"Obama might surprise the public. The main issue facing the electorate is whether the rich should be taxed more. It shouldn’t be a difficult argument for Obama to make."
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