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When George Soros Broke the British Pound (2014)
- ceejayoz 7y agoThe "Soros broke the bank" framing I tend to see in discussions of this is really quite odd, as if it were some sort of illegal Oceans 11 style heist. He didn't break the bank. The bank broke itself. > What kept the pound from plummeting in value was the British government’s guarantee that it would keep the value propped up, and the market believed that it would. As long as everyone believed that England would stay indefinitely committed to buying pounds for around 2.95 Deutschemarks, the status quo was maintained. If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses.
- blancheneige 7y agoAh yes. When it's Wall Street doing it it's "greedy evil bankers" but when it's Soros, a vocal advocate of liberalism, suddenly it's just business as usual.
- blibble 7y agoI think it's kinda funny, 2019 Soros desperately wants Britain to remain in the EU (and funds various groups accordingly) whereas 1990s Soros did his best to force Britain out of the ERM if Britain stayed in the ERM until the point it became the Euro: there's no way brexit would have been even remotely possible
- ceejayoz 7y agoA central bank whose monetary policy relies on their not being greedy evil bankers is going to fail at implementing that policy.
- ajxs 7y agoI'm honestly aghast at the attitude of some of the posters in this thread, with their "The Bank of England had it coming" and "It's fair game." posts.
- vwuon 7y agoTrue. And if a kid pushes an old man and he breaks his hip, that's the old man's fault for getting old! Oh, wait. https://twitter.com/ceejayoz https://twitter.com/ceejayoz
- nabla9 7y agoExcept that Soros did not hurt UK economy. Just bruised some egos at the Bank of England by showing their stupid mistakes.
- hogFeast 7y agoThe only reason he could put on the trade in the size that he did was because the BoE took the other side (they sold $27bn worth of £ and Soros had a $10bn position) and believed they were omnipotent (even amongst British civil servants, the BoE was unusually stacked with "god complex" types...and still is to a certain extent). Documentary on this - https://www.youtube.com/watch?v=K_oET45GzMI https://www.youtube.com/watch?v=K_oET45GzMI
- scottlamb 7y agoHuh? He gained billions of dollars (pounds, Deutschmarks, whatever), the UK government lost billions. That clearly hurt their economy. Letting the currency float was better in the long term, and his actions made that happen, but I'd like to think there were other ways. And I doubt helping the UK was his goal; I can think of billions of other more likely reasons. Many people would say he stole this money from the government. It was legal, clever, and successful. He did some good things with some of the money afterward. Still, I'm not going to like him for it. (That sums up my feelings on much of the finance industry, in fact.)
- sukilot 7y agoThe UK government did not by inventing a phony exchange rate.
- PeterisP 7y agoThe point is that the money lost by UK government was lost because they stupidly gambled away that money by betting against reality - they asserted that the rate of pound "should" be at an unrealistic, unsustainable position, and they bet a lot of money on that. It turned out that they were wrong - making these large bets did prolong that fiction for a while longer, but it was unsustainable. Thus everyone in the market who was right about the "proper" position of GBP (Soros was just one of them, the largest but not the majority) won a bunch of money, and everyone who was wrong but still chose to bet more and more billions instead of accepting the reality - namely, UK government - lost billions. They could have chosen not to attempt to artificially prop up the exchange rate with these major transactions, and float the currency earlier, when it had to be floated. Heck, floating the currency a single day earlier wouldn't have any meaningful drawbacks but would have avoided much of the losses. It's not that the money was taken from the government, but rather the government wasted a huge amount of taxpayer's money betting on the false assumption (wishful thinking for domestic political reasons) that the pound doesn't have to be floated. Such bluffs are punished by the market, with the people calling the bluff getting the money (and people falsely calling a bluff losing their money if they turn out to be wrong).
- tjfl 7y ago> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses. It's at least partially the kid's fault. Don't go kicking stilts under houses.
