Introducing Game Theory: A Graphic Guide (Graphic Guides)

by Ivan Pastine

On “Black Wednesday” – 16 September 1992 – in a sudden speculative attack investors sold massive amounts of British pounds with the anticipation of a devaluation (a drop in the value of the pound against other currencies). At the time, the value of pound was fixed by the Bank of England against other European Union currencies. On the day, the Bank bought £4 billion to keep the pound from losing value. However, unable to resist the market forces, the next day the Bank let the value of the pound fall by more than 10%. Speculators who had sold pounds and purchased German marks just one day earlier made huge profits. The Bank made huge losses. One of the large speculators, Hungarian-American businessman George Soros (b. 1930) became known as “the man who broke the Bank of England”.