How Soros Made A Billion Dollars And Almost Broke Britain

How Soros Made A Billion Dollars And Almost Broke Britain

George Soros: a man shrouded in political
controversy and yet one of the most successful investors of all time. While many today are familiar with his political
endeavors, there is a much more interesting story that has in comparison avoided the public
spotlight. In this video, we’re going back to the decade
before the euro, where the wild west of European currencies allowed George Soros to almost
break the Bank of England and to make a billion dollars in the process. This video is brought to you by Skillshare. Watch my classes on how the stock market works
for free by registering with the link in the description. In the aftermath of the Second World War,
the nations of Europe decided that the only way to prevent the same sort of destruction
from ever happening again was by banding together and forming a closely integrated union. The idea was that if the European economies
all depended on each other they’d be unlikely to start another war. The ultimate expression of this integration
is, of course, the Euro, but before the single currency was introduced in 1999, Europe had
another system to manage its currencies. Back in 1979, the countries of the European
Community weren’t ready to give up their national currencies just yet, but they did
agree to link them all together at a fixed rate, effectively removing the exchange rate
fluctuations you usually have to consider when doing business across borders. This new system, known as the Exchange Rate
Mechanism or ERM, sounded good on paper and did make things easier for a lot of people,
but it also made the national banks of these countries very vulnerable. You see, people buy currencies every day in
vast volumes to fund imports or exports and these transactions have a significant effect
on the actual exchange rate you can get from the market. So once a country became a part of the ERM,
it had to constantly monitor the markets and intervene if their exchange rate started to
deviate too much. If too many people were buying, the national
bank would start to sell and if everyone was selling, it would go in to buy. Without going into too much detail, the ERM
was flawed because every country is unique: it has to constantly balance interest rates,
inflation and economic growth, which it cannot do if its currency is artificially chained
to others. Margaret Thatcher, the Prime Minister of the
UK at the time, understood this very well, which is why she opposed it and why Britain
wasn’t a part of the ERM when it first began. However, as the British economy worsened towards
the end of the 1980s, Thatcher’s eurosceptics lost ground to the more pro-European members
of the Conservative Party. By October 1990 Thatcher’s power had diminished
so much that Britain joined the ERM despite her opposition, thanks to the political power
of John Major, the Chancellor of the Exchequer at the time. Less than a month later, Thatcher had resigned
and Major was selected as prime minister, hailing the ERM as his victory. All my adult live I’ve seen British governments
driven off their virtuous pursuit of low inflation by market problems or political problems. I was under no illusions when I took Britain
into the Exchange Rate Mechanism. I said at the time that membership was no
soft option. The soft option, the devaluous option, the
inflationary option, in my judgement that would be a betrayal of our future at this
moment and I tell you categorically: that is not your government’s policy. But while November 1990 might have been the
start of a very successful political career for John Major, it was just the beginning
of Britain’s economic problems. You see, when the UK joined the ERM, it was
already in a recession. Now, when an economy is in a recession the
central bank, in this case the Bank of England wants to cut interest rates to prop things
up, but because of the ERM it could no longer do that. The British pound was already a very weak
currency, with the UK’s inflation rate being three times higher than Germany’s. If the Bank of England cut rates, it would
help the British economy, but it would devalue the pound so much that Britain would have
to leave the ERM, which of course John Major would never allow. And so between 1990 and 1992 the British economy
suffered. Of course, just keeping interest rates high
wasn’t enough to maintain the pound’s value and so throughout these two years the
Bank of England would frequently go to the market and start buying up pounds by the millions,
using up its foreign exchange reserves in the process. Even that didn’t really help though, since
the pound continuously weakened during this time, just barely within the limits of the
ERM. Pretty much every currency speculator understood
that eventually the British pound would have to devalue, but the billion-dollar question
was, when would that happen and the man with the answer was George Soros. He had been running his hedge fund since the
1970s and his specialty was predicting and sometimes forcing the catalysts to big market
