As reported earlier on The Blaze, George Soros, the 81-year-old Hungarian billionaire, is suspected of having profited from the United States’ recent credit downgrading. According to ETF Daily News:

“Someone dropped a bomb on the bond market Thursday – a $1 billion Armageddon trade betting the United States will lose its AAA credit rating. In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world. The massive trade wasn’t placed in bonds themselves; it was placed in the futures market. The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.”

The rumor is that Soros bought 5,370 of these ten year Treasury futures and is thought to have also purchased 3,100 Treasury bond futures. The news site examiner.com draws its own conclusions:

“Of course, this mystery bet could have been made by any Hedge Fund that followed Soro’s course of action, and went private on their own.  However, very few people have the inside contacts with the Treasury Department and Obama administration that Soros does, and the historical evidence does point strongly to this bet being one that he has done in the past.”

By “past” they are of course referring to Soros’ most infamous moment.

16 September, 1992 was “Black Wednesday”: the day the British Conservative government was forced to withdraw the pound from the European Exchange Rate Mechanism (ERM). They had no choice; they were unable to keep sterling above its agreed lower limit. However, despite this economic setback, George Soros still managed to walk away $1 billion richer.

How did he do it? Shortselling.

Shortselling is the practice of selling assets, usually securities that have been borrowed from a third party (i.e. a broker), with the intention of buying back identical assets for less at a later date to return to the lender.

The whole point is to profit from the decline in the price of the asset(s) between the sale and the repurchase. The seller will pay less to buy the assets than they did selling them. Conversely, the short seller will suffer a loss if the price of the assets rises.

But Soros did not have to worry about that. He banked on the devaluation of the pound.

On September 16, 1992, Soros’s fund sold short more than $10 billion worth of pounds, profiting from the UK government’s reluctance to either raise its interest rates to levels comparable to those of other ERM countries (or to “float its currency”). He shrewdly bet that England’s government would be forced out, thus reducing the worth of the assets he had just sold. He simply bought them back for a lower price than he had sold it for and he returned it to the lender.

The aftermath to Soros’ actions?

High British interest rates put Britain into recession as large numbers of businesses failed and the housing market crashed. Many people in the UK think of “Black Wednesday” as a national disaster although some conservatives have claimed that the forced ejection from the ERM was a “Golden Wednesday,” paving the way for an economic revival.

The British government had been vigorously trying to breath life into Sterling for some time, and this lead to a noticeable weakness that Soros exploited when he bet on the pound being devalued. He was rewarded with a huge profit for his bet.

For this, he was dubbed “the man who broke the Bank of England.” Some suspect him of being the man who might try to break the bank of America.

Source:  The Blaze

About Ask Marion

I am a babyboomer and empty nester who savors every moment of my past and believes that it is the responsibility of each of us in my generation and Americans in general to make sure that America is as good or even a better place for future generations as it was for us. So far... we haven't done very well!! Favorite Quotes: "The first 50 years are to build and acquire; the second 50 are to leave your legacy"; "Do something that scares you every day!"; "The journey in between what you once were and who you are becoming is where the dance of life really takes place". At age 62 I find myself fighting inoperable uterine Cancer and thanks to the man upstairs and the prayers from so many people including many of my readers from AskMarion and JustOneMorePet... I'm beating it. After losing our business because of the economy and factors related to the re-election of President Obama in 2012 followed by 16-mos of job hunting, my architect-trained husband is working as a trucker and has only been home approximately 5-days a month since I was diagnosed, which has made everything more difficult and often lonely... plus funds are tight. Our family medical deductible is 12K per year for two of us; thank you ObamaCare. But thanks to donations from so many of you, we are making ends meet as I go through treatment while taking care of my father-in-law who is suffering from late stage Alzheimer's and my mother-in-law who suffers from RA and onset dementia as well as hearing loss, for which there are no caretaker funds, as I continue the fight here online to inform and help restore our amazing country. And finally I need to thank a core group of family, friends, and readers... all at a distance, who check in with me regularly. Plus, I must thank my furkids who have not left my side through this fight. You can see them at JustOneMorePet.
This entry was posted in Economy and Money, Knowledge Is Power, News and politics, Politics, Wake Up, Watch the Other Hand and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s