Billionare investor George Soros feels that once the economy gets going, then interest rates are going to take a big leap. CNBC’s Maria Bartiromo spoke to George Soros at Davos.
Here is an edited transcript.
Q: Is the Eurozone out of the woods yet?
A: The fundamental internal inconsistencies in the system have not been addressed and therefore you face political dangers. The euro is transforming the European Union into something very different from the original conception which was a voluntary association of equal states. And instead of that the financial crisis has created a two class system within the euro - creditors and debtors and the creditors are in charge. The biggest danger is that it is actually potentially currency war because the rest of the world follows a different recipe from the Germans. The Germans believe in austerity.
Q: Everywhere you look around the world there is austerity and there is debt. So we are all trying to rein in the debt even in the US. Would you say we need to get our armature in the debt in the US, rein things in, cut back or do you agree that the way you feel about Europe, no austerity this is not the approach, applies to the US as well?
A: I think it applies to the US because when you have unemployed resources, putting those resources to work is really the first objective and you need to re-establish growth for shrinking to debt. So I think the policy basically, pioneered by Bernanke is actually the right policy.
Q: You are not worried about the fact that the Federal Reserve has expanded its balance sheet so much, the ECB expanding its balance sheet so much. Is there a downside risk there?
A: There is a downside risk because once the economy gets going then interest rates are going to take a big leap because this is a delicate two faced maneuver where first you throw more money at the economy and as the economy picks up, you have to take that money out.
Q: Are you expecting that once we see a change in interest rates that it happens fast, it happens furious when would you expect a spike in interest rates?
A: As soon as there are clear signs of pickup in the economy.