George Soros on the consequences of Brexit

George Soros in The Guardian

David Cameron, along with the Treasury, the Bank of England, the International Monetary Fund and others have been attacked by the leave campaign for exaggerating the economic risks of Brexit. This criticism has been widely accepted by the British media and many financial analysts. As a result, British voters are now grossly underestimating the true costs of leaving.

Too many believe that a vote to leave the EU will have no effect on their personal financial position. This is wishful thinking. It would have at least one very clear and immediate effect that will touch every household: the value of the pound would decline precipitously. It would also have an immediate and dramatic impact on financial markets, investment, prices and jobs.

As opinion polls on the referendum result fluctuate, I want to offer a clear set of facts, based on my six decades of experience in financial markets, to help voters understand the very real consequences of a vote to leave the EU.

The Bank of England, the Institute for Fiscal Studies and the IMF have assessed the long-term economic consequences of Brexit. They suggest an income loss of £3,000 to £5,000 annually per household – once the British economy settles down to its new steady-state five years or so after Brexit. But there are some more immediate financial consequences that have hardly been mentioned in the referendum debate.

To start off, sterling is almost certain to fall steeply and quickly if there is a vote to leave– even more so after yesterday’s rebound as markets reacted to the shift in opinion polls towards remain. I would expect this devaluation to be bigger and more disruptive than the 15% 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.

It is reasonable to assume, given the expectations implied by the market pricing at present, that after a Brexit vote the pound would fall by at least 15% and possibly more than 20%, from its present level of $1.46 to below $1.15 (which would be between 25% and 30% below its pre-referendum trading range of $1.50 to $1.60). If sterling fell to this level, then ironically one pound would be worth about one euro – a method of “joining the euro” that nobody in Britain would want.

Brexiters seem to recognise that a sharp devaluation would be almost inevitable after Brexit, but argue that this would be healthy, despite the big losses of purchasing power for British households. In 1992 the devaluation actually proved very helpful to the British economy, and subsequently I was even praised for my role in helping to bring it about.

But I don’t think the 1992 experience would be repeated. That devaluation was healthy because the government was relieved of its obligation to “defend” an overvalued pound with damagingly high interest rates after the breakdown of the exchange rate mechanism. This time, a large devaluation would be much less benign than in 1992, for at least three reasons.

First, the Bank of England would not cut interest rates after a Brexit devaluation (as it did in 1992 and also after the large devaluation of 2008) because interest rates are already at the lowest level compatible with the stability of British banks. That, incidentally, is another reason to worry about Brexit. For 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.

Second, the UK now has a very large current account deficit – much larger, relatively, than in 1992 or 2008. In fact Britain is more dependent than at any time in history on inflows of foreign capital. As the governor of the Bank of England Mark Carney said, Britain “depends on the kindness of strangers”. The devaluations of 1992 and 2008 encouraged greater capital inflows, especially into residential and commercial property, but also into manufacturing investments. But after Brexit, the capital flows would almost certainly move the other way, especially during the two-year period of uncertainty while Britain negotiates its terms of divorce with a region that has always been – and presumably will remain – its biggest trading and investment partner.

Third, a post-Brexit devaluation is unlikely to produce the improvement in manufacturing exports seen after 1992, because trading conditions would be too uncertain for British businesses to undertake new investments, hire more workers or otherwise add to export capacity.

For all these reasons I believe the devaluation this time would be more like the one in 1967, when Harold Wilson famously declared that “the pound in your pocket has not been devalued”, but the British people disagreed with him, quickly noticing that the cost of imports and foreign holidays were rising sharply and that their true living standards were going down. Meanwhile 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.

I want people to know what the consequences of leaving the EU would be before they cast their votes, rather than after. A vote to leave could see the week end with a Black Friday, and serious consequences for ordinary people.

Brexit is a fake revolt – working-class culture is being hijacked to help the elite

Paul Mason in The Guardian

I love fake revolts of the underclass: I’m a veteran of them. At secondary school, we had a revolt in favour of the right to smoke. The football violence I witnessed in the 1970s and 80s felt like the social order turned on its head. As for the mass outpouring of solidarity with the late Princess Diana, and by implication against the entire cruel monarchic elite, in the end I chucked my bunch of flowers on the pile with the rest.

