- The Big Guns Are Out: Soros, Rothschild Warn Of Brexit Doom; Osborne Threatens With “Suspending” Market
by Tyler Durden, www.zerohedge.com
The big guns are officially out.
Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion.
24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.”
He predicts that the pound would decline “precipitously”, seeing a gargantuan drop of at least 15% and possibly >20% to below $1.15. Considering it has now become trendy for analysts to come up with ever “doomier” forecasts of just how low cable would plunge in case of Brexit, we are surprised Soros stopped there.
Here Soros makes the distinction how the collapse in cable would be different from the one that made him richer by saying that this devaluation wouldn’t be “healthy” like the one in 1992 because BOE wouldn’t cut rates, U.K. has large current account deficit and devaluation unlikely to improve manufacturing exports this time. Just don’t tell that to the BOJ, which would gladly leave the EU – twice if it had to – if it meant a 20% devaluation.