Higher commodities prices and rising inflation in China are putting the global economy in a better situation by cutting the potential for deflation, George Soros, chairman of Soros Fund Management, told CNBC Wednesday.
The combination of a fear of inflation with the reality of possible deflation "was a pretty bad situation to be in", but not the economy looks to be "resolving itself to the upside," Soros said, speaking at the World Economic Forum in Davos, Switzerland.
"Due to the [inflationary] pressure from commodities and the inflation in China, where wages are increasing at a pretty rapid tick, the cost of goods is going up," he said.
The stock market has been largely unaffected, because of quantitative easing, which has pushed real interest rates into negative territory and that's a "tremendous additional stimulus, particularly for the stock market," he said.
Europe Is Story of Winners and Losers
The European debt crisis has created a euro zone of "winners and losers," but on balance Europe "is not doing that badly," said Soros in something of a contrarian view.
"The winners are sprinting ahead of the losers" and Germany's relatively solid economy is pulling up some Eastern European economies like Poland and the Czech Republic, he said.
But Germany is also benefiting from the crisis, with the depressed euro helping exports, he added.
Still, the "difference between the winners and losers will have very negative consequences," Soros said.
Looking to the UK, he said contraction of the economy was almost inevitable and the government's policy of balancing their budge with such cuts will not "stand up."