The Day George Soros Destroyed the British Pound

George Soros | Photo: knownpeople.net

George Soros | Photo: knownpeople.net


Soros

June 25, 2016

Allan Stevo

Yesterday, as I watched the movement of the market during the Brexit vote, as the pound crashed 10% to a 31 year low, the lowest since 1985 and trillions of dollars left the markets overnight, a story came to mind about how George Soros once profited by manipulating the currency of the Bank of England. Untold misery for a nation and the far reaches of an economy resulted from what Soros did. Certainly the Bank of England was to blame as well. It often takes two to tango, after all.

Last night, I thought about how Janet Yellen was certainly on the phone with the Bank of Japan and how they were certainly discussing market interventions to stem the bleeding of the British currency, but the currency dropped further and further. Was it possible that no one would step in? Was a lesson being taught to the British people, and an example being made – withdraw from the march toward super states like the European Union at your own peril.

Perhaps we will one day learn that the secretive Federal Reserve Bank tried to step in but couldn’t stop the bleeding. On the other hand, perhaps we will one day learn that it engaged in open market operations shorting the pound, thereby helping to drive it down further. More than likely, it will never be known what exactly was happening at the Fed last night. So used to secrets being kept from the governed, we forget the fact that such a level of governmental secrecy is inconsistent with a free people. Certainly there was some shadowy well-heeled figure like George Soros at work in the marketplace last night, just like on September 16, 1992.

It would be strange in fact if an operation funded by George Soros were not actively shorting the British pound last night. He’d done it before. He knew how to do it. As a man in support of a global government rather than the diversity of nation-states, there would even be poetic justice for him in the bleeding of an economy. After all, if he didn’t profit from the bleeding of the British economy, someone else would have just stood in his place and done the same right ?

That’s not exactly how things work. A well funded active trading operation that knows what it’s doing can manipulate a market and cause it to go into panic mode, by attacking predictable places where a market will naturally slow or stop and doing it in predictable ways. Someone likely profited last night by doing that to the British Pound. George Soros profited by doing that to the British pound in the early 1990s. What he did in fact caused Britain to have to pull back from some quite significant European Union commitments. He force an early Brexit in 1992 long before there was the 2016 Brexit vote.

Leading up to September 16, 1992, or Black Wednesday in the UK, George Soros made a bet that the British pound was overpriced against the German mark and that there was no way the mark was going to hold strong under an attack.

The European Exchange Rate Mechanism, a predecessor to a fully integrated European Union governing its member states, was something the Soros knew could not hold in its relatively undeveloped state where. The British government was trying to move closer to European integration at the time, and Soros did his best to stymie that. In trying to integrate, the Bank of England sought to maintain a fixed exchange rate. The exchange rate was artificially high, especially given the economic conditions of the UK at the time. The Bank of England had a stated policy to buy everything that sold on the lower end of that peg, in order to keep the price above a certain level.

Forbes later that year claimed that though the world had many billionaires, George Soros was the first person who made a billion dollars in a single month.

His strategy was a little more complex than just shorting the pound.

“In carrying out this operation, Soros and his aides sold short sterling to the tune of about $ 7 billion, bought the mark to the tune of $ 6 billion and, to a lesser extent, bought the French franc. As a parallel play they bought as much as $ 500 million worth of British stocks even while they were shorting sterling, figuring that equities often rise after a currency devalues. Soros also went long German and French bonds, while shorting those countries’ equities. Soros’ reasoning on the French and German markets was that upward valuation was bad for equities but was good for bonds because it would lead to lower interest rates.”

This article by Rohin Dhar of Priceonomics nicely illustrates the value of perception in keeping a currency strong, which is a relatively weak foundation for a currency. The flashpoint for the pound finally dropping and Soros profiting of his legendary bet is explained by Dhar in this way:

“The event that ultimately led to the undoing of the British pound’s fixed exchange rate was an interview with the President of the German Bundesbank, Helmut Schlesinger. Schlesinger gave the interview to the Wall Street Journal and a German newspaper. He had one condition: If they wanted to directly quote him, they had to let him review the quotes. If they only indirectly paraphrased him, no such permission was necessary.

“That night…the following report paraphrasing Schlesinger’s words went out over the newswires:

“The President of the Bundesbank, Professor Helmut Schlesinger, does not rule out the possibility that, even after the realignment and the cut in German interest rates, one or two currencies could come under pressure before the referendum in France. He conceded in an interview that the problems are of course not solved completely by the measures taken.

“By the morning, the report landed on George Soros’ desk. Soros and the entire financial market took this to believe that the pound sterling was one of those currencies that could ‘come under pressure’ and be devalued.”

The story was released in the wires September 15, 2016, the night before Black Wednesday as cited in detail by The Independent.

