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GEORGE SOROS: THE MAN WHO ALMOST BROKE THE BANK OF ENGLAND

The name George Soros is often associated with political controversies, but there is another side to his story that has received less attention - his incredible success as an investor. In this video, we will delve into the fascinating tale of how Soros nearly broke the Bank of England and made a billion dollars in the process. This video is brought to you by Skillshare, where you can watch my free classes on how the stock market works. Sign up using the link in the description to gain access to these valuable resources.



In the aftermath of World War II, European nations realized the importance of unity to prevent future conflicts. The concept of a closely integrated union emerged, leading to the eventual introduction of the Euro. However, prior to the adoption of the single currency in 1999, Europe had a different system in place to manage its currencies.

In 1979, the countries of the European Community established the Exchange Rate Mechanism (ERM). While it simplified cross-border transactions by fixing exchange rates, it also made national banks vulnerable. These banks had to monitor the markets constantly and intervene if their currency's value deviated too much. This created challenges for countries like the United Kingdom (UK), which joined the ERM in 1990.

The UK's decision to join the ERM was met with opposition from then-Prime Minister Margaret Thatcher. However, her successor, John Major, pushed for membership. Unfortunately, the UK's economy was already in a recession, and the inability to cut interest rates worsened its situation. The Bank of England had to frequently purchase pounds in the foreign exchange market to maintain its value within the ERM limits. This intervention was unsuccessful, and speculators like George Soros realized that the pound's devaluation was inevitable.

Soros, known for his expertise in predicting market events, began building a position against the pound. He borrowed pounds, sold them for other currencies, and aimed to repurchase them at a lower exchange rate. In August 1992, Soros steadily increased his position to approximately $1.5 billion. To escalate the pound's decline, Soros utilized a seemingly innocent statement from the President of the Bundesbank, triggering a massive selling spree on September 16th.

The Bank of England, despite its frantic efforts, failed to stabilize the pound. The government's decision to increase interest rates by two percent was unable to counter the sell-off. Finally, on September 17th, the UK suspended its membership in the ERM, and the pound plummeted against major currencies. Soros and his fund profited significantly, while the cost to the British taxpayer exceeded 3 billion pounds.

Interestingly, the aftermath of this event saw the Bank of England regain control over the pound, leading to the restoration of the British economy and years of economic growth. In retrospect, Soros' actions may have inadvertently benefited the UK, despite his financial gains.

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