The man: An American currency speculator and billionaire.
The Impact: Caused British money to lose a quarter of its value, in one shot.To understand the scheme that made George Soros a billion dollars in one day and nearly caused the value of British money to collapse, you have to understand a practice called short selling. So for the few of your in our readership who don’t have vast and extensive investment portfolios, allow us to explain.
Short selling is a way to bet against stocks (or currencies or whatever) that you think are about to go down in value. You’re allowed to basically buy shares with an agreement to pay for them in the future, at whatever the prices are in the future. Then you can go ahead and sell them now, at whatever the prices are now. So if the price of the thing goes down like you think, when it comes time to actually pay you’ll have to pay less than what you sold them for, and you’ll have made a profit. If the price goes up, you’ll have to pay more than what you sold them for, and you’ll lose your ass. That’s the risk you take.
George Soros had a feeling the British pound was about to drop in value.
At the time, the British government was trying to keep the pound’s value up in comparison to the currencies of other European countries, despite the fact that their economy wasn’t doing as well as, for instance, Germany’s. It was doing this by buying up billions of units of its own currency. Soros, meanwhile, made one of the biggest gambles in the history of money: he short sold fucking $10 billion worth of currency on September 16, 1992, a day that would become known as Black Wednesday. This flooded the currency boat faster than the British government could bail it out. The value of the pound started dropping, to the point that the U.K. was forced to withdraw from the European Monetary System. Over the next three months, the value of the pound would drop by 24 percent.
Soros pocketed a cool $1.1 billion, and from then on became known as “The Man Who Broke the Bank of England.”