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Comment by ceejayoz | Hacker News Reader

The "Soros broke the bank" framing I tend to see in discussions of this is really quite odd, as if it were some sort of illegal Oceans 11 style heist.

He didn't break the bank. The bank broke itself.

> What kept the pound from plummeting in value was the British government’s guarantee that it would keep the value propped up, and the market believed that it would. As long as everyone believed that England would stay indefinitely committed to buying pounds for around 2.95 Deutschemarks, the status quo was maintained.

If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses.

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> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses.

It's at least partially the kid's fault. Don't go kicking stilts under houses.

If someone will pay you billions to go kicking stilts there would be few who could resist. Betting against a nation state is usually a losing proposition, Soros happened to have large enough boots to do the kicking.

Noting the boots are not his and he risked nothing personally in the process. hedge fund = betting other people money.

I don't think they were complaining. Now they have boots too!

Fault and responsibility are two entirely different concepts. The kids doing the kicking might be at fault for bringing the house down, but the kids are not responsible for the house being in such a sorry state that kids kicking it's stilts can lead it to collapse.

If the kids knew that kicking may bringing the house down then the kids are at least partially responsible for it.

In a realistic situation, the homeowner or designer could end up in jail for endangering the kid.

Stilts would be expected to resists minor impacts from accidents and general course of life without bring the house down on your head and killing you in the process.

Breaking the bank is a gambling term where you make and win a bet the house can't cover.

It's very apt.

> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses.

Don't like this metaphor. Maybe the the homeowner can't afford to fix their house. Now they're homeless. Hurting others for enjoyment is the basis of evil. Leave the world better at the end of the day, not worse.

If you own a house/land, you must maintain it in a safe condition and can be liable for injuries to third parties that result from poor maintenance.

Simplest example: a roof tile fall off your roof and kills a passerby.

Those sorts of maybes don't really matter. "Please don't be a dick" doesn't even work at the neighborhood kids level. It certainly doesn't work at the international finance level.

The Bank of England propped up the currency in a non-sustainable fashion, and spent billions trying to avoid having to admit that was a bad call. Someone was always going to come along and smash it, especially with billions of dollars of upside available.

I can see both sides of this. You can describe Soros' as an inexorable result of natural law, but he still gets to be the dick who kicked it and to profit grotesquely from it.

If I build a house on stilts strong enough to withstand kicks but somebody comes along with a giant sledgehammer to break the stilts, they will be at least somewhat to blame.

The house is the economy of UK in your metaphor. The house dropped into solid ground and was in better condition overall (especially exports). The Guy who build the house on stilts was proven wrong. Artificial stilts are stupid thing. Houses should be build on solid ground.

No one is running around and destroying healthy financial entities. Rotting posts will break eventually, a little effort can just change the timing.

Why no one ? You don't believe, out of all human in the world, that there is someone that gain satisfaction out of destroying healthy financial entities ?

If one person could destroy it, it wouldn't be healthy would it?

Healthy doesn't mean could not be destroyed.

In this context that's exactly what it means. I have no idea what you are talking about, but this article is about the pound not being backed and the peg being forced to break. That doesn't happen unless there is some sort of dishonesty or insolvency going on.

In your context, even if the pound are being backed, doesn't mean it can't be destroyed.

That's exactly what it means.

If there is enough to exchange for the price that is claimed, then a billionaire can't break the peg by exchanging out pounds and forcing their hand.

The gold standard collapse in the US happened when France thought they didn't really have enough gold to back their currency. They started exchanging dollars for gold and the US was forced to break the amount of gold they claimed dollars were worth.

What do you think is meant by destroyed here? How is a financial entity destroyed if they aren't insolvent?

>If there is enough to exchange for the price that is claimed, then a billionaire can't break the peg by exchanging out pounds and forcing their hand.

Sure, doesn't mean that there is no other way to break it.

What do you mean by 'break' and how would it happen?

If the currency is priced at fair value but the country is small and thus has proportionate reserves, a multi-billionaire could simply pump all his money into pushing the currency out of its declared price range, causing a loss of trust in the currency, resulting in a further slide of the currency.

That isn't what happened here of course, but it could happen to a smaller country trying to maintain a pegged currency.

It isn't what happened here because that doesn't happen anywhere.

Putting more money into a currency makes it worth more. If a currency is backed by something else, you buy more of it as your currency is bought. That's how pegs work, the currency is an IOU for something else.

Insolvency happens when a financial institution says they have more than they do and someone withdrawals enough to call their bluff. You don't 'break' a currency or financial institution by pumping money into it.

You don't pump money into purchasing the currency. You pump money into shorting the currency, as Soros did here.

A short is just a method of selling first and buying later. This doesn't destroy a currency that is properly backed or a financial entity that is solvent. It only forces an organization that doesn't have what they say they have to eventually admit it.

The person replying to me was saying that it didn't matter if an organization was healthy or not - a billionaire could still 'destroy' or 'break' it, but they weren't able to give an example of how that would happen despite repeating the same claim multiple times.

This is correct and accepted view today. Floating currencies are a good thing because they adjust the economy automatically. Central banks should only "lean" against radical sudden movements but allow gradual straightening or weakening.

Trying to keep currency artificially strong with weak economy is insanity.

The economy of UK did better after Soros broke the Bank of England.

> If you build a house on rotten stilts, and some neighborhood kid comes and kicks one of them, it's not the kid's fault when the house collapses.

If you build a house that isn't fire proofed properly and a pyromaniac sets fire to it then you won't blame the contractor, even if the house wasn't properly built. Sure, there might be fines involved for breaking rules etc. but the blame for the fire is still attributed to the person who lit it.

Soros and his associates did this to a number of countries, includingMalaysia, South Korea, Sweden, Thailand and others; this is not about a single incident where someone used a small loop hole to make some profit -- it's about the financial sector deliberately playing nation states for massive profits, affecting the lives of hundreds of millions of people in those countries.

Should the banks have been better prepared? Yes, definitely. Does that in anyway shift the blame for playing with the livelihood of millions in order to turn a profit? Not a chance.

Soros didn't kick the stilts; he bet that the house would collapse.

Ah yes. When it's Wall Street doing it it's "greedy evil bankers" but when it's Soros, a vocal advocate of liberalism, suddenly it's just business as usual.

A central bank whose monetary policy relies on their not being greedy evil bankers is going to fail at implementing that policy.

I think it's kinda funny, 2019 Soros desperately wants Britain to remain in the EU (and funds various groups accordingly)

whereas 1990s Soros did his best to force Britain out of the ERM

if Britain stayed in the ERM until the point it became the Euro: there's no way brexit would have been even remotely possible

Is that all that strange?

Things change over 20 to 30 years?

Depends on what his motivations are, is it to make money? In out is only relevant to what your betting on.

I'm honestly aghast at the attitude of some of the posters in this thread, with their "The Bank of England had it coming" and "It's fair game." posts.

If someone builds an argument on a weakly relevant analogy, and gets a response with an equally dumb, but oppositional analogy, who’s at fault for wasting time?

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