When George Soros Broke the British Pound (2014) • Hacker News Board

Re: When George Soros Broke the British Pound (2014)

#201

Post by scottlamb » Wed, Nov 06, 2019, 7:41 AM UTC

PeterisP wrote: post #127

scottlamb wrote: post #50

Earlier quoted context omitted.

Huh? He gained billions of dollars (pounds, Deutschmarks, whatever), the UK government lost billions. That clearly hurt their economy. Letting the currency float was better in the long term, and his actions made that happen, but I'd like to think there were other ways. And I doubt helping the UK was his goal; I can think of billions of other more likely reasons. Many people would say he stole this money from the gove…

The point is that the money lost by UK government was lost because they stupidly gambled away that money by betting against reality - they asserted that the rate of pound "should" be at an unrealistic, unsustainable position, and they bet a lot of money on that. It turned out that they were wrong - making these large bets did prolong that fiction for a while longer, but it was unsustainable. Thus everyone in the mark…

Nothing you said is wrong, per se, but...

> Such bluffs are punished by the market, with the people calling the bluff getting the money (and people falsely calling a bluff losing their money if they turn out to be wrong).

I think this kind of wording (the market does this, not the individual actors) can be misleading. Look at this quote from the article:

> "Our total position by Black Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when Norman Lamont [the British finance minister] said just before the devaluation that he would borrow nearly $15 billion to defend sterling, we were amused because that was about how much we wanted to sell."

They weren't just placing bets on events outside their control. They deliberately created the situation where the UK couldn't borrow sufficient money to maintain the rate. The fall was arguably inevitable, but they caused it to happen at a time of their choosing, in a way that enriched themselves at the UK's enormous expense. Sure, the BoE folks should have yielded sooner, but they didn't, and the people paid for it while Soros profited. This isn't something I would be proud of.

Re: When George Soros Broke the British Pound (2014)

#202

Post by raxxorrax » Wed, Nov 06, 2019, 7:50 AM UTC

lol_wut wrote: post #161

wheels wrote: post #126

Earlier quoted context omitted.

The gist of it is that if Germany were still on the Mark, then the Mark would be significantly stronger than the Euro is today. Having weaker economies on the same currency causes Germany's currency to be artificially weak, which makes its exports artificially cheap on the world market. In contrast, the poorer Eurozone countries have an artificially strong currency, which makes their exports more expensive than they…

how is having an artificially weak currency a subsidy to Germany? isn't that like underpricing their goods? and wouldn't that imply that countries who import German goods are being subsidized, because they are able to get German goods at artificially low prices? also can you suggest a place where I could read more about this? its awfully confusing, and somewhat counter-intuitive and it would be helpful to read where…

For the average German it is plain and simple not an advantage. Maybe if the export bonuses keep the company you are working for alive, but that is a unrealistic edge case.

Re: When George Soros Broke the British Pound (2014)

#203

Post by hoseja » Wed, Nov 06, 2019, 7:51 AM UTC

Every one of these trades should be taxed with an equivalent of VAT to make this sort of ruinous speculation nearly impossible.

Re: When George Soros Broke the British Pound (2014)

#204

Post by hoseja » Wed, Nov 06, 2019, 7:55 AM UTC

user5994461 wrote: post #100

mc3 wrote: post #88

Ah those poor boomers! Paying 15% interest on their £40,000 mortgage. These millennials don't know how easy they have it, paying 3% on their £200,000 mortgage.

At 15% the boomer could fully pay and own the property within 5-10 years. Then save or go on to buy a new one. At 3% the millennial will still not be owning their property after 30 years.

Yes, that is the joke.

Re: When George Soros Broke the British Pound (2014)

#205

Post by raxxorrax » Wed, Nov 06, 2019, 7:57 AM UTC

barrkel wrote: post #158

atmosx wrote: post #107

Earlier quoted context omitted.

There is not an economist I know of, left or right wing, who believes that joining the EUR was beneficial for weak economies. Especially for Italy, proved to be catastrophic. Greece was always a basket case but Italy was doing pretty well before joining. Joining the EUR means literally giving up sovereignty. The Iron Lady explained that very concisely in her last speech as a PM in the House of Commons: “He who contro…

It's a two way street, the sovereignty argument. A bigger entity has different sovereignty to multiple smaller entities. The British pound is worth about half what it was when I first moved to the UK - that's not the kind of sovereignty that's kind to my pocket. A bigger currency is a more stable store of value for citizens. That's not worthless, independent of the lack of friction in international transactions - not…

And yet, the argument here is that a weak currency is advantageous for an economy. Advanteageous relative to countries also having the Euro burden perhaps. But even just from a marcoeconomic perspective there seem to be distinct contradictions everywhere.

Re: When George Soros Broke the British Pound (2014)

#206

Post by raxxorrax » Wed, Nov 06, 2019, 7:59 AM UTC

skissane wrote: post #116

devtul wrote: post #111

Earlier quoted context omitted.

No, we should do a second vote, maybe even a third vote in case the second vote result is wrong again as the first one. Sometimes democracy doesn't work you know, so we have to try harder.

