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Economics

Currency Pegs and Speculative Attacks

Quick fact

The British pound was forced out of the European Exchange Rate Mechanism on 'Black Wednesday' (1992) after George Soros bet heavily against the peg, making over $1 billion in profit.

Why this is interesting

Imagine a country promises to exchange its currency for gold at a fixed price. What happens when everyone suddenly wants gold? The promise might break. That's the drama of currency pegs and speculative attacks.