The prominent hedge fund manager Crispin Odey has defended his bets against the pound, arguing that the historic rout in the wake of Kwasi Kwarteng’s tax cuts was triggered by Remainers in the City who “hate” the Government.
Mr Odey, arguably Britain’s best known hedge fund chief, told The Telegraph: “I never felt the kind of hate that Friday stirred up for a long time.
“Amongst lots of friends of mine who are Remainers, they just decided that they hate this Government. Obviously Kwasi they hate now as well, and they think Liz Truss is useless. They can't stand poor Jacob Rees-Mogg.”
Mr Odey, 63, branded attacks on his fund’s decision to bet against sterling and UK gilts as “rubbish”. Conspiracy theorists on Twitter have seized on Kwasi Kwarteng’s brief consultancy for Odey Asset Management as supposed evidence of collusion.
Mr Odey confirmed that his so-called “short positions” against UK assets – which allow his fund to make money as prices fall – has been in place for months on a belief that the Bank of England was failing to curb inflation. Prior to Kwasi Kwarteng’s mini-budget last Friday – which precipitated the sterling’s downfall – Odey’s flagship fund swelled in value by 140pc in the year to Sept 14.
He said: “My love is grouse shooting. And we are in the middle of [the season] right now.
“The truth is that I didn’t do anything on Friday. I shot. I haven't put a trade on for the last two months. I didn’t need to. This was easy to see from miles away and didn't depend on Kwasi coming into government or anything else.”
But Mr Odey, who last week married fellow financier Diana Vitkova, 38, warned that the worst may yet be to come and that sterling may soon be worth less than a dollar.
“In the short term, I think the pressure is still going to be downwards on the pound,” he says.
Mr Odey, who despite being a prominent supporter of Brexit made £220m by betting against the pound during the EU referendum, has his own theory as to why the rout against the British currency was - and continues to be - so pronounced.
He said: “The City loved it when Theresa May was in. It is in a deeply conservative place that doesn't change.
“Until we got to Covid, governments didn't spend money, all they did was increase taxes. Osborne was the worst of them. And this mini-Budget was just ripping out the last of Osborne's legacy.”
Despite the short-term pain, Mr Odey predicted that Kwarteng and Truss’s prescription for the economy will deliver a turnaround before long.
He said: “I look at this and think I'm now, for the first time, in the medium term very optimistic about the UK.
“The Remainers would love it that our situation [to be] much worse for having left Europe. But actually in the last four years Germany has lent Southern Europe €400bn. That is a monstrous amount of money that will never get paid back.
“Europe's got all the same problems that we have in terms of inflation coming through, but it doesn't have a Kwasi trying to sort of introduce a marketplace again… incentivising people to do the right thing rather than the wrong thing.”
“I always remember that sense of sort of, wow, when [Nigel] Lawson in March of 1987, cut the top rate of tax from 60 to 40. And one that there would be rioting in the streets.
“We are all pre-conditioned to move very gingerly.
“Whereas this is a government that has taken some big, big decisions. I don’t think it was politically motivated so much as it was, it was people [in the City] just hating that they might even get this right.”
Mr Odey attacked Bank of England Governor Andrew Bailey over the current turmoil.
“The Bank of England and therefore everybody else had a completely rosy view of inflation a year out. So they still think inflation is going to be 3pc. They now think it's about 3.5pc in a year's time.
“In order to have that view, they have to also believe that there will be a deep recession between now and then.
“But that didn't take into account the fact that the Government was very unlikely to want to recession two years before a general election. So what happened on Friday was the Government making sure that the recession was going to be much milder.
“The Bank of England should have put up interest rates by 1pc on the day before the mini-Budget, because they must have known what Kwasi was about to tell them.”
Bailey’s failure to control inflation has renewed calls for a review of the Bank’s independence.
The Telegraph reported on Monday that plans to rewrite its mandate have been pushed back to next spring, however.
Mr Odey said it is almost under effective government control already.
“Remember that as interest rates go up, the Bank of England finds itself holding lots of government debt, which is going down and on borrowed money, which is going up. What the Government is doing now bankrupts the Bank of England.
“The Bank of England's probably losing about £32bn a year. How independent can you be if you are losing that amount of money?”