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It isn't what happened here because that doesn't happen anywhere. Putting more money into a currency makes it worth more. If a currency is backed by something
by BubRoss 7y ago
It isn't what happened here because that doesn't happen anywhere.
Putting more money into a currency makes it worth more. If a currency is backed by something else, you buy more of it as your currency is bought. That's how pegs work, the currency is an IOU for something else.
Insolvency happens when a financial institution says they have more than they do and someone withdrawals enough to call their bluff. You don't 'break' a currency or financial institution by pumping money into it.
- ummonk 7y agoYou don't pump money into purchasing the currency. You pump money into shorting the currency, as Soros did here.
- BubRoss 7y agoA short is just a method of selling first and buying later. This doesn't destroy a currency that is properly backed or a financial entity that is solvent. It only forces an organization that doesn't have what they say they have to eventually admit it. The person replying to me was saying that it didn't matter if an organization was healthy or not - a billionaire could still 'destroy' or 'break' it, but they weren't able to give an example of how that would happen despite repeating the same claim multiple times.