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George Soros Essay – Brexit in Reverse

George Soros Essays – Brexit in Reverse, June 19, 2017

  • Economic reality is beginning to catch up with the false hopes of the general population
  • Believed the promises of the press that Brexit would not reduce their living standards so they managed to maintain those standards by running up household debts
  • Wage growth is not keeping up with inflation so real incomes have begun to fall
  • Households will realize that living standards are falling and they will adjust spending habits
    • Will also realize that they need to pay back their debts
    • Will reduce household consumption that has sustained the economy
  • Bank of England has made the same mistake as the average household: underestimated the impact of inflation and is now catching up by raising interest rates in a pro-cyclical manner
  • Fast approaching the tipping point that characterizes all unsustainable economic developments (I refer to the tipping point as “reflexivity”)
  • Economic reality is reinforced by political reality: Brexit is a lose-lose proposition to both Britain and EU – it cannot be undone but people can change their minds
  • Theresa May’s attempt to strengthen her negotiating position by holding a snap election has badly misfired: lost her parliamentary majority
    • Young people voted for labor in protest, not because they wanted to join a trade union or support Jeremy Corbyn; young people are eager to find well-paying jobs, whether in Britain or elsewhere and in that respect, their interests correspond with the interests of the City of London
  • By approaching the negotiations in a conciliatory spirit, Theresa May could reach an agreement with EU on their agenda and agree to continue as a member of the single market for a long period of time to carry out all the legal work
    • This would be a great relief to the EU because it would postpone the day when Britain’s absence would create an enormous hole in the EU’s budget
    • Only by taking this path can she hope to persuade parliament to pass all the laws that need to be enacted
  • Theresa May may have to abandon her ill-considered alliance with the Ulster Unionists and side with the Tories of Scotland
  • May would also have to atone for sins the Tories in Kensington with regard to Grenfell Towers
  • May could then carry on leading a minority government because nobody else would want to take her place
  • Divorce process would take at least five years to complete and during that time new elections would take place – if all went well, the two parties may want to remarry even before they have divorced
Image Source: Reuters
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