The economists that spend their days tracking the health of the world’s economy don’t usually agree with each other. The Wall Street elite try to explain the chaos in equities and global currencies that has been going on this year by throwing numbers and facts at investors. But there is one economic genius that doesn’t sugar-coat the fact that all the economic signs point to a global recession. That genius is George Soros. The eighty-five-year-old Soros is the guy that predicted the British pound would have to be devalued back in 1981. Soros was right and pocketed a cool 1 billion dollars when he shorted the pound against the dollar.
Mr. Soros is predicting on Bloomberg another major economic disaster, and once again, there are economists that agree with him, and economists that claim the sign Soros is seeing won’t turn into a bubble-bursting financial fiasco. Those economists say the economic turmoil in China doesn’t compare to the 1997 Asian debt crisis, but Soros thinks those soothsayers are sweeping the signs under the rug. They don’t like to predict a downtick on Wall Street, and they certainly don’t want to tell the world of market mayhem and the impending global recession.
Bur George Soros is not one to paint any picture but the real one. The S&P 500 began 2016 with the worst performance in its history. Mr. Soros said the United States goes into a recession about every five years. It has been seven years since the last recession, so the U.S. is overdue. The economic forecasters are saying the U.S. GDP will grow by 3.5 percent or more in 2016, but they aren’t reading the signs correctly. The main contributor for the next recession has been setting the stage for it for the last two years. China’s faltering economy has sent Brazil and other trading partners into recession mode already, and Soros believes the other countries are one step away from calling their economies stagnant.
China is trying to build a gigantic fixed asset bubble that isn’t contributing to the country’s GDP growth, according to Soros. He also said China’s currency is overvalued, and he is betting it will depreciate in 2016. Shanghai equity prices are down 40 percent over the last two years, and Chinese rail freight volume keeps dropping by 10.5 year after year. China is telling the world that their economy will grow by 6.5 percent over the next five years, But Soros says the Chinese government will have to pull a financial rabbit out of a black hat in order for that to happen.
Soros expects more stress on corporate earning as the global economic growth continues to slow down. He also thinks real estate values and equity prices can no longer be supported by incomes and GDP. All the signs are there for a 2008 type recession. Soros says it’s time to believe them.