Brexit will make the rich richer and the poor poorer. Take that elites!
Experts are out of favour in this referendum, and perhaps for good reason. The idea of an ‘expert’ is a rather shady one, especially in the weird world of economics.
No less than the Justice Minister, Michael Gove, has given voice to this popular suspicion of clever-clogs types instructing the public on what to think.
However, there are some ‘experts’ worth listening to. To paraphrase the prime minister, it’s probably sensible to listen to a mechanic before you take a car on the road, (I would add, even if that mechanic is looking to pinch your pocket with a tidy fee).
One such example is currency speculator George Soros.
Soros is a hate figure on the American Right, with wingnuts like Glenn Beck seeing this Hungarian-Jewish financier behind every liberal machination in US public life. (Soros has funded liberal groups like the Centre for American Progress and MoveOn.org, and is chair of the Open Society Foundations.)
Today he warns a vote for Brexit on Thursday will crash the British economy, costing jobs and resulting in a recession. So much we’ve heard from the Institute for Fiscal Studies and all the rest.
But he goes further. Writing in the Guardian, Soros compares the impact of a drop in the value of sterling – which he argues is already evident in its decline over Brexit fears, and rebound now Remain seems more likely – with a previous devaluation, in 1992.
Soros knows whereof he speaks. By some deft speculation that year, he was able to make a huge profit after Britain left the European exchange rate mechanism (ERM) and cut interest rates to soften the blow. On that occasion, a devaluation was good for the economy, but this time, things would be different.
He writes:
‘I would expect this devaluation to be bigger and more disruptive than the 15 per cent devaluation that occurred in September 1992, when I was fortunate enough to make a substantial profit for my hedge fund investors, at the expense of the Bank of England and the British government.’
His reasons are summed up by Guardian economics editor Larry Elliott:
‘In the months following the UK’s departure from the ERM [in 1992], interest rates were cut from 10 per cent to 5.5 per cent – easing the financial burdens facing consumers and businesses.
However, with official borrowing costs currently at 0.5 per cent, Soros said rates were already at the lowest level consistent with the stability of British banks and meant there was little the Bank of England could do in the event that Brexit led to a recession.’
In other words, there’s no room to cut interest rates this time. So, as Soros continues, ‘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’.
Soros predicts the pound would fall ‘at least 15 per cent and possibly more than 20 per cent’, making one pound roughly equal to the value of one euro.
He concludes that a better comparison would be with the 1967 devaluation, when prices rose and living standards dropped, while ‘financial speculators, back then called the Gnomes of Zurich, were making large profits at Britain’s expense’:
‘Today, there are speculative forces in the markets much bigger and more powerful. And they will be eager to exploit any miscalculations by the British government or British voters.
A vote for Brexit would make some people very rich – but most voters considerably poorer.’
So leaving the EU won’t ‘take back’ money from Brussels, but hand it over to financial speculators and hedge fund investors – in other words, make the poor poorer and the rich richer.
What an odd way to stick it to ‘the elites’.
Adam Barnett is staff writer for Left Foot Forward. Follow him on Twitter @AdamBarnett13
5 Responses to “When George Soros says Brexit will send the pound through the floor, we should listen”
NHSGP
meanwhile Osbourne is borrowing billions to pay for migrants. Public borrowing has rocketed again today.
Someone has to pay for the min wage migrants so they get free NHS, Free schooling, Free pensions. Then their HB, their income support, and all the other benefits that Cameron exludes from his pay their way analysis.
All on top of that socialist pension ponzi. The welfare state owes 10 trillion for pensions and is the cause of wealth inequality.
But what the heck. Lets get more people in, spend the money. Zero assets at the end of the day and the debt rockets.
Perhaps they will leave and out of the kindness of their hearts refuse their state pension.
NHSGP
So to sumarise the argument.
Soros who ripped people off for a billion is a shining light of the left.
Makes Phillip Green a saint.
Himself
When a corporation or banker tells you how to vote then you know that your democracy stinks.
The EU will collapse so it is better to get out now and have a head start.
Voting to remain is voting to remain until the bitter end and it will be very bitter.
J Sang
Yes, let’s say Soros is right – GBP and market drops and others make millions if not billions, but for longer term, the decision of Brexit is going to make this tiny island a lot more independent. Neither Bremain or Brexit arguments are incorrect. But put them on a timescale, and then make the decision on where you want this country to go.
David in England
A lower pound will help Rolls Royce to sell more aeroengines. So far their shares are up about 10%. This is good news for the rebalancing of the economy.