How George Soros Broke the Bank of England and made $1 billion?

Famous traders

George Soros
  • George Soros’s net worth is $8.6 billion in 2021.
  • He is also is know as the man “who broke the Bank of England”.

Who is George Soros? A brief introduction

George Soros, the Hungarian-born American whose success as an investor is known all across the globe was born in Budapest. He survived German-occupied Hungary and migrated to the United Kingdom in 1947. His academic accomplishments are mind-blowing. He got a bachelor’s degree from the London School of Economics, then earned his master’s degree and eventually a Doctor of Philosophy from the University of London. Meanwhile, he worked as a railway porter and waiter.

Soros’ business career is an embodiment of hard work, perseverance, persistence, and the utmost dedication. He faced many trials and tribulations to reach where he is today. Soros began his business career by taking ordinary jobs at various United Kingdom’s merchant banks and then in United State’s banks. He started his hedge fund namely Double Eagle in 1969. This was his breakthrough year and he never looked back. His first hedge fund made substantial seed money. He started his second hedge fund, Soros Fund Management in 1970. Soros renamed his first hedge fund to Quantum Fund that had whooping $12 million in assets under management. His professional achievements are innumerable and require thousands of pages to cover. People wonder who is George Soros. We say Soros is a twinkling that appears once in a blue moon.

George Soros net worth

George Soros’s net worth is $8.6 billion in 2021. According to Forbes, he is the 178th richest person in the world right now. He donated almost 64%, more than $32 billion, of his net worth to the Open Society Foundations. The world revers him as the most generous donator. 

How old is George Soros? 

George Soros was born on August 12, 1930. No one knew back then that a man born in German-occupied Hungary would go not only to live but also become one of the most successful investors in the world. George Soros’s age is now 91 years in 2021.

Where does George Soros live?

George Soros and his family own several homes. Although he was a resident of Manhattan for a very long time, he currently resides in a lavish residence in Bedford Hills in the suburb of New York. Soros has the following other residences as well. 

  • Southampton estate
  • Duplex on Manhattan’s Fifth Avenue with a view of the Central Park reservoir

How did George Soros break the Bank of England and made $1 billion?

On September 15, 1992, George Soros decided to go nuclear. The world witnessed what happened next. Soros and his friend Stan Druckenmiller went for the jugular, shorted the British pound sterling, and introduced themselves as trading icons. The very next day, on September 16, Soros and the Bank of England faced each other. The winner was Soros and became the man who broke the Bank of England and Made $ 1 BILLION in a single day. Since then, the world has been wondering how the veteran did it? Everyone wants to know How did Soros break the Bank of England and made $1 billion in a single day? We are here to unfold the mystery. 

The brief history of events that led to that day

To understand how did Soros break the Bank of England, it is imperative to turn the pages of a history book. The story begins, after World War 2, with the efforts of a handful of European nations to consolidate their powers for a better and stronger economy. Italy, the Netherlands, West Germany, Belgium, Luxembourg, and France signed the Treaty of Paris in 1951 establishing the European Coal and Steel Community. The purpose of the treaty was to protect diplomatic and trade relations. Those countries continued to strengthen their relations. They signed another treaty, the Treaty of Rome in 1957 establishing the European Economic Community (ECC). In 1973, the United Kingdom got into the picture and joined ECC. 

Those European countries went on to strengthen the bond. They all realized that a single currency is indispensable for their economy. However, none of them was willing to give up their own currency. Eventually, they established the Exchange Rate Mechanism (ERM). ERM opened the door for each member country to set fixed exchange rates against other currencies of member countries. 

Now, let’s take our protagonist, George Soros, into the frame. He was closely examining what was happening. He was aware of the UK’S reluctance to follow ERM. Soros’s predictions proved right and the UK decided to keep its own exchange rate instead of following ERM. 

Meanwhile, ECC members realized after the success of ERM that the dream of a single currency was achievable. The result was “the Euro,” a single unifying currency of all the ECC members. Since Germany had the most powerful economy, each member state decided to tie its currency value to the Deutschmark. For Soros, the game was on and all pieces were accurately placing themselves. Only one piece was missing -UK’s entry to the ERM.

Events leading to the final clash of titans

The UK government was extremely worried about the uncontrollable inflation that rose from 3% to frightening 10.9%. To tackle this situation, the country decided to join ERM. The UK wanted to stabilize its economy but that wasn’t possible because of high inflation and interest rates. It had to keep the pound stable in relation to the Deutschmark. But, it wasn’t possible, not even slightly possible. It was getting crystal clear that the United Kingdom would soon face a great economic recession. And the count down began to the clash of titans. 

The reserve bank normally lowers interest rates to maintain control during a recession. But, lowering interest rates also has negative consequences for currency values. That is why the UK had to contact foreign reserves to buy pounds to maintain the pound’s value. Soros was tracking the situation with the utmost interest and with purpose. Let’s see what happened next. 

Black Wednesday 1992 happened next

From 1990 to 1992, England kept on spending big to drive up the pound’s value. All the currency traders were ready to capitalize on the situation. The Bank of England was forced to keep spending billions to maintain the pound’s value. 

So, let’s now see how George Soros made the most of this situation. There were many other currency traders who were tracking this situation. But, no one else had the courage to confront the government’s bank and win. So, what exactly happened that led to Black Wednesday? 

An interview by Helmut Schlesinger, the president of the Bundesbank, ignited the fire that proved detrimental for the UK’s economy. He floated the idea of currency devaluation because European currencies had to be realigned. After the interview, UK’s government was aware that maintaining the pound’s value is paramount to keep it away from the plummet. The government planned to buy a huge amount of pounds to lift its value but nothing worked in the end.

On September the 15th, Soros began to sell pounds aggressively to buy them again at a later date. His selling caused the pound’s price to fall drastically. On September 16th, the British government started to buy pounds to discourage bearish currency traders. But, Soros continued to crash pound at the same pace. The clash between the titans continued for the whole day but victory finally chose Soros. He earned more than $1 billion on a single day of September 16th, 1992.

In the battle against the Bank of England, Soros wasn’t alone. There were several other players but his bet was the difference-maker. He risked it all and eventually made 1 billion in a single day at the expense of the UK’s loss of £3.3 billion. UK had to leave ERM and the Bank of England also suffered damages to its standing. That day is known as Black Wednesday in the history books. And the man who defeated the government made a fortune. George Soros broke the Bank of England because he dared to be a jugular and he got what he deserved for his daring. 

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