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George Soros predicts ‘black Friday’ after Brexit

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Billionaire investor George Soros has warned a vote to leave the European Union would spark “black Friday” resulting in a devaluation of the pound that would leave voters worse off.

Writing in the Guardian, Soros says the devaluation of the pound after a Brexit would be worse than the 15 per cent fall on “black Wednesday” in September 1992 when he made substantial profits for his hedge fund investors.

He predicts a potential fall of more than 20 per cent and says if the pound drops to below $1.15 then £1 would be worth around €1.

He disagrees a devaluation would be helpful to the economy, which he sats was the case in 1992.

Soros says: “That devaluation was healthy because the government was relieved of its obligation to ‘defend’ an overvalued pound with damagingly high interest rates after the breakdown of the exchange rate mechanism.”

He cites three reasons why devaluation after Brexit would be unhelpful: the Bank of England would not cut interest rates, the UK’s “large current account deficit”, and because manufacturing exports are unlikely to improve.

He says: “Interest rates are already at the lowest level compatible with the stability of British banks. That, incidentally, is another reason to worry about Brexit. For if a fall in house prices and loss of jobs causes a recession after Brexit, as is likely, there will be very little that monetary policy can do to stimulate the economy and counteract the consequent loss of demand.”

On the account deficit he adds: “The devaluations of 1992 and 2008 encouraged greater capital inflows, especially into residential and commercial property, but also into manufacturing investments.

“But after Brexit, the capital flows would almost certainly move the other way, especially during the two-year period of uncertainty while Britain negotiates its terms of divorce with a region that has always been – and presumably will remain – its biggest trading and investment partner.”

Soros says a Brexit vote would make some people very rich but would leave most voters “considerably poorer”.

He adds: “I want people to know what the consequences of leaving the EU would be before they cast their votes, rather than after. A vote to leave could see the week end with a Black Friday, and serious consequences for ordinary people.”

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Comments

There are 15 comments at the moment, we would lover to hear your opinion too.

  1. Soren Lorenson 21st June 2016 at 9:42 am

    I’d agree. We all know that Brexit will cause a financial storm.

    The remainers only seem to be able to say that the EU is pretty rubbish but leaving it will be even worse.

    We survived Black Friday and are much stronger now than we were then. Is it worth 2 years or so of financial stress to leave the EU? I’m still wavering but I’m beginning to think that it might be.

  2. There are 2 types of people in this world, those that don’t know what the future will be, and those that don’t know that they don’t know what the future will be!

  3. To my knowledge, none of the pro-remain lobby has answered the question: Given the undeniably parlous state of the economies of nearly all the EU countries (Germany, of course, is the one notable exception) and the irresponsible way in which the ECB has handed out massive grants left, right and centre, like confetti, which the recipient countries have swiftly squandered, would you, were we presently NOT a member, vote to join the EU?

    • Maybe we wouldn’t but that isn’t the question. Joining an organisation as a new member isn’t the same as leaving one that you are already in. There is too much potential damage to the economy from leaving for me to vote out.

  4. There are none so blind as those who will not see – Simon Hall.

    Soros did it before and cleaned up. There are many who are now salivating at the prospect of emulating him.

    Fear? WE should all be prepared to wear nappies if Brexit triumphs.

    I see from today’s paper that 13 Nobel Laureate Economists and 80 Economics Professors plus an additional 75 economist have all entreated us to remain. Odd isn’t it that we have those who honestly think they know better.

  5. Norway is not a member of the EU and has held two referendums on whether or not to join.
    On each occasion they were apparently told, by all the ‘experts’ and the political elite, that the sky would fall in, their currency would tank and their economy would crash.
    While accepting that this was many years ago Norway seems to have proven all these prophecies of doom and gloom wrong.
    If the UK stays in the EU will continue on it’s federalist path and eventually we will become subsumed within a vast undemocratic bureaucracy.
    David Cameron has in just a few months obtained the agreement of the heads of all the other 27 member states on special arrangements for the UK.
    Either he is being economical with the truth or he is totally naive if he expects any of these ‘promises’ to last once the polls are closed. It’ll be ‘sorry but things have changed, my coalition partners won’t accept it etc..etc…!
    In any case most of this misses the point which is that a high proportion of citizens in western democracies have lost faith in their respective politicians and elites and are also asking why globalisation has not included them in it’s benefits.

    • headbelowthe parapet 21st June 2016 at 4:34 pm

      To be fair Norway has the 3rd highest nominal GDP per capita (almost 40% higher than that of the UK), so the economics are just ever-so slightly different…

  6. Black Friday maybe, but Happy Monday for sure!

  7. David Quarrell 21st June 2016 at 3:55 pm

    Has George hedged the wrong way this time and is getting worried ? Wow what a week, the Archbishop of Canterbury, George Soros and David Beckham they all can’t be wrong ? In the words of a famous song…
    The higher you build your barriers, the taller I become
    The farther you take my rights away, the faster I will run
    You can deny me, you can decide to turn your face away,
    No matter cause there’s something inside so strong,
    I know that we can make it
    Though you’re doing us so wrong, so wrong
    You thought my pride had gone, oh no
    The more you refuse to hear my voice, the louder I will sing
    You hide behind the walls of Brussels, your lies will come tumbling
    Deny my country’s place and time, you squander wealth that’s mine,
    Our light will shine so brightly it will blind you,
    Because there’s something inside so strong !
    Brothers and sisters when they insist were just not good enough,
    Well we know better, just look em in the eyes and say
    Were gonna do it anyway !
    Vote Leave

  8. Only Harry Katz and PG on this thread looking like safe pair of hands for investment advice then. A pity defiance doesn’t pay the bills.

    Interesting Norway is given so often as the example of how we’d do fine. Only last Wednesday the Prime Minister of Norway was reported as saying that the UK should be wary of leaving the EU, and that they ‘wont like it’. Possibly because it’s the “Pay, with no say” model.

    Norway’s deal:
    Accepts free movement of people
    Has to comply with EU rules but with no input or veto
    Pays about the same per person into EU Budget as UK

    Worth noting also that Norway runs a very different economic model to the UK too, mostly based on natural resources with high levels of regulation and state ownership in key areas. Britain’s dependence on financial and business services, by contrast, makes us look a bit daft to purposely rock the international financial boat.

  9. George Soros has also been wrong in the past. Not always correct.

  10. The highly prized experts told us joining the ERM would bring stability and growth. They were wrong. It brought instability and recession. Only by taking back our control did we recover – and strongly.

    Then the highly prized experts, including the CBI, told us to join the euro. Or, we would become an insignificant backwater, losing billions of FDI. Once again, they were wrong. We kept our control and grew very nicely, thank you.

    Now those same sources, with such a catastrophic record in EU forecasting are telling us to stay.

    Maybe it’s because they are all EU-connected or EU-funded?

  11. @ Ruth Gilbert.
    I was commenting on the similarity of the doom and gloom mongers during each referendum campaign, not suggesting we should follow the ‘Norway Model’.

  12. How funny from a currency speculator !!

    Most telling comment (not published widely) was from the of the German ‘CBI’ about so called trade sanctions !! – lets get out of this political wet dream for god’s sake !!

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