US, UK Economies: Worse to Come Warns Billionaire Investor Soros

22 May 2008

NEW YORK: Billionaire George Soros (pictured), perhaps the most savvy of Planet Earth's buccaneering investors, believes the "acute phase" of the global credit crisis is over, although he warns that the aftermath will lead to recessions in the USA and UK.
Best known for "breaking the Bank of England" on Black Wednesday in 1992, when his massive bet against the pound sterling drove the British government out of the European Exchange Rate Mechanism, Soros is these days heeded like no other sage, bar perhaps Warren Buffett.
Speaking on Wednesday to BBC Radio, Soros was in sombre mode: "Financial institutions have been severely damaged and we are currently in a situation that will probably, I think almost inevitably, result in a recession – certainly in the United States and most likely in England also."
Both nations have cut interest rates to protect their economies from falling house prices, as well as subprime mortgage banking losses that total $379 billion (€241.9bn; £192.3bn).
But US and UK politicians and banks alike are playing down recession fears. The Bank of England has stated that  that the credit crisis "may abate" and that the UK economy may face "an odd quarter or two" of contraction.
Not so, believes Soros: "We've had a pretty serious crunch, but the acute phase is behind us," he told the BBC. "Now we have to feel the effects. In the case of the UK, you've had a housing bubble that in terms of price increases has been greater than in the US."
The financier didn't mince his words: "We're entering a period of much greater instability because we've got the threat of recession and at the same time the threat of inflation."

Data sourced from People's Daily Online (China); additional content by WARC staff