For all his wealth, [George] Soros’s greatest influence comes not from spending his own money, but by inducing other people to spend theirs. This is most obvious in his approach to the financial markets. Soros’s reputation as a financial prognosticator is such that legions of investors hang on his word, and buy or sell at his signal. An op-ed piece by Soros published in the Wall Street Journal or an interview broadcast on CNN’s Money Line can move vast sums of money in the financial markets, which far exceed Soros’s personal spending power, but which move at his command. In journalese, “When Soros speaks, world markets listen.”
Through the years, Soros has matched his strength more than once against the economic power of nations, and emerged victorious. He famously shorted the British pound in 1992, wagering $10 billion on a drop in its value. In a desperate bid to keep its currency afloat, the Bank of England tried to buy up pounds as fast as Soros could dump them. However, as more and more investors followed Soros’s lead and joined his efforts, the Bank of England eventually gave up. The British pound was devalued, launching a tsunami of financial turmoil from Tokyo to Rome. When it was over, millions of hardworking Britons confronted their diminished savings, while Soros counted his gains. He had personally made nearly $2 billion on the catastrophe, and was henceforth known as “the man who broke the Bank of England.”
Breaking this bank was a formidable undertaking. Soros had to risk $10 billion in investment capital in order to accomplish it. On other occasions, he has wreaked similar havoc by investing nothing more than the time it takes to compose a letter. On June 9, 1993, Soros sent a letter to The Times of London suggesting that that the German mark was weak. “I expect the mark to fall against all major currencies,” he wrote. The statement triggered twenty-four hours of panic selling, which sent the Deutschemark into a tailspin. Soros repeated the feat on July 14, 1998, this time with far more destructive consequences, when he suggested in The Financial Times of London that the Russian government ought to devalue the ruble by 15 to 25 percent. Panic selling again ensued. Russia plunged into a deep depression, in the course of which the average Russian wage fell 50 percent.
Few private individuals in the history of finance have possessed the power to break currencies with a single utterance. Soros is one of those few. He likens his influence to the magic of alchemy. In his 1995 book Soros on Soros, he wrote, “The alchemists made a big mistake trying to turn base metals into gold by incantation. With chemical elements, alchemy doesn’t work. But it does work in the financial markets, because incantations can influence the decisions of the people who shape the course of events.”
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