- jacquesm 7y agoIf someone will pay you billions to go kicking stilts there would be few who could resist. Betting against a nation state is usually a losing proposition, Soros happened to have large enough boots to do the kicking.
- user5994461 7y agoNoting the boots are not his and he risked nothing personally in the process. hedge fund = betting other people money.
- jacquesm 7y agoI don't think they were complaining. Now they have boots too!
- rumanator 7y agoFault and responsibility are two entirely different concepts. The kids doing the kicking might be at fault for bringing the house down, but the kids are not responsible for the house being in such a sorry state that kids kicking it's stilts can lead it to collapse.
- matz1 7y agoIf the kids knew that kicking may bringing the house down then the kids are at least partially responsible for it.
- ClumsyPilot 7y agoIn a realistic situation, the homeowner or designer could end up in jail for endangering the kid. Stilts would be expected to resists minor impacts from accidents and general course of life without bring the house down on your head and killing you in the process.
- spaceflunky 7y agoSoros shills in full force. "If you build a house in a brush canyon and then someone lights the brush on fire, it's YOUR fault for building house there." Ummmm... ok
- nabla9 7y agoLook at the economy of UK at the time. What damage Soros did to it? Soros extracted few billion as a fee from teaching a lesson but properly priced Sterlign was a good thing overall. The UK economy started to recover from recession immediately.
- ceejayoz 7y agoIf you intentionally pile up dead brush around your house into a nice big bonfire waiting for a spark, yes, you've got some culpability.
- nostrademons 7y ago"If you build a house in a brush canyon and then someone lights the brush on fire, it's YOUR fault for building house there." Don't we hear this exact same argument repeated in every thread about California wildfires?
- nabla9 7y agoThis is correct and accepted view today. Floating currencies are a good thing because they adjust the economy automatically. Central banks should only "lean" against radical sudden movements but allow gradual straightening or weakening. Trying to keep currency artificially strong with weak economy is insanity. The economy of UK did better after Soros broke the Bank of England.
- ummonk 7y agoIf I build a house on stilts strong enough to withstand kicks but somebody comes along with a giant sledgehammer to break the stilts, they will be at least somewhat to blame.
- nabla9 7y agoThe house is the economy of UK in your metaphor. The house dropped into solid ground and was in better condition overall (especially exports). The Guy who build the house on stilts was proven wrong. Artificial stilts are stupid thing. Houses should be build on solid ground.
- BubRoss 7y agoNo one is running around and destroying healthy financial entities. Rotting posts will break eventually, a little effort can just change the timing.
- matz1 7y agoWhy no one ? You don't believe, out of all human in the world, that there is someone that gain satisfaction out of destroying healthy financial entities ?
- BubRoss 7y agoIf one person could destroy it, it wouldn't be healthy would it?
- matz1 7y agoHealthy doesn't mean could not be destroyed.
- BubRoss 7y agoIn this context that's exactly what it means. I have no idea what you are talking about, but this article is about the pound not being backed and the peg being forced to break. That doesn't happen unless there is some sort of dishonesty or insolvency going on.
- throwawayhhakdl 7y agoIf someone builds an argument on a weakly relevant analogy, and gets a response with an equally dumb, but oppositional analogy, who’s at fault for wasting time?
- optimiz3 7y ago> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses. Don't like this metaphor. Maybe the the homeowner can't afford to fix their house. Now they're homeless. Hurting others for enjoyment is the basis of evil. Leave the world better at the end of the day, not worse.
- ceejayoz 7y agoThose sorts of maybes don't really matter. "Please don't be a dick" doesn't even work at the neighborhood kids level. It certainly doesn't work at the international finance level. The Bank of England propped up the currency in a non-sustainable fashion, and spent billions trying to avoid having to admit that was a bad call. Someone was always going to come along and smash it, especially with billions of dollars of upside available.
- silasdavis 7y agoI can see both sides of this. You can describe Soros' as an inexorable result of natural law, but he still gets to be the dick who kicked it and to profit grotesquely from it.
