Who Broke the Bank of England
By Andy Chen
“Reflexivity is, in effect, a two-way feedback mechanism in which reality helps shape the participants’ thinking and the participants’ thinking helps shape reality”, George Soros, a well-known hedge fund arbitrager and currency speculator, addressed to the MIT Department of Economics in April 1994. A little less than two years earlier, Soros had single-handedly “broken” the Bank of England by short-selling the pound at a massive position and caused a total loss of British Reserves of $27 billion pounds and UK Treasury loss of £3.4 billion on Wednesday, September 16, 1992. This “Black Wednesday” has then being marked as an important historical event for the Bank of England, the British government and many policy makers and speculators to this day.