George Soros “broke the Bank of England” in 1992 with his famous bet against the British pound. Now, he’s warning that a U.K. vote this week to leave the European Union would do far more damage to the currency—and the British economy—than the aftermath of his bet “Black Wednesday” ever did.
In a guest column for Britain’s Guardian newspaper published Tuesday, Soros notes that he was praised for triggering the 1992 devaluation of the British poundGBPUSD, +0.4558% that followed the currency’s ejection from the European exchange-rate mechanism. That’s because the move gave a lift to a U.K. economy held back by a stronger-than-justified pound that was being defended by ever-higher interest rates.
Read: The Brexit vote: Everything you need to know about the referendum
While some advocates of a British exit, or Brexit, from the European Union argue that a likely devaluation by the pound would set up a repeat of the 1992 experience, Soros isn’t convinced.
He offers three reasons:
First, in 1992 (and in 2008, for that matter) the Bank of England was able to cut interest rates sharply following the devaluation. That’s not possible this time around because interest rates are already near zero, Soros notes.
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,” he wrote.
Second, the U.K. current-account deficit is much larger than it was in 1992 or 2008. In fact, Soros notes, the U.K. is more dependent than at any time in history on foreign capital. Instead of the increased capital inflows that followed the 1992 and 2008 devaluations, capital flows after Brexit “would almost certainly move the other way.”
Third, Soros said, a post-Brexit devaluation probably won’t boost manufacturing exports like it did in 1992 “because trading conditions would be too uncertain for British businesses to undertake new investments, hire more workers or otherwise add to export capacity.”
In the end, the most likely post-Brexit scenario would have more in common with the pound’s humiliating and painful 1967 devaluation than it would with the 1992 event, he wrote—a move that cut U.K. living standards. On top of that, speculative forces in the markets are “much bigger and more powerful” than they were in 1967 and will be “eager to exploit any miscalculations” by the U.K. government or voters, he said.
“Brexit would make some people very rich but most voters considerably poorer,” Soros predicted, warning that a “leave” vote could lead to a “Black Friday.”
The column puts Soros on the same side as British Prime Minister David Cameron, who has led the “remain” campaign. In September 1992, Cameron was a young aide to then British Chancellor of the Exchequer Norman Lamont, who was unable to withstand the speculative onslaught against the pound by Soros and other speculators, who correctly bet that the U.K. government wouldn’t be able to defend the pound’s trading band versus the German D-mark.