- ClumsyPilot 7y agoIf you own a house/land, you must maintain it in a safe condition and can be liable for injuries to third parties that result from poor maintenance. Simplest example: a roof tile fall off your roof and kills a passerby.
- maxerickson 7y agoBreaking the bank is a gambling term where you make and win a bet the house can't cover. It's very apt.
- sukilot 7y agoSoros didn't kick the stilts; he bet that the house would collapse.
- ahje 7y ago> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses. If you build a house that isn't fire proofed properly and a pyromaniac sets fire to it then you won't blame the contractor, even if the house wasn't properly built. Sure, there might be fines involved for breaking rules etc. but the blame for the fire is still attributed to the person who lit it. Soros and his associates did this to a number of countries, includingMalaysia, South Korea, Sweden, Thailand and others; this is not about a single incident where someone used a small loop hole to make some profit -- it's about the financial sector deliberately playing nation states for massive profits, affecting the lives of hundreds of millions of people in those countries. Should the banks have been better prepared? Yes, definitely. Does that in anyway shift the blame for playing with the livelihood of millions in order to turn a profit? Not a chance.
- justaguyhere 7y agoA bit off topic - does anyone know other blogs like priceonomics? I'm a big fan - I think the first article I read there was the "Diamonds are bullshit" one. Must be fun having access to all kinds of interesting data and poring over them.
- krmmalik 7y agoCheck out Matt Stoller on Substack.
- john_minsk 7y agoLiked the "Diamonds are bullshit" Anything similar on watches/suits. THese are mine flaws
- mixmastamyk 7y agohttp://paulgraham.com/submarine.html http://paulgraham.com/submarine.html
- mixmastamyk 7y agoThe original diamond piece is from the Atlantic in the eighties. Still a great read.
- mieseratte 7y agoGood example of why anyone should be skeptical of Soros. He is a profiteer with little regard for the damage he causes.
- ummonk 7y agoWhat I would like to see is what led to the pound being so badly mispriced in the first place. Did they just price it at whatever was the prevailing price? And was that why the Bank of England ended up with such small reserves? Presumably they could have priced it lower and bought up Deutschmarks to bring down the price of pounds and build up reserves to start with when they decided to fix it. There is also the question of how much Germany was contributing to the problem by keeping its currency overly strong, making it harder for other countries to stay in sync. Presumably if the Germans had raised interest rates somewhat and / or bought more reserves from other countries they could have helped relieve the pressure.
- LatteLazy 7y agoIt was a political choice. The idea was to avoid inflation and keep prices low for consumers. Of course the same action strangled exporters but they don't vote much...
- H8crilA 7y agoIndeed, and that's also why the trade was so good. The pound couldn't possibly get much higher, but it could break and go far far lower. That's why Soros bet 200% of his fund on this position, huge upside with very small, tolerable downside.
- sgt101 7y agoAlso it meant that the owners of UK assets had the best possible valuation of those assets. Those asset owners were significant in the calculations of the tory party, for some reason.
- nostrademons 7y agoMarket prices for currencies reflect what you can buy with them. If a country's economy is strong, they're exporting a lot of things that the world wants to buy from them, and the world wants to invest in a bunch in a number of securities denominated in their currency, the currency will be strong. If the country's economy weakens (relative to other countries in the global economy), the currency will weaken. There could be a lot of potential causes for that. A generation of lazy people who don't work hard. Poor corporate leadership that has people building products that nobody wants to buy. Corruption and misincentives that encourage people to shift value around rather than producing value. The rest of the world suddenly building out their technology and capital stock and catching up to your economy. Britain was the pre-eminent world power up through WW2, so there was a lot of historical inertia propping up the value of the pound. They recovered slowly from WW2, though, lost their position as world leader to America, and had a very rough 70s and 80s. The historical strength of the pound actually hurts in that regard: it makes their exports less competitive, which leads to industry moving away from Britain and a generation that has difficulty finding work. Through their 80s they still had much of their reputation as a world power (the Falklands war was fought over it); by the 90s it was becoming apparent that reality did not match reputation.
