Another Japanese standard is the Bank of England. For a long time, the Bank of England represents prosperity and strength, and is a powerful pillar of British finance. Nothing can shake its position as a strong fortress for the country to deal with market chaos.
Soros wanted to test how authoritative the pound and the Bank of England would be, and no one even thought about it before. He wants to do something that no one has done before, and he has been preparing for it for a long time.
The prelude to the war in the second quarter
Before he acted, several developments were intertwined.
The exchange rate mechanism established by 1979 is the first stage of trying to establish a single European monetary plan. A single currency will stabilize European business. It will also weaken the ability of traders and speculators and make the operation of national banks difficult, especially if the government does not participate in the integration of goods and currencies.
With the implementation of the currency exchange rate mechanism, the countries in western Europe are getting closer and closer. Their mechanism is not fixed on gold, nor stable on the dollar, but stable with each other. Every currency fluctuates within a fixed range, and if it exceeds this range, the central banks of member countries are obliged to intervene. Within this fixed range, the currencies of member countries can float relative to those of other countries, while the core exchange rate is based on the Deutsche Mark.
1on February 7, 1992, the Maastricht treaty was signed, and the process of European integration was strengthened. The Maastricht Treaty, signed by 0/2 member states of EU/KLOC, attempts to establish a regional monetary and economic system in order to realize gradual and comprehensive integration. The plan is to establish a European Central Bank and a single currency before the year 2000, and strive to make Europe move towards political integration.
What a grand plan this is.
This expectation reveals the belief that European countries act together to suppress national interests for the benefit of the overall alliance.
The difficulty is that some people forgot to tell European countries that they should act in unison.
The success of economic integration depends more on countries coordinating their economic policies. However, no matter how many documents these countries have signed and how important their speeches are, it is impossible for politicians in western Europe to really coordinate with each other.
1in the autumn of 1992, every billion dollars Soros spent on daily insurance of sterling was only a small part of the huge capital in the world financial market. With the progress of technology and the cancellation of various market restrictions, trillions of dollars of transactions are going on every day in the world, which is more than three times that of 1986. American workers' pension companies invested 1.5 trillion dollars overseas, 20 times as much as 1.983. All kinds of organizations, from Japanese insurance companies to American funds, are madly investing in the world.
Since 1987, most European currencies have stabilized on the German mark. For example. The exchange rate between pound and mark is 1 pound to mark 2.95, which makes the cost of joining the currency exchange rate mechanism very high. 1992, obviously, the currencies of several European countries. Not only the British pound, but also the Italian lira began to depreciate in the peg to the French franc and the German mark. Because of the British economic recession, people thought that Britain could not maintain a high exchange rate with the German mark. Speculators believe that the British government will be forced to withdraw from the currency exchange rate mechanism.
The genius of Soros in the third quarter
George soros believes that it is impossible to maintain the harmony of the currency exchange rate mechanism. He knows that the only way for European countries to give speculators an opportunity is to keep the exchange rates consistent. If the exchange rate is diversified, speculators like him will speculate in weak currencies. This is the root of what happened in the summer of 1992.
Soros foresaw this result long ago.
George soros's genius lies in finding the long-term development trend faster than others.
Gary Gladstone, Soros's investment management manager, said, "George's genius lies in finding long-term trends faster than others. George realized what would happen after the fall of the Berlin Wall. Because of his open and clear thinking, he knew that the cost of German reunification was very high, which exceeded the predictions of Chancellor Kohl and others. His understanding of macroeconomics is just what we need. He doesn't have to see the change and development of reality, but in his mind, he has imagined it. "
Who is right and who is wrong in the fourth quarter
The difficulties in Europe are increasing. Less than a year after the signing of the Maastricht Treaty, it is difficult for several European countries to coordinate their actions.
Although Britain decided to strengthen its economic position, Soros and other investors believed that Britain could not maintain its high interest rates. The only feasible solution for the British government is to lower interest rates, but this will weaken the British currency and force Britain to withdraw from the exchange rate mechanism of commodities and currencies. At the same time, in the financial field of London, speculators such as Soros are speculating in pounds, and in the first few months, they have begun to occupy a considerable market share.
As time went on, from 65438 to 0992, the British government became more and more embarrassed. Britain needs Germany to reduce its profit margin, but as we all know, this is impossible.
Britain needs to change its policy, but this suspicion will shake the government and may even fall.