events. He knew that almost everyone was ready to
bet against the British pound if only there was some sort of bad news that could trigger
a stampede big enough to overwhelm the Bank of England. Starting in August 1992, Soros and his fund
began building a position against the pound and here’s how he did it. He’d go to a big bank or another hedge fund
and he’d borrow pounds from them, with the promise of repaying them with some interest
on top. Then, he’d go to the foreign exchange market
and he’d sell those borrowed pounds to buy G
You can expect my next video two weeks from now, and until then: stay smart.erman marks
instead, the idea being that when the exchange rate drops he’d be able to buy back those
pounds cheaper, earning the difference as profit. By the end of August Soros had slowly built
up a position equivalent to $1.5 billion dollars against the pound, but the exchange rate had
barely moved. He needed some sort of news to really start
increasing his position and luckily for him, on September 16th the President of the Bundesbank
held a seemingly innocent interview that Soros could nevertheless use. The Bundesbank President said that he “doesn’t
rule out that some currencies might come under pressure,” which in and of itself is a very
vague and unconvincing statement, but Soros decided that it was good enough for him. That same night, while Europe was fast asleep,
Soros called up any international bank or company or really anyone that had British
pounds and he tried to borrow them with great success. By the time the British woke up, Soros had
sold the equivalent of $10 billion worth of pounds on the open market. Unsurprisingly, the Bank of England was in
complete chaos. After an emergency meeting with John Major,
the Chancellor of the Exchequer began a desperate fight. At 8:40 AM on September 17th, he authorized
the purchase of one billion pounds from the market to no effect. By 9 AM he had purchased another two billion
pounds, at which point he dialed John Major again to request permission to increase the
interest rate, which of course because Britain was in a recession would be devastating to
the economy. Initially, John Major refused because he thought
it would be political suicide, but as Soros and the global currency market continued selling
pounds, by 11 AM Major conceded and Britain made a surprise announcement that it was increasing
its interest rates by two percent, which is a very big increase. By the end of the day, Britain had purchased
27 billion pounds and had increased its interest rate a second time to 15%, but just Soros
alone had sold about half as many pounds and by that point the entire world was following
suit. At 7:30 PM the British government accepted
defeat with the following news conference. A unique day in London’s financial markets
ended with the Chancellor announcing that the pound was being suspended from the ERM
and that the second of two dramatic interest rate rises during the day was after all cancelled. Today has been an extremely difficult and
turbulent day. Massive speculative flows continued to disrupt
the functioning of the Exchange Rate Mechanism. As chairman of the Council of European Finance
Ministers I have called a meeting of the Monetary Committee in Brussels urgently tonight to
consider how stability can be restored to the foreign exchange markets. In the meantime, the government has concluded
that Britain’s best interests are served by suspending our membership of the Exchange
Rate Mechanism. Over the next few days, as the foreign exchange
markets were left to their own devices, the British pound fell by 15% against the German
mark and by 25% against the US dollar. Soros and his fund pocketed a nice $1 billion
from their trade, while the estimated cost to the British taxpayer was over 3 billion
pounds. Here’s the funny thing though: in the aftermath
of Black Wednesday, as they called it, the Bank of England was once again free to control
the British pound, which it did and over the next few years it steadily cut interest rates
and actually restored the British economy to high levels of growth. By 1997 the British pound was actually more
valuable than it had been during the ERM and the UK was on its way to 16 consecutive years
of economic expansion, so much so, that some people actually call that day White Wednesday. So in the end, Soros might’ve actually done
the British a favor, even though he pocketed about $15 for every man, woman and child in
Great Britain. Now, if you enjoy learning about financial
markets then you’ll be happy to know that I have two animated courses on Skillshare
about how the stock market works. The first one is a 20-minute general introduction,
whereas the second one is a 40-minute exploration that dives deeper into how stocks actually
work and how you can value them. You can watch both my classes right now for
free if you’re one of the first 500 people to sign up for Skillshare using the link in
the description. I’d appreciate it a lot if you watch my
courses and even more so if you share it around with your friends. Of course, you’re also welcome to share
this video and I really hope you enjoyed.

