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Sunday, 30 June, 2002, 14:23 GMT 15:23 UK
Interview with George Soros, financier
BBC BREAKFAST WITH FROST INTERVIEW: GEORGE SOROS FINANCIER JUNE 30TH, 2002
Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used
DAVID FROST: Well it's been a turbulent week for Stock Exchanges around the world. On Wednesday we learned about the fraudulent accounting of the US phone telecom company Worldcom. And on Friday another American multinational Xeros faced new questions about the accuracy of its accounts. That all follows on of course from Enron. Can we rely on company figures and how will these cases affect investment? I'm joined in the studio by the financier, the legendary financier turned philanthropist George Soros, George good morning.
GEORGE SOROS: Good morning.
DAVID FROST: We've got all these headlines today on Worldcom here, the financial section of the Sunday Express says Worldcom disaster now ten times worse and all of that, what are the lessons, what the conclusions you draw from this horrendous set of headlines this week?
GEORGE SOROS: Well this is, in one way, a normal fall-out of the, of the preceding boom but in another way the fact that it is so widespread, that there are so many irregularities that come to, to the fore raises a more far-reaching issues about the values that guide us, not just in business but also in politics and generally. Because there is a culture in the United States that success matters and that's the only principle that you really have to rely on. So anything goes and if you're successful and particularly financially successful you have admiration, respect and so on. So there is the lack of, what I would call moral principles now which I is I think very widespread, you see it in politics as well, it's the, a matter of you know, politician is supposed to win elections, it doesn't matter what he says, what he does as long as he gets elected. And this is a very unsound basis for a society so I think we ought to really look back a little bit and, and reflect a little bit more profoundly than we have done so far.
DAVID FROST: Well in fact those questions are asked about politicians and so on, but particularly in this case of the, in the financial world or in the business world what could be done?
GEORGE SOROS: Well obviously there has to be the changes in the way figures are presented. America has a rules-based system of accounting and it isn't enough to have rules because rules can lead to rules avoidance and in fact the rule avoidance business, the industry is a very large industry pursued by the most respectable people in finance. So rules alone are not enough, you need principles and this is where actually there is a difference between the accounting approach in, in Europe and in the, in the United States. Because in Europe you have actually principles-based approach and in America you have a rules-based approach.
DAVID FROST: I see, so, so would you say we, you wouldn't expect a similar scandal here?
GEORGE SOROS: Well it could occur, there are always excesses, I mean you had a few but you wouldn't have this sort of systemic problem and interestingly I think the most important step to bring it to the, to the fore, to correct this has already occurred because the SEC, the Securities and Exchange Commission sent out a directive to the directors of all the reporting companies saying that they are personally responsible for giving a fair and appropriate representation of the financial affairs of the companies irrespective of the rules. In other words, even if they, they meet all the accounting rules they misrepresent the overall condition of the company they are personally responsible and that's why all these things are now coming, coming out, because the directors are taking a closer look.
DAVID FROST: Well that's a very important point, that one, about accountability. Tell me in the overall view of the financial world at the moment, did I read you right that you said somewhere that you thought that in the foreseeable future the dollar could lose as much as a third of its value?
GEORGE SOROS: Yes I did say that and because you see markets generally, financial markets generally but particularly currencies don't move towards an equilibrium, they go to one excess or the other and they tend to move in sort of large waves, cycles which tend to last for two or three years and you never know when the trend has changed and you can only say in retrospect. But there are signs now that, that the trend has changed, that people in the world have lost confidence in the management in the United States, in other words this is now a kind of Bush bear market that is developing.
DAVID FROST: Well it's fascinating to go over this with you and I think that key point about personal accountability making chief executives look more closely at the figures is a vital one, thank you very much for being with us.
GEORGE SOROS: My pleasure.
DAVID FROST: George Soros there.
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