"Trump will be willing to do almost anything to stay in power"

George Soros, during the interview at his residence in Southampton (New York State).

George Soros just played a game of tennis. At 90, he plays three times a week. Of course, his mobility is not what it used to be, but he scores his points with impeccable elegance. And when he double-faults on the serve, his roars of frustration are intimidating. A few days before his birthday [born in Budapest, he turns 90 today], he is in perfect physical shape and more determined than ever to continue fighting for an open society. As soon as we sat down at his house for the interview - La Repubblica is part of the LENA European media alliance - I ask him about the current pandemic situation.

Question . The coronavirus has disrupted the life of the planet. How do you see the situation?

Answer . We are in a crisis, the worst crisis I have experienced since World War II. I would describe it as a revolutionary moment, in which the range of possibilities is much greater than in normal times. What in a normal situation would be inconceivable, not only becomes possible, but actually happens. People are disoriented and scared. They do things that are bad both for themselves and for the world.

Q. Do you also feel confused?

A. Maybe a little less than most. I have developed a conceptual framework that puts me slightly ahead of the pack.

Q. And how do you see the situation in Europe and in the United States?

R. I think Europe is very vulnerable, much more than the United States. The United States is one of the longest-lived democracies in history. But even there, a trickster like [Donald] Trump can win a presidential election and undermine democracy from within. However, the US has a long history of implementing checks and balances, and it also has well-established rules. And, above all, it has the Constitution. So I'm convinced that Trump will be a transitory phenomenon that, hopefully, will end in November. However, he is a very dangerous individual because he is fighting for his life, and he will be willing to do just about anything to stay in power, because he has broken the Constitution in many different ways. If you lose the presidency, you will be held accountable. But the EU is much more vulnerable, because it is an incomplete union. And it has many enemies, both internal and external.

Q. Who are the internal enemies?

A. There are many leaders and movements that oppose the fundamental values ​​of the EU. There are two cases in which these enemies have come to power and captured the government: Viktor Orbán in Hungary and Jaroslaw Kaczynski in Poland. It happens that precisely Poland and Hungary are the largest recipients of the structural fund distributed by the EU. But my biggest concern is Italy. A very popular anti-European leader, Matteo Salvini, managed to gain a lot of ground until he overestimated his success and dismembered the government. That was a fatal mistake. Now its popularity is on the decline. But he has effectively been replaced by Giorgia Meloni, from the Fratelli d'Italia party, which is even more extreme. The current governing coalition is extremely fragile.

The only thing that unites them is the desire to avoid an election, which the anti-European forces would surely win. And we are talking about a country that was once the most enthusiastic supporter of Europe. Because people trusted the EU more than their own governments. But now, public opinion polls reveal that the numbers of Europe's supporters are shrinking, and that support for staying within the eurozone is waning. But Italy is one of the largest members, it is too important for Europe. I could not imagine a European Union without Italy. The big question is whether the EU will be able to provide sufficient support to Italy.

Q. The EU has just approved a recovery fund of 750,000 million euros ...

R. It is true. The EU has taken a very big and positive step by committing to borrowing money from the market, on a much larger scale than ever before. But it is also true that some states, the so-called Frugal Five : the Netherlands, Austria, Sweden, Denmark and Finland, managed to make the agreement less effective. The tragedy is that they are all basically pro-European, but they are very selfish. And also very frugal. And they have led to an agreement that will prove inappropriate. The reductions in the magnitude of climate change plans and defense policy are particularly disappointing. Second, they also want to make sure the money is being spent correctly. This creates problems for the southern states, which were the hardest hit by the virus.

Q. Do you still believe in a European perpetual bond?

R. I still do not give it up for lost, but I do not think there is enough time for it to be accepted. Let me explain what makes perpetual bonds so attractive and why they are an impractical idea right now. As its name suggests, the principal of a perpetual bond never has to be paid, only its interest. Assuming an interest rate of 1%, quite generous at a time when Germany is able to sell 30-year bonds with a negative interest rate, the debt service of a 1 trillion euro bond would only cost 10 billion euros. euros per year. This represents a very low cost / benefit ratio of 1: 100. In addition, the trillion euros would be available immediately, at a time when it is urgently needed, while interest must be paid over time, and the more time passes, the less is the discounted present value. So why aren't they broadcast? The buyers of the bond must have guarantees that the European Union is able to pay the interest on the debt. This would require the EU to have sufficient resources (ie capacity to collect taxes) and Member States are a long way from authorizing such taxes. The four frugal : Holland, Austria, Sweden and Denmark (now five, because Finland joined them) are opposed. Taxes would not even have to be collected, but your mere authorization would suffice. In short, this is what makes perpetual bond issuance impossible.