The problem is, I also know what a real revolt looks like. The miners strike; the Arab Spring; the barricade fighting around Gezi Park in Istanbul in 2013. So, to people getting ready for the mother of all revolts on Thursday, I want to point out the crucial difference between a real revolt and a fake one. The elite does not usually lead the real ones. In a real revolt, the rich and powerful usually head for the hills, terrified. Nor are the Sun and the Daily Mail usually to be found egging on a real insurrection.

But, all over Britain, people have fallen for the scam. In the Brexit referendum, we’ve seen what happens when working-class culture gets hijacked – and when the party that is supposed to be defending working people just cannot find the language or the offer to separate a fake revolt from a real one. In many working-class communities, people are getting ready to vote leave not just as a way of telling the neoliberal elite to get stuffed. They also want to discomfort the metropolitan, liberal, university-educated salariat for good measure. For many people involved, it feels like their first ever effective political choice.

I want to have one last go at convincing you that leaving now, under these conditions, would be a disaster. First, let’s recognise the problem. For people in the working classes, wages are at rock bottom. Their employers treat them like dirt. Their high streets are lined with empty shops. Their grown-up kids cannot afford to buy a home. Class sizes at school are too high. NHS waiting times are too long.
I’m glad it has become acceptable to say: “You are right to worry about migration.” But I wish more Labour politicians would spell out why. Working-class people, especially those on low pay in the private sector, worry that in conditions of austerity, housing shortages, wage stagnation and an unlimited supply of migrant labour from Europe has a negative effect on their living standards. For some, that is true.

They are right, too, to worry about the cultural impact. In a big, multi-ethnic city, absorbing a lot of migrants is easy. In small towns, where social capital is already meagre, the migrant population can feel unabsorbed. The structure of temporary migration from Europe means many of those who come don’t vote, or don’t have the right to – which feels unsettling if you understand that it is only by voting that the workforce ever achieved progress. It feels as if, through migration, the establishment got to create the kind of working class it always wanted: fragmented, dislocated, politically distant, weak.

But a Brexit led by Ukip and the Tory right will not make any of these things better: it will make them worse. Take a look at the people leading the Brexit movement. Nigel Farage, Neil Hamilton, Boris Johnson, Michael Gove. They have fought all their lives for one objective: to give more power to employers and less to workers. Many leading Brexiters are on record as wanting to privatise the NHS. They revelled in the destruction of the working-class communities and cultures capable of staging real revolt. Sir James Dyson moved his factory to Malaysia, so much did he love the British workforce. They talk about defying the “elite”. But they are the elite.

Suppose leave wins on Thursday and, within two years, most migration from eastern Europe stops. What is the most likely outcome? For all the rhetoric about “cheap labour”, nobody in the Tory Brexit camp has promised to end it. What they actually promised is to to cut wages and scrap the laws that protect people at work. So even if the migrants stop coming, and maybe a few fruit farms and meat-packing operations in East Anglia shut down, there will still be millions of low-paid jobs on long hours. But guess who will be doing them? Most likely it will be you, the very people flag-waving for the leave camp now: low-skilled people in small towns. And should there be a shortage of unskilled workers, the Brexit camp’s figurehead – Iain Duncan Smith – knows what to do. Before ultimately resigning over benefit cuts, he had made a career out of dragging people out of wheelchairs and off sickbeds and into job assessments designed to cut their benefits.
Some people are fantasising that, if leave wins, Cameron will fall and then there will be a Labour government. But there is no new election on offer. Boris Johnson has already signed a letter pledging to keep Cameron in power if leave wins. Because that’s what elite politicians do: stick together. If leave wins, the most rightwing Tory government since Thatcher will be in charge of negotiating the terms of exit. The same newspapers running fake stories about refugees now will run fake stories about the Labour party to stop it winning the next election.

In the past week, Labour’s frontbench has signalled, loud and clear, that they will take measures to stop the creation of low-paid jobs that only migrants can do; and they will take the issue of free movement into a big renegotiation with the EU as soon as possible. Frankly, they should have done this sooner. I’m glad face-to-face contact with the people they represent has pushed them to accept that free movement should be filtered through strong UK measures to protect the lowest paid and end migrant-only recruitment.