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About the Author: Maximilian Kuhn



  2. One silver lining that came out of this crisis was when Germany ordered the Labour Party to have Britain join the new Euro, they had to dither. It set the stage for the only force in Europe who could challenge German rule to end up voting to leave. Compared to the war the cost was low.

  3. Globalism politicians such as John Major and companies forced world economy into a more desparate. So Non-globalism politicians such as Donald.J.Trump and Boris Johnson have appeared in this age.

  4. Τρία Μούτρα Late Night (ΟΛΟΓΡΑΦΩΣ ΓΙΑΝΝΟ, ΜΠΑΚΑ, ΤΣΑΓΚ) brought me here

  5. George Soros is a dangerous man. At least four of his financial foundations are behind the central American migrant crisis. I think he is trying to destabilize parts of the US; is civil war coming?

  6. Why do conservatives feel like Jews such as Soros control the world? Perhaps they are antisemitic. Perhaps the Right Wingers are basing it on this kind of financial gamesmanship.

  7. Open border or borderless world is very OK at a time when racist consciousness ha been already replaced by We-Are-All-One-Family consciousness. But for others to freely enter the USA, not good at this time!

  8. Sold out many of the fellow jews to Hitler did ya Soros? That's how he made his early fortunes, as a Nazi collaborator.

  9. Has anyone noticed the resemblance between Soros and jabba the hut from star wars…both slimey looking reptiles…


  11. If Politicians are real patriots and perform their jobs well, people like George Soros won't have their way.

  12. I don't like him because of his immigration politics , but i can say he was a fucking genius and shame what our dictator Orbán Viktor doing with him in the last 2 years .

  13. Soros is the anti Christ … and let’s not forget he helped the nazis hunt down and kill his own people …

  14. Soros could not have accomplished his typically Jewish theft without Jewish help from inside England! We now know john major and tony Blair were both on the Jewish payroll! The Rothschild's spread the rumours that England would lose and was losing the war against France even though he knew they were winning to buy up English stocks, then when England won, those stocks became priceless, making the Jew the wealthiest in England! Truly the international Jew is the worlds formost problem!

  15. there has got to be a tremendous power behind soros. he doesn't piss off people. he pisses off countries. the power behind his throne is on full display daily.
    if not, this asswipe would have achieved room temperature decades ago.

  16. As teenager I thought John Major was a joke when I first saw him, I couldn't believe that's what he was actually like what a utterly useless twat.

  17. if you create chaos and always place your bet on both sides you will always be successful and just as corrupt as the evil soros!

  18. This video blames Soros. But I blame the UK government because what they did enabled Soros to take the money. To me it was predictable and all Soros did was predict that when it comes to a decision between the City of London and the Country, the government and the Bank of England will always support the City. Soros saw that huge billboard flashing, Come and get it! Free money!

  19. Can't take this channel seriously anymore. The titles and videos always insinuate conspiracy theories of “them/they”. “They” who???

  20. Soros, Jacob Rothschild, the 'British royal family', the Clintons, the Rockefellers and all the other demonic paedophiles will soon die, and they will burn in Hell for all eternity for what they have done to the people of this world.

  21. As usual financiers ripped the guts out of ordinary people, lots of people lost their jobs yet you try to say Soros did the UK a favour. I guess you're in favour of what they did in2008?

  22. Government's Dont necessarily do better with the bucks than privately funded internationals do so just cause hes not elected by a body or board members

  23. The only thing he and his family deserve are bullets to the head. He invested $18 billion into his open society, had 42 meetings with the EU Commission and published a book that had 226 "friends" names listed who belong to multiple governments across the world. He is a cancer that needs to be eliminated.

  24. Soros almost single-handedly kept UK out of the European Currency System, precursor of the EURO which has been such a a disaster for Europe. Everyone in the UK should light a little candle every night in front of his photo.

  25. Black Wednesday was September 16th, not September 17th as the graphic and voice in your video states. The two interest rate increases and BOE sterling intervention took place on the 16th.

  26. To the multi billionaire's of this world (Bezos, Gates, Soros, Zuckerberg, etc), I often wonder, " just how much money do these people want ? ". There has to be a threshold were you can honestly say, " I don't need anymore money. Anything else is just pure greed.. "

  27. "His is no master people; he's an exploiter: the Kikės are a "people" of robbers. He has never founded any civilization, though he has destroyed civilizations by the hundreds…everything he has is stolen. Foreign people, foreign workmen build him his temples, it is foreigners who create and work for him, it is foreigners who shed their blood for him."Adolf Hitler

  28. Wow….. fantastis 🌷🌷🌷🌷🌷🌹🌹🌹🌹🌹🌹🌹🌹🌹🌹🌹🌹🌹 I like this performance so sweet 😘😘😘😘😘😘😘😘😘😘😘😘

  29. Arrhh right! The Nazi collaborator who be-trade his own people, to save his own skin. Ladies and Gentlemen "George Soros" Beware of this snake.🐍

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