- nostrademons 7y agoIt's interesting to read this with an eye on current global macroeconomic conditions. The dollar is significantly overvalued today, a result of its status as the global reserve currency. And the consequences of that are all the same ones mentioned for the pound in the article. The U.S. has been running a large current account deficit since 1980: we import more than we export. Our jobs are moving overseas, because it doesn't make sense to employ Americans at the wages they demand, because the wages they demand are artificially inflated by the overvalued dollar they're paid in. We need to keep interest rates high relative to peer countries to maintain the dollar's reserve status. We insist - through foreign diplomacy if possible and military intervention if not - that oil-producing companies price their oil in dollars, creating demand for dollars that would otherwise flow through other currencies. And all of this has been widely reported for the last couple decades. The U.S. has stated that they're committed to defending the dollar as the world's reserve currency. What happens when they can't, and the collective weight of the market is more than a national government can prop up?
- jk27277 7y ago"we import more than we export. " Doubt that. Before you answer with a statistic, Google "dark matter in accounting" regarding the deficit. If apple sells an iPhone to Germany. In what export balance does it appear? What company makes the profits?
- user5994461 7y agoMagic, the profits are transmuted into a sandwich?
- PeterisP 7y agoWithout putting much analysis into it, IMHO whenever Apple would sell an iPhone in Germany the effects are as follows: Goods export worth the "wholesale price" from China to EU; An EU company (Apple entity in Ireland or Netherlands? the 'double Irish sandwitch' arrangement which IIRC is still used is a bit tricky, but one of these) earning almost all of the profits of that deal; The shares of publicly traded USA company 'Apple' appreciating in value because the value of the EU company that they fully own increased because they gained profit and cash (but which won't be repatriated to USA due to tax reasons). IMHO that sale wouldn't have any direct effect on USA trade balance and on USD supply/demand. Does this make sense? Am I getting something substantially wrong?
- williesleg 7y agoWho is this guy?
- codexon 7y agoIt makes me wonder if he would have been successful if he wasn't able to short 10 billion. As the article said, Norman Lamont was planning to defend the sterling with 15 billion.
- tiernano 7y agoIt wasn't just him though. By the sounds of things lots of players smelled blood in the water. Saros has 10bn, but other players probably had a lot more between them...
- codexon 7y agoThey may have only done so because they saw Soros betting so much on it.
- mixmastamyk 7y agoYes, and they were able to borrow more eventually. But when you see that kind of movement there’s gonna be momentum.
- dang 7y agoDiscussed at the time: https://news.ycombinator.com/item?id=7752291 https://news.ycombinator.com/item?id=7752291
- BoyGeorgeISoros 7y agoThanks for the heads up. The biographies have more direct ibfo though. Interesting thanks.
- viburnum 7y agoI don’t understand why it is that the hike in interest rates had to fail. Had the speculators bought tied up so much liquidity that nobody had pounds to sell to the UK’s central bank?
- AnimalMuppet 7y agoThis would be hiking interest rates while the UK was in a recession. That would be devastating to employment in the UK, and was therefore politically not possible. [Edit: Per the article, they did try raising the interest rates, but by then everyone knew that the outcome would be devaluing the pound, so it didn't work.]
- singingboyo 7y agoI think you've got it backwards. If no one is buying and everyone is selling, the value drops. The central bank couldn't sell back the pounds it had bought, and couldn't feasibly keep buying more forever. And, well, no one else would buy pounds in the fixed range: * The currency spent the morning dropping in value. * This despite the government buying up pounds. * There had been news stories about possible devaluation of currencies in the ERM, and suggestions it will be the pound * The country was in recession - the government has limited flexibility with interest rates. Against this backdrop, who would buy pounds? Essentially, as the article notes, it was already a matter of when the pound would drop, not if. Soros' Quantum Fund and other funds might have made it happen a bit sooner, but it was pretty clear that the pound was overvalued.