For many people, the Brexit campaign feels, for one brief moment, like the first time they have had control. But the clue is in the word “brief”. Once the vote is over, it will be the rightwing Tories in control. Ask Ukip; ask Boris Johnson: will Brexit guarantee a rise in wages, a cap on rents, a fall in NHS waiting times or class sizes? Ask the leave camp to put targets on these things – not for the longterm, but within 12-18 months. They can’t.

What can is a left-led Labour party, combined with the progressive nationalist parties and the Greens, which will institute real change. There will be no dilemmas in the newsrooms of the Times and Telegraph if that happens: they will unite to crush it.

That’s how you know the difference between a real revolt and a fake one: by its enemies.

The Conservatives are giving us a masterclass in how not to govern

Zoe Williams in The Guardian

There is always a rueful moment following a Conservative election victory, disappointment tinged with the consolation that at least they’ll be solid. Sure, they will want to march back to a time of Victorian certainties, where if you lose it’s because you’re a loser, and if you win, it’s because you goddamn tried. But at least they will captain their vessel with competence and assurance. We might not like where it’s going, but at least we won’t drown.

Consider what good a government of any party can do, if it takes the business of statecraft seriously. It is within its power to solve the housing crisis: not chuck lump sums at the already privileged, but to undertake a building programme of breadth and vision that would change lives. It is easily within a government’s scope to make plans for energy and carbon emissions, half a century into the future. It is within a government’s purview to think radically about what people need, in order to feel optimistic about the future: not just a health service, but a great health service; not just pensions but proper social care; not just benefits but genuine security. All the life-changing architecture of citizenship has been undertaken by good government, thinking decades beyond the electoral cycle, with dreams infinitely greater than personal power.

That’s what is really crushing about our current situation: not that the political landscape was permanently scarred by a brutal act last week; not that we’ve been invited to unleash some pointless vandalism on the EU on the basis of lies from its most ardent proponents; not that all of us have been dragged into a vicious battle between ideas so hollow and limited – free-market fundamentalism versus the same with added racism – that you wouldn’t want to be detained by them for five minutes eavesdropping on the bus, let alone see them obliterate everything else in the public discourse. No, the really dispiriting thing is that we haven’t got a government.

When they’re good, governments embody civility; they can take the instinctive care that we have for one another and turn it into something solid, whether that’s a street light or a tax credit; they can turn hopes into plans; they can make people’s lives better. There were times before this referendum when it may have seemed preferable to have a government doing nothing to one as socially destructive as David Cameron’s. But it would be wrong to lose faith in politics altogether, because of the terrifying spectacle of people doing it wantonly. It is time to remind ourselves what good government can do.

Governments, when they are solid, maintain standards in public life. They do not panic when they’re criticised by the Daily Mail in the middle of a parliamentary term, or when a more radical party such as Ukip seems to be peeling off voters. They do not throw up their hands and offer referendums on amorphous, incomprehensible matters, because they do not sacrifice the stability of the nation for the sake of their own party, and they would not drag a whole continent into their squalid leadership battle.

But if that’s a little specific, let’s frame it more broadly: good governments insist on the decent and truthful use of statistics. They can’t enforce this – they can’t imprison their opponents for making up bogus numbers, and repeating them until half the country believes that they’re true. They can’t do much to insist that the press doesn’t twist or misrepresent the facts, doesn’t stir up hatred with relentless falsification. They can’t even make it a law, I shouldn’t think, that every time a newspaper lies about a foreigner, it has to print the correction with the same prominence as the lie. That would be far too intrusive, a bit too Leveson-y.

Yet a good government will set standards. It will tell the truth itself, and it will be trenchant about accuracy from others. It will not pander, and when it sees racist propaganda material it will say so. No general election has ever been as ugly as this referendum, as personal, as vitriolic, as full of accusations of mendacity, so that the casual voter basically has to guess who is telling the truth by how fast they’re talking and the look in their eyes (although this does give one pretty reliable answer: not Michael Gove). Good governments respect the institutions that provide sound and impartial analysis – universities, the civil service, statistics authorities – and advance their work, rather than routinely falling foul of it themselves.