Q. And couldn't Chancellor Merkel, determined that her presidency be a success, could do something about it?

A. You are doing your best, but you are facing strong cultural opposition: the German word Schuld has a double meaning. It means "debt" and "guilt". Those who incur debt are guilty. This does not take into account that creditors may also be at fault. This is a very, very ingrained cultural issue in Germany. It has created a conflict between being German and European at the same time. And it explains the recent decision of the Supreme Court of Germany, which conflicts with the Court of Justice of the EU.

Q. Who are the external enemies of Europe?

A. They are numerous, but they all share a common characteristic: they oppose the idea of ​​an open society. I became a passionate advocate for the EU because I see it as a true embodiment of open society on a European scale. Russia used to be the biggest enemy, but lately China has taken supremacy from it. Russia dominated China until the time of Nixon, who understood that by opening up to China and supporting its development, it could weaken both communism itself and the Soviet Union. Yes, he was removed from office, but both he and Kissinger were great strategists. His actions led to the great reforms carried out by Deng Xiaoping.

Today, things are very different. China is a leader in the field of artificial intelligence. Artificial intelligence generates instruments of control that are very useful for a closed society, and that represent a mortal danger for an open society. It tips the balance in favor of closed companies. Today's China is a much greater threat to open societies than Russia. And in the US, there is a bipartisan consensus that China is a strategic rival.

Q. Returning to the issue of the coronavirus, is it beneficial or harmful for open societies?

R. Definitely harmful, because the monitoring instruments produced by artificial intelligence are very useful to control the virus, which makes these instruments more acceptable even in open societies.

Q. How did you get to be so successful in the financial markets?

A. As I said before, I have developed a conceptual framework that gave me an advantage. It focuses on the complex relationship between thought and reality, but I used the market as a testing ground to corroborate the validity of my theory. I can summarize it in two simple postulates. The first is that, in situations where there are thinking participants, the worldview of these participants is always incomplete and distorted. That is fallibility. The other is that these distorted views can influence the situation with which they are linked, because distorted views can lead to inappropriate actions. That is reflexivity. This theory gave me an edge at the time, but now that my book The Alchemy of Finance has become a near-mandatory reference work for professional market participants, I have lost my edge. I realize this, and I no longer actively participate in the market.

Q. Does your conceptual framework tell you that you should be concerned about the perceived disconnect between market valuations and the weakness of the economy? Are we in the middle of a bubble fueled by the immense liquidity that the Federal Reserve has generated?

A. You are spot on. The Fed did a much better job than President Trump, who criticized it. It flooded the markets with liquidity. Currently there are two considerations that support the market. One of them is that an injection of fiscal stimulus even greater than the 1.8 trillion USD of the CARES law is expected to occur in the short term; the other is that Trump will announce the existence of a vaccine before the election.

Q. You have donated 220 million dollars to causes of racial equity and related to the black population. What would your assessment of the Black Lives Matter be?

R. It is very important, because this is the first time that a great majority of the population, beyond the African American demographic segment, recognizes that there is systemic discrimination against blacks, whose origin dates back to the days of slavery.

P. Many believe that, after COVID-19 and the teleworking experience, the future of cities and metropolitan areas is at risk.

A. Many things will change, but it is too early to predict how. I remember that after the destruction of the Twin Towers in 2001, people thought that no one would want to live in New York again, and a few years later this concept had already been forgotten.

P. In this revolution statues are being demolished and political correctness is becoming very important.

A. Some call it the cancellation culture. I think it is a temporary phenomenon. I also think that it has been greatly exaggerated. On the other hand, political correctness in universities is very, very exaggerated. As an advocate of an open society, I consider political correctness to be politically incorrect. We must never forget that the plurality of points of view is essential for open societies.

Q. If you could send a message to the European people, what would it be?

R. SOS While Europe is celebrating its customary August holidays, the revival of travel may have precipitated a new wave of infections. If we look for a parallel reference, the Spanish flu epidemic of 1918 is immediately apparent. It had three waves, of which the second was the deadliest. Epidemiology and medical science in general have come a long way since then, and I am convinced that the experience does not have to be repeated. But, in order to take the necessary steps to avoid a second wave, it is first necessary to admit the possibility of its existence. I am not an expert in epidemiology, but I am clear that people who use public transport must wear masks and take other precautions.

Europe also faces another existential problem: it does not have enough money to simultaneously deal with the virus and climate change. In hindsight, it is clear that the face-to-face meeting of the European Council was a complete failure. The course the European Union has set will produce too little money, too late. This makes me think again about the idea of ​​perpetual bonds. In my opinion, the frugal four , or all five, should recognize this: instead of opposing the idea, they should become great advocates for it. Only their genuine conversion could make perpetual bonds acceptable to EU investors. Without them, there is a chance that the European Union will not survive. This would be a terrible loss, not only for Europe but for the entire world. And this is not only possible, but even probable. I believe that if the public pushes enough, the authorities could prevent it from happening.