Soros then made a decision. He had a bet on already. Was he going to force the hand of the Bank of England that day or was he going to sit by and watch as the world followed its own course. He went for the jugular.

Throughout the day, in costly market interventions, the Bank of England failed to affect the market place, while making themselves appear inept by raising interest rates, not once but twice that day, a total of 50%, from 10% to 12% and later to 15%. By the end of the day the Bank of England announced it would stop supporting the price of the pound on the international markets and would leave the ERM.

Former British Prime Minister Margaret Thatcher was proven right that day that the UK should not be propping up the price of its currency. Her former Chancellor of the Exchequer, and Black Wednesday Prime Minister, John Major, who insisted on artificially propping up the currency was proven wrong. The British people paid a hefty price tag, their economy suffered a sudden correction instead of constant gradual changes, and George Soros made a billion dollars that month proving how very ineffective a central bank was at doing the job it set out to do.

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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The Fires of St. John

Janske Ohne

June 24, 2016

Allan Stevo

With St. John´s Day taking place today, I present to you an article from the archives of 52 Weeks in Slovakia about this interesting Slovak tradition.

From the darkest days of December, nature grows lighter.  These darkest days were the time that our ancestors long ago feared the evil they believed wandered the world during the the longest nights of the year.  When Christianity emerged in Europe, these darkest days surrounding the winter solstice were adopted for a celebration of the birth of God’s son.

Once the December solstice has come, we know that the days ahead of us are only getting longer, the hours of darkness shorter until we reach a counterpoint in the year. That counterpoint is today, just after the summer solstice, in the midst of a time when all nature rejoices at the long, long day. St. John’s Day or simply “Jan” is how this day is referred to in Slovak.  From this counterpoint, all the way up until Christmas, that tide will change and the days will only get shorter and the nights longer.

We will not feel it from day to day because the changes are so small, but the march toward winter’s death has begun, nature’s trend in the direction of life has ceased.  Soon there will no longer be light in the sky from 4 a.m. or after 10 p.m. in Slovakia.  Nature will begin its march toward days where light at 8 a.m. will be a blessing and overcast skies the norm before turning into pitch black before 5 p.m.

Click here to keep reading The Fires of St. John

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Process Oriented People, Outcome Oriented People, and Sunrises – What Watching the Sunrise Says About You

Sunrise
Sunrises

May 29, 2016

Allan Stevo

I watched the sun rise this morning over Long Island Sound.

It broke the horizon red and then light pink after it all came up, the whole circle able to be stared at directly through the mist, for a long time, maybe ten or fifteen minutes. Then rose colored. Then orange. It passed through layers of clouds so that the sun was repeatedly hidden and revealed. Sometimes only showing as a sun-width line atop the horizon. So that there were seven or eight sunrises this morning. Each more intense than the previous. With the second-to-last being the most beautiful, orange like the embers of last night’s camp fire, too bright to stare long at, made the sky to my back the same orange and rose and pink. The sun hid behind another layer of cloud, disappearing entirely, and then came up once more. Yellow. Too bright to look at. Clearing the rest of the color from the sky and starting the day.

He who appreciates the sunrise is one who also appreciates the journey.

Willa Cather wrote “the end is nothing the road is all,” but not everyone feels that way. Some live for the destination. Others live for the journey. A sunrise always leads to the same place. The sun always rises. The details of that path to rising, the journey it takes on its approach to the horizon and its early ascent, a unique daily journey, that makes the watching of a sunrise a special appreciation for he who loves the journey at least as much as the destination, if not more. We all know how the story will end. He who cares to watch the rising sun cares a little more about the details of the plot that gets us there.

You can chart this behavior on a spectrum of outcome oriented people and process oriented people. The outcome oriented people are extreme in that they strive exclusively for the goal and the process oriented people are extreme in that they live exclusively for the details of the process that leads to the goal. Individuals are often some combination of the two and often that combination varies depending on particulars of a situation.

I watch sunrises, I glory in complicated lengthy ways of getting to destinations, I stop and smell the roses as often as I can remind myself to. The joy of the journey is very special to me, usually a little more than the joy of arriving at the destination.

Which do you tend to see more in yourself?

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Mailbag – Trip to Slovakia, Looking for a Teaching Job in Slovakia

Teaching Question

May 29, 2016

Allan Stevo

The graduation of Slovak high school students takes place at this time of year. With that in mind, I present to you an article from the archives of 52 Weeks in Slovakia about finding a teaching job in Slovakia.

A reader wrote to mention a few months back that she was heading to a wedding in Slovakia and to ask advice about finding a school to teach at. Here’s her note and here’s how I answered.