A majority of people voted to leave the EU. They didn't (at the ballot box) express any opinion on how to leave the EU – deal or no-deal, hard Brexit or soft Brexit, etc. If having an initial referendum on whether to leave was the right thing to do, why would not a further referendum to decide how to leave be equally right? It could take the form of an up-down vote on Johnson's deal; or, it could take the form of pre…

Even other countries had a lot of votes against further integrating the Union. Since the last 30 years of policy were in the exact opposite direction with limited success, I think it would indeed be time to at least explore other options.

Re: When George Soros Broke the British Pound (2014)

#207

Post by raxxorrax » Wed, Nov 06, 2019, 8:04 AM UTC

willyt wrote: post #119

jamiegreen wrote: post #95

Earlier quoted context omitted.

We should leave the EU because it was voted for by the majority

...consisting of ~1/4 of the population. Parliament represents the interests of all 65 million of us.

A decade ago the EU promised more grassroots democracy. That was a time when people were convinced of it. Currently the EU is just a complete embarrasment. And that is also due positions like this. Not the Russian is the problem, you are with your position. Why would anybody want to form a union with you?

Re: When George Soros Broke the British Pound (2014)

#208

Post by hydraxis » Wed, Nov 06, 2019, 8:08 AM UTC

timthorn wrote: post #106

user5994461 wrote: post #100

Earlier quoted context omitted.

At 15% the boomer could fully pay and own the property within 5-10 years. Then save or go on to buy a new one. At 3% the millennial will still not be owning their property after 30 years.

Typical mortgage duration was and is ~25 years. The scenario in the 80s that gave homeowners relief was that the costs got inflated away (and MIRAS allowed the interest on a mortgage to be deducted from taxation)

I don't have this information for the UK, but for France parent is right. Mortgage duration for a typical income and a typical house in the 70s was 10 years, compared to 25 years today.

Re: When George Soros Broke the British Pound (2014)

#209

Post by wheels » Wed, Nov 06, 2019, 8:26 AM UTC

raxxorrax wrote: post #202

lol_wut wrote: post #161

Earlier quoted context omitted.

how is having an artificially weak currency a subsidy to Germany? isn't that like underpricing their goods? and wouldn't that imply that countries who import German goods are being subsidized, because they are able to get German goods at artificially low prices? also can you suggest a place where I could read more about this? its awfully confusing, and somewhat counter-intuitive and it would be helpful to read where…

For the average German it is plain and simple not an advantage. Maybe if the export bonuses keep the company you are working for alive, but that is a unrealistic edge case.

That's false. I'll give you a very easy example of how it's benefited me (and many, many Germans):

I sell SaaS software on a subscription basis to customers all over the world. They pay for our service in USD, which is then converted to EUR when I get paid from the company.

If the Euro was stronger, which it would be if it were only the currency for Germany, I'd get less Euro when that conversion happened, and I'd have less local currency for things like rent, groceries, etc. The Euro being artificially depressed against USD absolutely benefits anyone who either personally or via their company exports products, including stuff like SaaS. Since exports are the backbone of the German economy, it has a very concrete benefit to most Germans. Greece's economic problems literally mean I get more cash.

Re: When George Soros Broke the British Pound (2014)

#210

Post by bildung » Wed, Nov 06, 2019, 8:37 AM UTC

op00to wrote: post #154

Despegar wrote: post #147

Earlier quoted context omitted.

How much each member contributes to the EU budget is a drop in the bucket compared to the transfer payments I'm talking about (healthcare, social security, defense). The Eurozone should either go all the way like the US, or they should scrap the currency union. This halfway step only serves the wealthy.

> halfway step only serves the wealthy How?

(Warning: Armchair economist!)

Poorer countries in general have lower productivity (possible causes can be lacking infrastructure (roads, electricity, telecom, but also regulations etc.), lacking capital, lacking foresight/lacking capital to invest in future tech by the governement (e.g. broadband internet)).

This results - despite lower wages! - in higher unit labor costs.

If you form a monetary union with poorer and richer countries (like the EU), you have problem. The richer countries, despite higher absolute wages, will have lower unit labor costs. The richer countries can therefore expand exports at the cost of domestic production in the poorer countries (e.g. Germany vs. rest of EU).

If the poorer country wouldn't be part of the union, it could (among other things) lower the value of its own currency (or the forex markets would do that). Lower-valued domestic currency assists exports, which levels competition with the richer countries a bit.

This doesn't mean that there are no alternatives inside the current EU! They just haven't been implemented yet. Options would be

* way higher minimum wages in the rich countries (Germany was one of the last countries in Europe to implement them)

* implementing less union-hostile laws in the richer countries (resulting again in higher wages, but also for higher income groups not affected by minimum wage)

* More infrastructure investments in the poorer countries (there already are significant transfers, but more would help)

* A unified fiscal strategy. After implementation of the Euro zone, there were massive capital inflows into the poorer countries, resulting in overvaluation of the local economy. This was a big reason for the local problems of the last decade [1]

[1] https://streetlightblog.blogspot.com/2011/09/what-really-cau...