Soros Has Another Warning, But Has He Lost His Touch?

Soros Has Another Warning, But Has He Lost His Touch?

There is a clash of powerful economic forces occurring in the UK, George Soros says in a Project Syndicate opinion post written Monday. The ultimate impact of Brexit, inflation rising faster than wage growth and the need for consumers to deleverage will converge with the need for the Bank of England to raise interest rates. This four-corner offense of economic factors will have the net result of slowing growth at a time when economic vitality is needed most, Soros predicted. One path to soften the blow could be a soft Brexit exit.

Soft brexit, UK, Soros, May 2017 hedge fund letters Q1 letters
George Soros says a soft Brexit is the answer for the UK and Theresa May

Soros: UK is at a Brexit tipping point

“The British are fast approaching the tipping point that characterizes all unsustainable economic trends,” he wrote. “Economic reality is reinforced by political reality,” and the “lose-lose” proposition of Brexit voted on by the slimmest of majorities.

The political dysfunction in the UK can be seen in the recent rejection of British Prime Minister Theresa May’s call for snap elections. The vote was lost by May and her conservative party because they asked senior citizens – the conservative party’s key constituency – to pay more in taxes. Many of the elderly stayed home or voted for other candidates in protest of the new taxes. This occurred as they young got energized and voted for “remain” candidates.

“The Brexit referendum cannot be undone, but people can change their minds,” which impacts the severity with which an exit plan is executed. A soft Brexit would help the economy.

If Theresa May wants to stay in power, a coalition with soft Brexit backers is the answer

Soros predicts if May wants to remain in power, she must change her attitude regarding Brexit “and there are signs that she is prepared to do so.”

There are several components of the negotiation, with a conciliatory attitude and a focus on creating a win-win rather than a lose-lose. This path Soros advocates is found in addressing the needs of both sides: the UK wants the single market and the EU wants the UK’s financial resources:

May could reach an understanding with the EU on the agenda and agree to continue as a member of the single market for a period long enough to carry out all the legal work that will be needed. This would be a great relief to the EU, because it would postpone the evil day when Britain’s absence would create an enormous hole in the EU’s budget. That would be a win-win arrangement.

May needs to become a pragmatist to remain in power, Soros says, a move that would involve embracing – and forming a coalition – with forces that advocate a decidedly softer Brexit stance.

However, it is important to note Soros has made a lot of predictions lately, which have for the most part (in our opinion) not come true (although watch China WWIII one -which is still a scary and growing possibility) – if they do not come true he may end up like the (much richer and successful) boy who cried wolf. See a list of some recent ones below:

 

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