Hi Allan, Your blog is of particular personal interest as I am considering a move to Slovakia in October, and I’ve also been working in Chicago for the last five years, originally from Wisconsin. So the anxiety of “Oh God, will I love/hate Slovakia?” that has been dancing around in my head has eased a little after reading through your experiences.

Do you have any sage advice on securing a teaching position? I read that you were teaching… any chance that was in Bratislava? I have experience teaching English and Spanish and wanted to start making a few contacts at schools in Bratislava, but not sure where I should head first.

Click here to keep reading Mailbag – Trip to Slovakia, Looking for a Teaching Job in Slovakia

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Guru Peter Drucker comments on Guru Jan Amos Komensky (Comenius)

Comenius

May 28, 2016

Allan Stevo

The graduation of Slovak high school students takes place at this time of year. With that in mind, I present to you an article from the archives of 52 Weeks in Slovakia about great Czecho-Slovak scholar, thinker, and educator Comenius.

Peter Drucker was a management expert extraordinaire, an author of 39 books who told his readers to focus in life and in business not on “success,” but on concrete contributions they could make to society. In short, his writing looked at ways that organizations could bring out the best in people and to offer their best to society.

  • One observer, Harriet Rubin in Inc. March 1, 1998, noted “No human being has built a better brand by managing just himself than Peter Drucker has. He has represented quality, integrity, and value longer than Intel, Microsoft, or McDonald’s has. He has done this in ways that reject the standard formula for success. “
  • The Drucker Institute references his 600 page Management: Tasks, Responsibilities, Practices (1974) (read it here for free or buy it here), his magnum opus, as a text that “would become the playbook for generations of corporate executives, nonprofit managers and government leaders.”

Click here to keep reading Guru Peter Drucker comments on Guru Jan Amos Komensky (Comenius)

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Tablo – What’s a Tablo?

May 27, 2016

Allan Stevo

With summer around the corner, I present to you an article from the archives of 52 Weeks in Slovakia about this graduation ritual of Slovak high school students.

A tablo is an elaborate class picture. It is a tradition in Slovakia for such class pictures to be made by graduating gymnasium students and to be displayed in a shopkeeper’s window for all to see. They are often entertaining. The tradition of tablo is talked about more in the article – Graduation Parades. Below is a tablo from 1956, as is noted in the tablo. It was sent in by a reader of 52 Weeks in Slovakia. The school is Dunajska, across from “Liga Passage.” A bust of the great educator Jan Amos Komensky (a.k.a. Comenius) is shown in the tablo.

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Graduation Parades Through the Old Town

Graduation Parades

May 25, 2016

Allan Stevo

With summer around the corner, I present to you an article from the archives of 52 Weeks in Slovakia about this graduation ritual of Slovak high school students.

The Thursdays and Fridays throughout May mark a special time in Slovak culture. A sort of coming of age parade takes place. Slovak high school students go into the town with every member of their class and beg for money. They don’t lie about what they are going to do with this money–it’s going to be spent on drinking.

In the upcoming weeks, these 17-, 18,- and 19-year-old students will take their difficult and stressful leaving exams. Sitting at the end of that testing period will be a large pot of money that they will go out and blow on a party the day they finish exams. The entire class will be there at this final party and most likely it will be the very last time the entire class will be together. Teachers will be invited. The party will go late.

Click here to keep reading Graduation Parades Through the Old Town

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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Photos from Slovakia May 2012 – Winning the Silver in Hockey

Silver

May 23, 2016

Allan Stevo

With 2016 IIHF Ice Hockey World Championship taking place in Russia this year,I present to you this article from the archives of 52 Weeks in Slovakia.

As I have long pointed out, Slovaks tend to be fond of their hockey. On Sunday May 20, 2012, Russia faced Slovakia in the world finals of hockey. Russia beat Slovakia 6-2. While Russians offered their world championship hockey team a bit of a weak welcome home, Slovaks offered their silver medal winning team a grand celebration.

In 2002, Slovakia won the gold and many Slovaks proudly mentioned that fact for seven or eight years. In 2012, they have won the silver. I think visitors to this land will be hearing about that victory for at least a few years to come – unless, of course, next year’s team outdoes this year’s team.

Below are a few photos of memorable moments from this year and some photos of Slovaks watching and celebrating hockey. I think these photos are likely enough to demonstrate the deep appreciation for hockey felt by many in this country.

Click here to keep reading Photos from Slovakia May 2012 – Winning the Silver in Hockey

Allan Stevo writes on Slovak culture at www.52inSk.com. He is from Chicago and spends most of his time travelling Europe and writing. You can find more of his writing at www.AllanStevo.com. If you enjoyed this post, please use the buttons below to like it on Facebook or to share it with your friends by email. You can sign up for emails on Slovak culture from 52 Weeks in Slovakia by clicking here.

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