George Soros: The Man Who Broke the Bank of England

The Survivor Who Learned to See the Future

George Soros wasn't born wealthy. He was born in 1930 in Budapest, Hungary — right as the world was descending into chaos.

When the Nazis invaded in 1944, 13-year-old György Schwartz (his birth name) had to hide his Jewish identity to survive. His father, a POW survivor from World War I, knew how to navigate danger. He obtained false papers for the entire family.

While other families hesitated, Tivadar Soros taught his son a lesson that would shape his entire trading philosophy: When survival is at stake, act decisively. Waiting for certainty can kill you.

"The worse a situation becomes, the less it takes to turn it around, and the bigger the upside."

— George Soros

After the war, Soros emigrated to England with nothing. He worked as a railway porter and a waiter while studying at the London School of Economics. There, he discovered philosophy — particularly the work of Karl Popper — which would later become the foundation of his trading strategy.

The Theory That Changed Everything

While other traders studied charts and earnings reports, Soros developed something different: The Theory of Reflexivity.

Most people believe markets reflect reality. Soros believed something radical:

In simple terms: If everyone believes something that isn't true, Soros would bet against them. And when reality caught up with the false belief, he would make a fortune.

"Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected."

— George Soros

He moved to New York in 1956 and started applying his philosophy to real trades. By 1969, he was running his own hedge fund. But his biggest moment was still decades away.

The Setup: Britain's Fatal Flaw

To understand the greatest trade in history, you need to understand the European Exchange Rate Mechanism (ERM).

In the early 1990s, European countries agreed to keep their currencies within fixed ranges against each other. Britain joined in 1990, promising to keep the pound between 2.78 and 3.13 German marks.

There was just one problem: Britain couldn't afford to keep this promise.

Britain was in recession. Unemployment was rising. The government needed low interest rates to stimulate the economy. But to defend the pound, they needed high interest rates.

Soros saw the contradiction. The British government was making a promise it couldn't keep. And when they broke that promise, the pound would collapse.

The Attack Begins

In September 1992, Soros and his team at Quantum Fund began building a massive position against the pound.

But it wasn't just any position. Stanley Druckenmiller, Soros's right-hand man, came to him with the idea. He wanted to short $1.5 billion worth of pounds.

Soros's response was legendary:

"That sounds like a lot. But when you're right, you can't be big enough. Go for the jugular."

— George Soros to Stanley Druckenmiller

They didn't short $1.5 billion. They shorted $10 billion.

Other hedge funds saw what Soros was doing and piled on. The selling pressure on the pound became overwhelming.

Black Wednesday: The Day Britain Lost

September 16, 1992. A date that would live in British financial infamy.

As the pound came under attack, the Bank of England panicked. At 11:00 AM, they raised interest rates from 10% to 12%. It didn't work — the pound kept falling.

At 2:15 PM, they raised rates again to 15%. A desperate, unprecedented move. The markets didn't care. Traders kept selling.

At 7:30 PM, the British government gave up. They withdrew from the ERM. The pound went into freefall, dropping 15% against the German mark.

George Soros had just made over $1 billion in a single day. Some estimates put his total profit from the pound trade at $2 billion over the following weeks.

"I'm only rich because I know when I'm wrong. I basically have survived by recognizing my mistakes."

— George Soros

The Aftermath

Black Wednesday made Soros world-famous — and deeply controversial. The British tabloids called him "the man who broke the Bank of England." Some saw him as a villain who profited from Britain's pain.

But economists later argued that Soros actually helped Britain. Freed from the ERM straitjacket, the British economy recovered quickly. The lower pound boosted exports, and the government could finally cut interest rates.

Sometimes, the market is smarter than the policymakers. Soros just helped reality arrive faster.

Soros went on to attack other currencies. In 1997, he was blamed for contributing to the Asian Financial Crisis. In 1998, he lost $2 billion betting against the Russian ruble. Win or lose, his philosophy remained the same:

"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."

— George Soros