The major must make a decision. He insisted that Britain will resolutely implement the policy of staying within the currency exchange rate mechanism. Then, his finance minister Lemmon also emphasized his point of view.
However, the press strongly opposes the Prime Minister's policy of maintaining the status of the pound at all costs. As Major spoke, the exchange rate of the pound against the mark began to drop to 2.85.
1early July, 992.
Six monetary experts jointly wrote to The Times in London, demanding that the British government withdraw from the exchange rate mechanism. They want to ask the government to lower interest rates to overcome the economic depression.
However, the government is unwilling to lower interest rates, because it will weaken the currency status and make the pound more vulnerable to speculation and arbitrage. The British government can lower interest rates, but only if the interest rate in Germany is very low. However, the German Federal Bank rejected many requests from the British government and resolutely opposed to lowering its interest rate.
65438+0992 at the end of July.
There are more and more criticisms. Many financial experts question the government's exchange rate policy. They asked Major who would support him to implement such a policy before the British recession. British business leaders demand that all countries adopt a consistent exchange rate within the exchange rate mechanism, that is, the ratio of British currency to mark is 2.60, and they demand that interest rates be reduced by at least 3 percentage points.
A few months later, British Chancellor of the Exchequer Raymond refused to consider devaluation.
65438+mid-August 0992.
The British Chancellor of the Exchequer declared that "we will not devalue our currency". In response to his critics, he declared: "As some people have suggested, if we quit the exchange rate mechanism and relax interest rates, the situation will get worse, the pound will depreciate sharply and inflation will be very serious.
"I will never give up our efforts until I quit the exchange rate mechanism." He wrote in the newspaper.
18: 26 am on August 28th, 992.
It seems impossible for Cai Meng to gain a foothold. A few minutes ago, a staff member of the Ministry of Finance was busy polishing the bronze medal in front of the Ministry of Finance to make it suitable for TV cameras. Soon, Finance Minister Lemmon appeared outside the Ministry of Finance and stood in front of the TV camera. He clapped his fists and smiled as if to hide his excitement.
While studying his speech, the reporters at the scene also tried to explore the truth by speculating his body language. Cai Meng keeps nodding and usually holds his breath when it comes to sensitive issues. He speaks quickly, which shows that he is trying to get back to normal. He didn't want to be interrupted. He dressed seriously and tried to convey his credibility and reliability to others, but few people were fooled.
He refused to devalue the pound, hoping to calm the financial market: to prevent interest rates from rising. He believes that Britain will not quit the exchange rate mechanism for a long time. He said firmly: "In order to clarify the British position, I don't think it is possible for the pound to depreciate. Britain will not quit the exchange rate mechanism. We have an absolute obligation to the exchange rate mechanism. This is our policy-the core of our policy. "
He repeated what he heard in Downing Street recently: "We will do whatever is necessary." This means that the government will not hesitate to raise interest rates if necessary. He ignored other issues and said exactly what he said: "We are taking action".
Lemmon's public speech came at a time when the Bank of England was actively intervening in the pound. The Bank of England bought 3.3 billion pounds. This action of the Bank of England tries to make people understand the intention of the Chancellor of the Exchequer's speech, that is, to prevent speculators from keeping the exchange rate between the pound and the mark below the minimum level of 2.7780.
On that day, the exchange rate of the pound against the mark was 2.7946. Neither Cai Meng's speech nor the bank's active intervention had the expected effect. "This man has his own doubts," Catherine said. Charlton said that she is a language teacher and one of several experts who analyze the tapes of Lemmon's speech to the Daily Telegraph. Charlton thinks the frequency of Lemmon's blinking reveals his secret. She noticed that most people blink six to eight times a minute, but Lemmon blinks 64 times a second. Her conclusion is: "Generally speaking, if you tell the truth, your eyes are quieter and blink less".
Body movements, blink frequency, publicity, all of which together reveal one thing, that is, the influence of the British government is weakening. Speculators are aware of this.
1August 28, 992
Lemmon also made another speech, this time after the meeting of EU finance ministers.
What is the content?
He declared that the exchange rate mechanisms of European countries would no longer be consistent.
This sounds a bit contradictory.
End of August 1992.
Soros once talked with Ham Schlesinger, president of the German Federal Bank, and knew that Germany had no intention of saving the currencies of other European countries.