- viburnum 7y agoI think that’s begging the question, though. They could have fought it out, like the Volcker shock in the US from just a few years earlier. Maybe everybody assumed they wouldn’t do anything as dumb as that.
- whack 7y agoHiking up the rates from 10% to 15% gets you an additional 5% in returns over the course of the next year. Whereas if the English government decides to stop propping up the currency, you're going to see a significant loss, within the next few days or weeks. Which is exactly what happened in this case. Anyone who bought pounds in order to lend it at 15%, would have taken an immediate 15% loss over the next week instead. Unless you want to speculate, you're better off waiting for the market to settle instead of diving in during turbulent times.
- ajxs 7y agoThere seems to be an abundance of posts about Soros himself getting flagged killed in this thread. Why is that? Are his character and his political ambitions not relevant to a discussion about his demonstrated ability and intent to cause massive financial disturbance in the global economy?
- simlevesque 7y ago> demonstrated [...] intent to cause massive financial disturbance in the global economy it's not clear to me that this was his intent. the intent seems to be making a lot of money.
- ajxs 7y agoSurely reckless indifference as to the outcome of his actions must at some level attribute him some moral culpability for what he did. Thieves might say that their intent wasn't to deprive others, simply to enrich themselves. Soros may well have just wanted to make a lot of money, but the manner in which he did it has consequences.
- momokoko 7y agoBecause it's been done to death. It adds nothing new, and has nothing to do with this specific conversation. There is a time and a place for everything. This is not the place in my and many other's opinion.
- scandox 7y agoI think his character and intentions have become such a trope that it has made it near impossible to gauge the good or bad faith of the person who starts discussing them. In a sense his name has now transcended rational discussion and become a symbol. Probably there needs to be an internet "law" for this, like Poe's Law or Godwin's law...You just cannot know if the person who names him wants a sane discussion or to just to bang that massive drum one more time.
- redler 7y agoWe might call it Soros’ Law, but that could be inflammatory. Which may be perfect.
- elmar 7y agoThis incident was the main reason the UK didn't enter the Euro. This wonderful BBC documentary explains everything on detail. https://youtu.be/K_oET45GzMI https://youtu.be/K_oET45GzMI
- elmar 7y agoSometimes I wonder if this incident didn't happen, would the UK had entered the Euro and Brexit wouldn't be on the horizon today.
- gumby 7y agoThey fellout of the EMS because their economy wasn not as tightly coupled to the rest of what became the Eurozone (whether that level of coupling is good or bad is a matter of disagreement). So if this incident hadn't happened it's likely they would have had a touch time under the Euro. For a weak economy IMHO the Euro is worth the disadvantages (and I happen not to consider the inability to do competitive devaluations a disadvantage). These can be small (GR) or large (IT) economies. For a pretty solid (sometimes strong, sometimes less strong, but never "weak") economy (DE, NL, FR, etc) it's definitely good; the small amount you lose in freedom of action is far overshadowed by the benefits (who did better from the greek financial crisis: Greece or Germany?). But for a middling economy which I consider the UK to be, despite its large size, being coupled to the eurozone would give them the worst of both worlds. BTW I don't think this is an argument for the UK getting out of the EU; I think they should fix their shit (which goes back decades) instead.
- jamiegreen 7y agoWe should leave the EU because it was voted for by the majority
- devtul 7y agoNo, we should do a second vote, maybe even a third vote in case the second vote result is wrong again as the first one. Sometimes democracy doesn't work you know, so we have to try harder.
