EU falling apart; Chinese economy set for hard landing: George Soros

22 January 2016

Billionaire investor George Soros says the world economy is headed for another, bigger collapse and a worsening of the deflationary pressure, which could force the disintegration of the European Union (EU).

In an interview with Bloomberg Television's Francine Lacqua from the World Economic Forum in Davos on Thursday, Soros said China's economy is headed for a hard landing, a slump that will worsen global deflationary pressures, drag down stocks and boost US government bonds.

"A hard landing is practically unavoidable," he said, adding, "I'm not expecting it, I'm observing it.''

The magnate and philanthropist said the US Federal Reserve raised interest rates too late, and Republican presidential front runner Donald Trump was "doing the work" of the Islamic State (IS) group.

"You have a panic in the European asylum policy," he said, adding, "We have passed a tipping point where the influx reduces the capacity of the countries to assimilate or integrate the refugees."

"Everybody is out for himself."
The Hungarian-born multi-billionaire added that the migrant crisis had also hurt German Chancellor Angela Merkel.

She "wanted to stop it (the migrant crisis) so she risked her political capital and she lost because her gesture of opening Germany was not properly prepared".

Russia, according to Soros, was in a "very, very weak position" and faced "impending collapse", but the financier said that while China's economy was experiencing a hard landing, "it has greater latitude... than most other countries".

Soros, who built a $24-billion fortune through savvy wagers on markets, said he's been betting against the Standard & Poor's 500 Index, commodity-producing countries and Asian currencies, while buying Treasuries.

China's economic downturn will have spillover effects on the rest of the world, even though the nation's policy makers have resources to manage the domestic fallout, he said.

Soros's warning comes after a market selloff that erased $16 trillion from global equities since June and sent commodities to the lowest levels in more than two decades.

Soros rose to fame as the manager who broke the Bank of England in 1992, netting $1 billion with a bet that the UK would be forced to devalue the pound. He also successfully bet that Germany's mark would rise after the collapse of the Berlin Wall in 1989 and that Japanese stocks would start to fall in the same year.

Soros, who began his career in New York City in the 1950s, led his hedge fund to average annual gains of about 20 per cent from 1969 to 2011, when he returned money back to investors.

More recently, he has repeatedly warned of a 2008-like catastrophe. While Soros didn't elaborate on his definition of a hard landing, he said a more accurate measure of China's current economic growth is 3.5 per cent, versus the latest official figures showing a 6.8 per cent expansion in the fourth quarter.

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