Icon of the Left: George Soros

[Luissa]

"How did George Soros "break the Bank of England"?


In Britain, Black Wednesday (September 16, 1992) is known as the day that speculators broke the pound. They didn't actually break it, but they forced the British government to pull it from the European Exchange Rate Mechanism (ERM). Joining the ERM was part of Britain's effort to help along the unification of the European economies. However, in the imperialistic style of old, she had tried to stack the deck.

Although it stood apart from European currencies, the British pound had shadowed the German mark in the period leading up to the 1990s. Unfortunately, the desire to "keep up with the Joneses" left Britain with low interest rates and high inflation. Britain entered the ERM with the express desire to keep its currency above 2.7 marks to the pound. This was fundamentally unsound because Britain's inflation rate was many times that of Germany's. (Keep reading about this in Stop Keeping Up With The Joneses - They're Broke.)

Compounding the underlying problems inherent in the pound's inclusion into the ERM was the economic strain of reunification that Germany found itself under, which put pressure on the mark as the core currency for the ERM. The drive for European unification also hit bumps during the passage of the Maastricht Treaty, which was meant to bring about the euro. Speculators began to eye the ERM and wondered how long fixed exchange rates could fight natural market forces. Spotting the writing on the wall, Britain upped its interest rates to the teens to attract people to the pound, but speculators, George Soros among them, began heavy shorting of the currency.

The British government gave in and withdrew from the ERM as it became clear that it was losing billions trying to buoy its currency artificially. Although it was a bitter pill to swallow, the pound came back stronger because the excess interest and high inflation were forced out of the British economy following the beating. Soros pocketed $1 billion on the deal and cemented his reputation as the premier currency speculator in the world.

How did George Soros "break the Bank of England"?

This is what I don't understand.

You have conservatives on here lambasting Soros and defending bad government policy. The government created a policy to keep the pound and interest rates far too high thwarting "natural market forces." Government was controlling the price and manipulating the market. Yet the government is good and the market is bad? Why?

If he wasn't a liberal he would be their hero.

 

[Toro]

Imagine this scenario:

The government says "this is the price."

The market says "no it isn't".

The government spends billions of dollars and causes further increased economic hardship trying to convince the market that this is, indeed, the price.

In the end, the market imposes the price and the government gives up, having wasted billions of dollars and imposing punishing interest rates on it's own people to show the market it knows better?

Now, would you expect conservatives and libertarians to take the side of the government or the market?

Because in this thread, it's not what you'd otherwise expect.

 

[PLYMCO_PILGRIM]

Here is UK pension fund performance.

http://www.watsonwyatt.com/europe/pubs/statistics/render2.asp?ID=21

You can see that in the fourth quarter of 1992, which was the quarter following Black Wednesday, performance was up in every single asset class except for property, which fell -0.6%. Even in the third quarter, performance was strong. In 1993, all asset classes were up as UK pensions had one of their best years.

Toro you know that busts are followed by booms...i know you know this you are smart in the realm of economics.


The average joe won't see the drastic downturn coming and get screwed (remember 2008 in the usa) while those "in the know" put their money in the proper places before the bust is helped along and get rich. IE: People like soros who have the money to cause such a downturn by moving their investments.

 

[PLYMCO_PILGRIM]

How did George Soros "break the Bank of England"?

This is what I don't understand.

You have conservatives on here lambasting Soros and defending bad government policy. The government created a policy to keep the pound and interest rates far too high thwarting "natural market forces." Government was controlling the price and manipulating the market. Yet the government is good and the market is bad? Why?

If he wasn't a liberal he would be their hero.

LOL if he wasn't a liberal he wouldn't get rich off the backs of the poor like he does

Tee Hee....see I can play that bullshitting game too

 

[Luissa]

This is what I don't understand.

You have conservatives on here lambasting Soros and defending bad government policy. The government created a policy to keep the pound and interest rates far too high thwarting "natural market forces." Government was controlling the price and manipulating the market. Yet the government is good and the market is bad? Why?

If he wasn't a liberal he would be their hero.

LOL if he wasn't a liberal he wouldn't get rich off the backs of the poor like he does

Tee Hee....see I can play that bullshitting game too

Doesn't work.

