Black Wednesday
Black Wednesday
Black Wednesday occurred in the United Kingdom on 16 September 1992, when John Major's Conservative government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism (ERM) after it was unableto keep the pound above its agreed lower limit in the ERM. In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.In 2005,documents released under the Freedom of Information Act indicated that the actual cost may have been slightly less, £3.3 billion.At that time, the United Kingdom held the Presidency of the European Communities.
The trading losses in August and September were estimated at £800 million, but the main loss to taxpayers arose because devaluation could have made them a profit. The Treasury papers show that if the government had maintained $24 billion foreign currency reserves and the pound had fallen by the same amount, the UK would have made a £2.4 billion profit on the pound sterling's devaluation
George Soros
Born - Schwartz György
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Budapest, Hungary
Citizenship - Hungary, United States
Education - London School of Economics (BA, MA, DPhil)
Occupation - Investor, hedge fund manager, author, and philanthropist
Known for - Managing Soros Fund Management
Founding the Open Society Foundations
Advising the Quantum Fund
Target of several conspiracy theories
Net worth - US$8.3 billion (November 2018)
Spouse(s) - Annaliese Witschak
(m. 1960; div. 1983)
Susan Weber
(m. 1983; div. 2005)
Tamiko Bolton (m. 2013)
Children - 5, including Jonathan and Alexander
Relatives - Paul Soros (brother)
George Soros, Hon FBA (born Schwartz György; August 12, 1930) is a Hungarian-American investor and philanthropist. As of February 2018, he had a net worth of $8 billion,having donated more than $32 billion to his philanthropic agency,Open Society Foundations.
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Soros is known as "The Man Who Broke the Bank of England" because of his short sale of US$10 billion worth of pounds sterling, which made him a profit of $1 billion during the 1992 Black Wednesday UK currency crisis.Based on his early studies of philosophy, Soros formulated an application of Karl Popper's General Theory of Reflexivity to capital markets, which he claims renders him a clear picture of asset bubbles and fundamental/market value of securities, as well as value discrepancies used for shorting and swapping stocks.
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Early life and education
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Soros has wryly described his home as a Jewish antisemitic home.His mother Erzsébet (also known as Elizabeth) came from a family that owned a thriving silk shop. His father Tivadar (also known as Teodoro Svarc) was a lawyer and a well-known Esperanto-speaker editing a literary magazine ('Literatura Mondo') who had also been a prisoner of war during and after World War I until he escaped from Russia and rejoined his family in Budapest.The two married in 1924. Tivadar was an Esperantist writer.In 1936, Soros's family changed their name from the German-Jewish Schwartz to Soros, as protective camouflage in increasingly antisemitic Hungary.Tivadar liked the new name because it is a palindrome and because of its meaning. In Hungarian, soros means "next in line," or "designated successor"; in Esperanto it means "will soar."
Soros was 13 years old in March 1944 when Nazi Germany occupied Hungary.The Nazis barred Jewish children from attending school, and Soros and the other schoolchildren were made to report to the Judenrat ("Jewish Council"), which had been established during the occupation. Soros later described this time to writer Michael Lewis: "The Jewish Council asked the little kids to hand out the deportation notices. I was told to go to the Jewish Council. And there I was given these small slips of paper ... I took this piece of paper to my father. He instantly recognized it. This was a list of Hungarian Jewish lawyers. He said, 'You deliver the slips of paper and tell the people that if they report they will be deported'."
Soros did not return to that job; his family survived the war by purchasing documents to say that they were Christians. Later that year at age 14, Soros posed as the Christian godson of an official of the collaborationist Hungarian government's Ministry of Agriculture, who himself had a Jewish wife in hiding. On one occasion, rather than leave the 14-year-old alone, the official took Soros with him while inventorizing a Jewish family's confiscated estate. Tivadar saved not only his immediate family but also many other Hungarian Jews, and George would later write that 1944 had been "the happiest [year] of his life," for it had given him the opportunity to witness his father's heroism.In 1945, Soros survived the Siege of Budapest, in which Soviet and German forces fought house-to-house through the city.
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In 1947, Soros immigrated to England and became a student at the London School of Economics.
While a student of the philosopher Karl Popper, Soros worked as a railway porter and as a waiter, and once received £40 from a Quaker charity.Soros would sometimes stand at Speakers' Corner lecturing about the virtues of internationalism in Esperanto, which he had learned from his father.
Soros took a Bachelor of Science in philosophy in 1951, and a Master of Science in philosophy in 1954, both from the London School of Economics.
1992-pound short
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By September 16, 1992, the day of Black Wednesday, Soros's fund had sold short more than $10 billion in pounds, profiting from the UK government's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or float its currency.
Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound. Soros's profit on the bet was estimated at over $1 billion.He was dubbed "the man who broke the Bank of England".The estimated cost of Black Wednesday to the UK Treasury was £3.4 billion.
On October 26, 1992, The New York Times quoted Soros as saying: "Our total position by Black Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when Norman Lamont said just before the devaluation that he would borrow nearly $15 billion to defend sterling, we were amused because that was about how much we wanted to sell."
Stanley Druckenmiller, who traded under Soros, originally saw the weakness in the pound and stated: "[Soros's] contribution was pushing him to take a gigantic position."
In 1997, during the Asian financial crisis, the prime minister of Malaysia, Mahathir bin Mohamad, accused Soros of using the wealth under his control to punish the Association of Southeast Asian Nations (ASEAN) for welcoming Myanmar as a member. Following on a history of antisemitic remarks, Mahathir made specific reference to Soros's Jewish background ("It is a Jew who triggered the currency plunge"and implied Soros was orchestrating the crash as part of a larger Jewish conspiracy. Nine years later, in 2006, Mahathir met with Soros and afterward stated that he
accepted that Soros had not been responsible for the crisis.In 1998's The Crisis of Global Capitalism: Open Society Endangered Soros explained his role in the crisis as follows:
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ringgit that we did not currently hold.) Subsequently, Prime Minister Mahathir of Malaysia accused me of causing the crisis, a wholly unfounded accusation. We were not sellers of the currency during or several months before the crisis; on the contrary, we were buyers when the currencies began to decline—we were purchasing ringgits to realize the profits on our earlier speculation. (Much too soon, as it turned out. We left most of the potential gain on the table because we were afraid that Mahathir would impose capital controls. He did so, but much later.)
In 1999, economist Paul Krugman was critical of Soros's effect on financial markets.
[N]obody who has read a business magazine in the last few years can be unaware that these days there really are investors who not only move money in anticipation of a currency crisis, but actually do their best to trigger that crisis for fun and profit. These new actors on the scene do not yet have a standard name; my proposed term is 'Soroi'.
In an interview regarding the late-2000s recession, Soros referred to it as the most serious crisis since the 1930s. According to Soros, market fundamentalism with its assumption that markets will correct themselves with no need for government intervention in financial affairs has been "some kind of an ideological excess." In Soros's view, the markets' moods—a "mood" of the markets being a prevailing bias or optimism/pessimism with which the markets look at reality—"actually can reinforce themselves so that there are these initially self-reinforcing but eventually unsustainable and self-defeating boom/bust sequences or bubbles."
In reaction to the late-2000s recession, he founded the Institute for New Economic Thinking in October 2009. This is a think tank composed of international economic, business, and financial experts, who are mandated to investigate radical new approaches to organizing the international economic and financial system.
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