The MoneyHatch Newsletter, Edition 6

February 18th, 2024

Editor’s Note

In 1992, billionaire investor George Soros pulled off one of the most legendary financial moves in history: he bet against the British pound and made $1 billion in a single day.

At the time, Britain was struggling to keep its currency within the European Exchange Rate Mechanism (ERM), a system similar to how the Bahamian dollar is pegged to the US dollar. Soros saw the cracks in the system and made his move.

He borrowed billions of pounds and immediately sold them for other currencies he believed were stronger, while the pound was still highly valued. The sheer volume of pounds being sold, combined with existing speculation, weakened the currency even further. The Bank of England fought back by raising interest rates and buying back billions of pounds to stabilize its value, but the pressure was too great. Eventually, on September 16, 1992, the UK government conceded, exited the ERM, and the pound’s value plummeted. This day became known as Black Wednesday.

With the pound now significantly devalued, Soros used the foreign currency he had acquired to buy back the pounds at a much lower price, repay his debts, and walk away with a billion-dollar profit.

The lesson? Money moves fast, and there are many out to get it: both through ethical and unethical means. Keep up with your financial knowledge so you can act, rather than be left behind.

Warm regards,

The MoneyHatch Team

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