- aazaa 7y ago> ... Countries weren’t ready to give up their national currencies, but they agreed to fix their exchange rates with each other instead of “floating” their currency and letting capital markets set the rates. Since Germany had the strongest economy in Europe, each country set their currency’s value in Deutschmarks. They agreed to maintain the exchange rate between their currency and the Deutschmark within an acceptable band of plus or minus 6% of the agreed upon rate. Germany's economic policies in particular have had a big effect on the course of the last 100 years of European history. The hyperinflation following Versailles and ensuing economic dislocation led in no small part to the rise of the Nazi party. The commitment of Germany in particular among European countries to strict budget controls to avoid another hyperinflation laid the groundwork for Soros' attack on the Pound. Continued fiscal discipline has helped make Germany a dominant economic force in the EU. It set the stage for the Greek debt crisis, and several others in the works. These all resemble the Pound crisis in that the unusually strong vigilance against excessive debt in Germany is/was a driving factor.
- the_why_of_y 7y ago> The hyperinflation following Versailles and ensuing economic dislocation led in no small part to the rise of the Nazi party. Nonsense - it was deflation caused by austerity policies following the 1929 crash that helped the NSDAP come to power. https://www.anderson.ucla.edu/Documents/areas/fac/gem/nazi_austerity.pdf https://www.anderson.ucla.edu/Documents/areas/fac/gem/nazi_a...
- lbeltrame 7y agoIt also happened to the Italian lira at the same time. Up to the point (or perhaps, the consequence) that the government at the time forcibly withdrew money (not large amounts, mind you, but if you do some sums...) from all bank accounts throughout the country overnight.
- mc3 7y agoAh those poor boomers! Paying 15% interest on their £40,000 mortgage. These millennials don't know how easy they have it, paying 3% on their £200,000 mortgage.
- turtlecloud 7y agothe boomer can always refinance to the 3% - not sure what you are getting at here.
- aloknnikhil 7y agoThe OP is being sarcastic.
- mc3 7y agoYes I am parodying the old avocado toast argument.
- user5994461 7y agoAt 15% the boomer could fully pay and own the property within 5-10 years. Then save or go on to buy a new one. At 3% the millennial will still not be owning their property after 30 years.
- timthorn 7y agoTypical mortgage duration was and is ~25 years. The scenario in the 80s that gave homeowners relief was that the costs got inflated away (and MIRAS allowed the interest on a mortgage to be deducted from taxation)
- hydraxis 7y agoI don't have this information for the UK, but for France parent is right. Mortgage duration for a typical income and a typical house in the 70s was 10 years, compared to 25 years today.
- 7y ago
- Sidious 7y agoJust read: culture of critique - Kevin M and some stuff by e. M. Jones. To grasp the truth and the bigger picture, you cant get it on controlled sites such as this, where truth is suppressed.
- dang 7y agoWe've banned this account. As you know, HN is no place for this. Would you please stop posting it here? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- mjevans 7y agoMy takeaway from this is that austerity is not a government level solution. That works for smaller players (even corporations) within a larger system, but at the level of system where a whole economy's possible size of pie is defined by laws and regulations cutting back only wastes the potential of the resources within. I speculate that a better measure is to direct efforts towards wise expenditures. Seek to focus the economy on things that will be of benefit when done, with a focus on long term positive value to the economy and the quality of life for all. "John Major had made entering the ERM the centerpiece of his monetary policy and his plan to bring austerity to England. The events destroyed his credibility." ... "If you’re looking for a take away from this story, that’s one of them."
- bArray 7y agoForgetting the politics of George Soros (which isn't suitable for HN anyway), I don't believe he is to blame for the UK government's questionable choices. To put the estimated £3.3 billion loss into perspective: * The failed NHS software update/upgrade project cost >£12 billion [0]. * The UK spends ~£9 billion a year (after calculating rebates) to be a minority voting block in the EU [1]. It's currently costing ~£0.75 billion a month to stay in the EU [2]. * The "divorce" settlement to the EU is currently set between £30 billion and £40 billion [2]. To put that itself into perspective, that is each person (including people on death's door and babies) in the UK (~70M) paying the best part of £600 out of their own pocket to the EU - something they never voted to be a part of anyway. I could go on all day about the UK government's awful handling of money. [0] https://en.wikipedia.org/wiki/List_of_failed_and_overbudget_custom_software_projects https://en.wikipedia.org/wiki/List_of_failed_and_overbudget_... [1] https://fullfact.org/europe/our-eu-membership-fee-55-million/ https://fullfact.org/europe/our-eu-membership-fee-55-million... [2] https://www.bbc.com/news/uk-politics-49563957 https://www.bbc.com/news/uk-politics-49563957
- zenlot 7y agoUK should be now getting 350 million GBP per week for NHS.
