Let’s turn back time to 1992, to a day known as Black Wednesday. It was on this day, 16 September, that a financial whirlwind blew through the United Kingdom. At the heart of it all was a man named George Soros.
Who is George Soros, you ask? He’s a Hungarian-born investor and philanthropist who had made a name for himself as the head of the Quantum Fund, a hedge fund that had consistently churned out spectacular returns since its inception in 1969. But it was on Black Wednesday that Soros truly made his mark on the global financial scene.
The British pound was in a bit of a pickle. The UK was part of the European Exchange Rate Mechanism (ERM), which pegged the pound to other European currencies to stabilise exchange rates. But the British economy was struggling, and many believed the pound was overvalued.
Sensing an opportunity, Soros bet against the pound. He speculated that the British government would have to devalue the currency or withdraw from the ERM. Soros went all in, borrowing and selling over $10 billion worth of pounds.
The British government fought back hard, raising interest rates from 10% to 15% in a single day to attract investors and prop up the pound. But despite their efforts, the government could not support the currency’s high value. Finally, they had to withdraw from the ERM and let the pound devalue.
When the dust settled, Soros’ bet had paid off handsomely. His fund made a profit of $1 billion, earning him the nickname, “The Man Who Broke the Bank of England”.
Soros’ move on Black Wednesday is still studied in business schools and discussed in financial circles. It was a bold gamble that demonstrated the impact one investor could have on the global currency markets. And while he’s been a controversial figure, Soros’ actions on that day forever stamped his name on the annals of financial history.
