The most interesting, and fun part of this chapter for me was learning about the European Exchange Rate Mechanism, Great Britain's recession and devaluing currency in the 1990's, and George Soros' billion dollar gain in one day. Wheelan's explanation of what the exchange rate between currencies is (the value of a country's currency relative to the value of another country's currency), and the example of an actual exchange rate that Wheelan included (Britain's 1 pound equaling 2.95 German marks) really helped me understand the importance of exchange rates, and what that means to have a strong valuable currency. Wheelan also included how the value of currency is measured (the supply relative to the demand for the currency.)
I thought it was really interesting how a man named George Soros made a billion dollars in one day by monitoring the value of Great Britain's currency during their recession in the 90's and taking out loans based on the decaying value of the British pound.
Basically Soros waited for signs that the British pound was going to drop tremendously in value. Right before it did Soris took out a loan for basically 10 billion pounds. Soros then exchanged these 10 billion pounds for 10 billion German marks (assuming that the exchange rate for British pounds and Germany marks was 1 pound = 1 mark) Then Soros waited for the value of the British pound to drop. When it did drop, it dropped by 10% causing the exchange rate for British pound and German marks to be 1.10 pounds = 1 mark. Soros exchanged his 10 billion marks for 11 billion pounds. Then Soros paid off his loan with 10 billion of his pounds, and walked away with an extra 1 billion pounds.
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