- bArray 7y ago> UK should be now getting 350 million GBP per week for NHS. It hasn't left yet and the reality is that it'll take years to leave (if it does). You could maybe justify £350 million a week over the course of a year based on a hard Brexit, where the UK doesn't pay the £30-£40 billion divorce settlement. It's unclear how much will be spent in replacing EU infrastructure, but it should be overall beneficial to the UK once trade agreements are in place after a number of years.
- Torn 7y ago> it should be overall beneficial to the UK once trade agreements are in place after a number of years It probably won't. I don't know why leavers think the UK will be able to negotiate better trade deals than a bloc of 27 countries.
- tmp1132323 7y agoSoros didn't "break" the pound. The systematically important financial and political players he fronts for "broke" the pound. You can't "break" a systematically important currency like the pound, swiss franc, dollar, yen, etc without significant banking and political support behind the scenes. The pound was "broken" in order to pay off the myriad soviet leaders who agreed to dissolve warsaw pact and then the soviet union.
- User23 7y agoWynne Godley's Maastricht and All That[1] is a great explanation of why the Euro was, and in fact is, doomed to failure and the UK was correct to stay out. This essay was written less than a month after Black Wednesday, so I assume it was probably influenced by the event. Sadly the lesson was evidently not learned, as the word "fiscal" doesn't appear a single time in the article. The key lesson here for states is only ever acquire financial obligations in your own sovereign currency. This is why the Swiss were able to put a ceiling on the value of the CHF during the European Debt Crisis. Their ability to spend CHF is unlimited, so they could just keep expanding their balance sheet indefinitely buying Euros, which devalued the CHF. A sovereign can always devalue, but not necessarily do the opposite. [1] https://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that https://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-al...
- TMWNN 7y ago>Wynne Godley's Maastricht and All That[1] is a great explanation of why the Euro was, and in fact is, doomed to failure and the UK was correct to stay out. The Guardian speculated in 2013 http://www.theguardian.com/business/economics-blog/2013/jun/02/britain-euro-what-if-joined http://www.theguardian.com/business/economics-blog/2013/jun/... that if Britain had joined the Euro: * The mid-2000s British housing bubble, and its collapse in 2007, would have been even bigger. * Britain would have had to ask the IMF, ECB, and EU for loans. * The Tories would in 2010 have promised a referendum to leave the Euro and won a majority. Labour would have won fewer than 100 seats, and UKIP would have "made spectacular gains". * The anti-Euro side would have won the referendum, and the currency would have collapsed. * "after a deep and painful recession economic recovery began". * "Britain would have destroyed the euro on departure, and would now be on the point of leaving the EU altogether. The idea that Farage might be the next prime minister would be quite credible."
- hoseja 7y agoEvery one of these trades should be taxed with an equivalent of VAT to make this sort of ruinous speculation nearly impossible.
- smabie 7y agoWhy would you want to make it harder to buy currency?
- ptah 7y ago> The hope was that tighter relations would prevent catastrophic wars from breaking out every few decades This is a crucial fact that has not been mentioned by anyone in public discourse about Brexit
- aembleton 7y agoDavid Cameron warned that Brexit could trigger World War Three during the referendum campaign https://www.mirror.co.uk/news/uk-news/brexit-could-trigger-world-war-7928607 https://www.mirror.co.uk/news/uk-news/brexit-could-trigger-w...
- sexisfun 7y agoWhy is my account still banned?