Morning Line: George Soros beats sterling yet again

The man who changed the course of British history by forcing the country out of the European exchange rate mechanism (ERM) in 1992 has been at it again, it emerged yesterday.

George Soros told the World Economic Forum in Davos that he had been shorting sterling for several months, in the not unreasonable belief that the UK currency was overvalued, and would fall against other major developed currencies once the scale of the country’s problems became clear.

It was, of course, and it did. And Soros no doubt made a healthy wedge on the bet, as he so often does.

That much is little surprise, as many other commentators were warning last summer that the pound was teetering on the edge of a cliff. One of the key differences between Soros and the rest, however, is that Soros is prepared to back up his convictions with hard cash.

More interesting, however, is the news that Soros appears to have taken the bet off, and that he is now neither bearish nor bullish on the immediate outlook for sterling. Instead, he suggested that the pound will ‘continue to fluctuate’, as indeed it has in recent days and weeks.

It is a measure of Soros’s influence that the pound jumped on the news, as some speculators dared to think the recent massive devaluation of the pound might be over, against the dollar at the very least.

Less reassuring, however, was Soros’s verdict on the way that governments and regulators had handled the financial crisis so far, and the immediate outlook for the global economy.

On the former, Soros has repeatedly accused western governments of first under-estimating and then completely mis-handling the crisis, especially in the decision to let Lehman Brothers go to the wall in September.

This decision has since proved catastrophic for the global economy Soros says, and betrays a fundamental misunderstanding of the way markets work - or rather don’t work, as has been the case over recent years.

For those who want to follow Soros’s argument in a little more depth, today’s FT contains a fascinating article by the man on this very subject.