 

[PLYMCO_PILGRIM]

If he wasn't a liberal he would be their hero.

LOL if he wasn't a liberal he wouldn't get rich off the backs of the poor like he does

Tee Hee....see I can play that bullshitting game too

Doesn't work.

Works as well as yours....just as much basis in reality



Ok make up sex now?

 

[Luissa]

LOL if he wasn't a liberal he wouldn't get rich off the backs of the poor like he does

Tee Hee....see I can play that bullshitting game too

Doesn't work.

Works as well as yours....just as much basis in reality



Ok make up sex now?

I am still mad. Bow to me first.

 

[Intense]

[ame=http://www.youtube.com/watch?v=puLL0Eh5HZc]Glenn Beck Puppet master part 1 George Soros - YouTube[/ame]

Glenn Beck Puppet master part 1 George Soros

 

[Intense]

[ame=http://www.youtube.com/watch?v=SZHsZCA9xo8&feature=related]George Soros Warns The World About Fox News And How Dangerous IT Really Is - YouTube[/ame]
George Soros Warns The World About Fox News And How Dangerous IT Really Is

 

[PLYMCO_PILGRIM]

Doesn't work.

Works as well as yours....just as much basis in reality



Ok make up sex now?

I am still mad. Bow to me first.

 

[Luissa]

Now kiss my feet.

 

[PixieStix]

Look, ravi; by default, a value judgment about a person is an opinion.

She and Pixie might think that the 14 yo Soros was bad, I don't.

I will argue with opinions if they are uninformed, but otherwise, it's silly.

Hypocrisy, I point out. Often.

I do not think that the 14 year old George Soros (György Schwartz) was a bad person. I just think that his life was probably shaped by that experience.

Like CG, I find it interesting that he says he does not have any remorse about what happened. It seems cold and indifferent to me.

 

[Si modo]

Look, ravi; by default, a value judgment about a person is an opinion.

She and Pixie might think that the 14 yo Soros was bad, I don't.

I will argue with opinions if they are uninformed, but otherwise, it's silly.

Hypocrisy, I point out. Often.

I do not think that the 14 year old George Soros (György Schwartz) was a bad person. I just think that his life was probably shaped by that experience.

Thanks for clarifying. I'm glad I decided to put 'might' in there.

 

[Trajan]

you can talk about all the wall st. scum you like, some of them are scum, no doubt, but currency speculators occupy a special place, most especially those that try to corner markets and blow up currencies*shrugs*

someone told me once they had him listed in wiki as a 'philosopher', among other things, I see, hes a philosopher too? How much does that cost?

 

[likeabird03]

He's stuffing his pockets while Rome is burning. This agenda 21 creep needs to go back to the disgusting hole he crawled out of. I would like to see Jack Bauer get his hands on him.

 

[Ravi]

Look, ravi; by default, a value judgment about a person is an opinion.

She and Pixie might think that the 14 yo Soros was bad, I don't.

I will argue with opinions if they are uninformed, but otherwise, it's silly.

Hypocrisy, I point out. Often.

I do not think that the 14 year old George Soros (György Schwartz) was a bad person. I just think that his life was probably shaped by that experience.

Like CG, I find it interesting that he says he does not have any remorse about what happened. It seems cold and indifferent to me.

What exactly do you think he should have felt remorse over?

 

[Ravi]

LOL! I should have realized that this thread on Soros is just a reflection of the latest rightwingnut meme.

Conservative Activist: Why OWS Should Protest The Super Scary George Soros | TPMDC

 

[Toro]

someone told me once they had him listed in wiki as a 'philosopher', among other things, I see, hes a philosopher too? How much does that cost?

He's not a philosopher but he wants to be one. He'd rather be that than a hedge fund manager.

Or so I've read.

you can talk about all the wall st. scum you like, some of them are scum, no doubt, but currency speculators occupy a special place, most especially those that try to corner markets and blow up currencies*shrugs*

I have some sympathy for that pertaining to small, illiquid currencies, where they are easy to push around. I have zero sympathy for that when it comes to big, liquid currencies like the pound.

When currencies come under speculative attack, there is usually an economic reason (except perhaps during contagion when markets get irrational). In this case, the pound was too high.

