George Soros warns UK on economy, oil and inflation

George Soros talked to the Telegraph, and in an article released today, sounded very downbeat about the prospects for the UK economy. M. Soros also said that their were many fundamental supports for the price of oil, including supply ad denand as well as inflation arguments. But ultimately speculative fervour has driven the price in a parabolic move to levels that are unsustainable. These prices will not decline until recession causes a slackening in demand.

The article quotes on oil.

At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses.

However, Mr Soros warned that the oil bubble would not burst until both the U.S. and Britain were in recession, after which prices could fall dramatically.

“You can also anticipate that [the bubble] will eventually correct but that is unlikely to happen before the recession actually reduces the demand.

“The rise in the price of oil and food is going to weigh and aggravate the recession.”

The Bank of England recently warned that soaring energy and food costs would push inflation above its target range for most of the next 18 months, making it more unlikely that it will cut borrowing costs soon.

The article continues on the economy.

Mr Soros warns Britain is facing its worst economic storm in living memory, dwarfing those of the 1970s and early 1990s, with a housing slump and serious recession.

He said: “The dislocations will be greater [than in the 1970s] because you also have the implications of the house price decline, which you didn’t have in the 1970s.”

The warning undermines predictions that Britain will suffer only a brief and relatively painless recession, unlike the precipitous dives of previous years.

Mr Soros also warned that the Bank’s inflation report represents a “Faustian pact”, obliging it to keep interest rates high to control inflation, even as the economy is starting to slump.

“You had the nice decade,” he said. “Now that is over and you are in a straitjacket.”

See also: Other posts under the label ‘UK.’