Good governments, even in the teeth of internecine squabbling, continue to govern: they don’t announce a complete overhaul of prisons, then luxuriate in a six-month hiatus and leave the service wondering whether it was ever meant to be seen through. They don’t part-privatise probation and then lose interest, they don’t try to academise every school and realise the senselessness of that halfway through; they don’t pick a fight with the whole NHS that takes innumerable man-hours to solve and yields nothing but lasting unpleasantness.

Six months ago, this was, it was argued, all the opposition’s fault; a party with a slim majority was behaving like a party with a huge majority, because it knew it would face no resistance. It’s for another conversation whether the opposition has improved, but the question is moot anyway; there is nothing to oppose. The business of governing has ground to a halt, and in its place we find men arguing over whose exaggeration is the most egregious and who looks too scruffy for public life.

This is not the time to lose faith in politics; there has never been a more urgent time to rekindle faith. Remember what politics can do. We cannot conclude, from this sad episode, that its glory days are over.

Three shirts, four pairs of trousers: meet Japan's 'hard-core' minimalists

Reuters in The Guardian

Fumio Sasaki gave away the majority of his possessions and now lives with just the bare essentials.

 

The bathroom cupboard of minimalist Fumio Sasaki. Photograph: Thomas Peter/Reuters




Fumio Sasaki’s one-room Tokyo apartment is so stark friends liken it to an interrogation room. He owns three shirts, four pairs of trousers, four pairs of socks and a meagre scattering of various other items.

Money isn’t the issue. The 36-year-old editor has made a conscious lifestyle choice, joining a growing number of Japanese deciding that less is more.

Influenced by the spare aesthetic of Japan’s traditional Zen Buddhism, minimalists buck the norm in a fervently consumerist society by dramatically paring back their possessions.

Sasaki, once a passionate collector of books, CDs and DVDs, became tired of keeping up with trends two years ago.

“I kept thinking about what I did not own, what was missing,” he says.

He spent the next year selling possessions or giving them to friends.

“Spending less time on cleaning or shopping means I have more time to spend with friends, go out, or travel on my days off. I have become a lot more active,” he says.

Minimalist Naoki Numahata talks to his two-and-a-half-year-old daughter, Ei, in their living-room in Tokyo. Photograph: Thomas Peter/Reuters

Others welcome the chance to own only things they truly like – a philosophy also applied by Mari Kondo, a consultant whose “KonMari” organisational methods have swept the United States.

“It’s not that I had more things than the average person, but that didn’t mean that I valued or liked everything I owned,” says Katsuya Toyoda, an online publication editor who has only one table and one futon in his 22 sqm apartment.

“I became a minimalist so I could let things I truly liked surface in my life.“

Inspiration for Japan’s minimalists came from the US, where early adherents included Steve Jobs.

Definitions vary, because the goal is not just decluttering but re-evaluating what posessions mean, to gain something else – in Sasaki’s case, time to travel.

 Utensils lie in a kitchen drawer in the home of minimalist Saeko Kushibiki in Fujisawa, south of Tokyo. Photograph: Thomas Peter/Reuters

Sasaki and others believe there are thousands of hard-core minimalists, with possibly thousands more interested.

Some say minimalism is actually not foreign but a natural outgrowth of Zen Buddhism and its stripped-down world view.

“In the west, making a space complete means placing something there,” says Naoki Numahata, 41, a freelance writer.

“But with tea ceremonies, or Zen, things are left incomplete on purpose to let the person’s imagination make that space complete.”

Minimalists also argue that having fewer possessions is eminently practical in Japan, which is regularly shaken by earthquakes.

 Minimalist Saeko Kushibiki stores away her futon mattress in her apartment in Fujisawa. Photograph: Thomas Peter/Reuters

In 2011, a 9.0 magnitude quake and tsunami killed nearly 20,000 people and led to many re-evaluating possessions, Sasaki said.

“Thirty to 50% of earthquake injuries occur through falling objects,” he said, gesturing around his empty apartment.

“But in this room, you don’t have that concern.”