Currency speculation follows a pretty easy script (though it's harder to do in practice). All else being equal, currencies go up when the economy is strong and go down when the economy is weak. When there is no government manipulation - i.e. there is no currency peg - when the economy weakens, the government will cut interest rates. When the economy strengthens, the government will raise interest rates. Interest rates affect capital flows and the prices of currencies. When interest rates rise, it will attract capital, increasing the demand for the home currency, causing the currency to rise. When interest rates fall, capital will leave as it seeks higher yields elsewhere and the home currency will fall. Generally, the higher the interest rates, the higher the cost of capital to the economy and the economy slows. Likewise, the lower the interest rates, the lower the cost of capital and the economy picks up. So, when you think an economy is going to weaken, you sell the currency because you think interest rates will fall. If you think the economy is going to strengthen, you buy the currency because you think interest rates are going to rise.

Notice I didn't say that "You sell the currency because you think the economy is going to weaken and you think interest rates will rise." Basic economic theory tells you this is wrong.

What Soros and other currency traders saw - and it wasn't just Soros who did this, many others did as well - and saw correctly was that the pound should have been weaker because Britain was in a recession. But the British government was steadfast in keeping the pound within the ERM. It was the British government who was keeping the pound way above its market value. The government used interest rates to keep the value of the pound in the peg. As I noted earlier, the real interest rate in the UK was 6.5%. Though I sympathize with the government's attempt to kill the double-digit inflation from a few years prior, that's fucking insane when the economy is in a recession. A trader with a basic understanding of economics would think "That can't last, it's irrational," which is what Soros and many other traders thought at the time.

Given CG's seeming inability to articulate the economics of what exactly Soros did that was so evil, and given that the British economy began to expand once the speculators freed the pound from the chains of the ERM, I can only assume that all these bad things she claims had befallen average Britons occurred before the pound left the ERM.

What happened then was that to defend the pound against speculative attack, the British government jacked up overnight rates to something like 15% - double digit real interest rates - to keep capital within the country and the pound with the band. Over the summer, British stocks and bonds did fall, which, again, is in the standard playbook of capital allocation within financial markets.

Again, this is the dialogue the government and the market was having at the time.

The government: "This is the price."

The market: "No it isn't."

The government: "Yes it is."

The market: "No it isn't. It's too high. I'm going to sell."

The government: "OK. Then I'm going to manipulate the price by skyrocketing interest rates. You'll see."

The market: "Nope. Sorry."

And guess what? The market was right. The pound broke the band and stayed there for awhile and the British economy recovered. Meanwhile, the Bank of England lost £3.5 billion and ordinary Britons suffered.

But who is at fault? The government for trying to artificially set the price or the market?

Usually, it is the socialists who blame the market for thwarting the will of the government. In this case, it is CG and others we would normally think of as on the Right for blaming "evil speculators" for thwarting the will of the government.

Up is down and down is up.

 

[PixieStix]

Look, ravi; by default, a value judgment about a person is an opinion.

She and Pixie might think that the 14 yo Soros was bad, I don't.

I will argue with opinions if they are uninformed, but otherwise, it's silly.

Hypocrisy, I point out. Often.

I do not think that the 14 year old George Soros (György Schwartz) was a bad person. I just think that his life was probably shaped by that experience.

Like CG, I find it interesting that he says he does not have any remorse about what happened. It seems cold and indifferent to me.

What exactly do you think he should have felt remorse over?

According to the left? Being filthy rich. (sarcasm)

What do you know about this mans life Ravi?

He was interviewed on CBS 60 minutes? What?; you did not watch? Shame on you

 

[Ravi]

I do not think that the 14 year old George Soros (György Schwartz) was a bad person. I just think that his life was probably shaped by that experience.

Like CG, I find it interesting that he says he does not have any remorse about what happened. It seems cold and indifferent to me.

What exactly do you think he should have felt remorse over?

According to the left? Being filthy rich. (sarcasm)

What do you know about this mans life Ravi?

He was interviewed on CBS 60 minutes? What?; you did not watch? Shame on you

You claim he should feel remorse for what he did under the Nazis.

I'd like to know what you think he did that he should feel remorse over.