Black Wednesday: Currency Crisis in the UK
September 16th, 1992
September 16th, 1992
How Long Ago?
32 years, 5 months, 27 days ago
Location
United Kingdom
Category
Economics & Industry
People
- John Major
- George Soros
- Norman Lamont
Links & References
Tags
Black Wednesday: Currency Crisis in the UK
The British pound faced severe pressure from currency speculators, leading to its withdrawal from the European Exchange Rate Mechanism. The government was forced to raise interest rates significantly to defend the pound, but ultimately failed. This resulted in a sharp devaluation of the currency against the German mark, creating significant economic turmoil within the UK and affecting the public's confidence in the government’s economic policies.
The pound was forced out of the ERM.
Interest rates peaked at 15% to defend the pound.
George Soros famously profited from speculating.
Event shifted UK monetary policy towards independence.
What Happened?
On this day, the British pound experienced an unprecedented collapse as currency speculators launched a massive attack against it, betting that the pound would ultimately have to devalue. The UK was then part of the European Exchange Rate Mechanism (ERM), aimed at stabilizing exchange rates among EU countries. However, the pound’s position in the ERM was increasingly seen as unsustainable due to the UK’s economic conditions, including high inflation and low interest rates compared to Germany. As speculators such as George Soros poured billions into short-selling the pound, the UK government was forced to take drastic measures, including raising interest rates from 10% to 12% and later to 15% in an attempt to defend the currency’s value. Despite these efforts, the market was unyielding, and soon the British government conceded defeat, pulling the pound out of the ERM, leading to a rapid devaluation against the German mark and heightened financial instability.
Why Does it Matter?
This incident underscored the vulnerability of national currencies to speculative attacks and highlighted the challenges of maintaining fixed exchange rates in the context of differing national economic conditions. It brought about a profound shift in UK economic policy, prompting a reevaluation of the country's monetary strategy and an eventual shift towards a more independent approach, paving the way for the UK's later decision not to adopt the euro.
Discover More Historic Events from September 16th
Death of Mahsa Amini ignites global protests
Mahsa Amini, a 22-year-old Iranian woman, died after being detained by the Iranian morality police for supposedly wearing her hijab improperly. Her death led to widespread outrage both in Iran and internationally, sparking protests against the government’s policies and moral enforcement. Demonstrations called for justice and greater rights, capturing global attention and solidarity with Iranian women's rights movements. The protests rapidly escalated, with citizens expressing their frustration with political repression and the socio-economic conditions in the country.
Continue ReadingBurmese Military Attacks School in Sagaing Region
In Myanmar's Sagaing Region, the Burmese military launched an attack on a school, resulting in the deaths of 13 villagers, including eight children. This assault was part of a broader conflict in the region, where military operations have escalated against villagers suspected of aligning with resistance forces. Reports indicate that this act of violence was intended to intimidate the local population amidst ongoing instability and resistance against the ruling military junta.
Continue Reading6.0 Mw Earthquake Strikes Lu County, Sichuan
A 6.0 Mw earthquake occurred near Lu County in Sichuan, China, resulting in three fatalities and injuring over 88 individuals. The earthquake struck shortly after noon and was felt strongly in the region, causing significant public concern and prompting emergency responses from local authorities. Rescue operations began immediately, focusing on searching for survivors and providing medical aid to the injured. The tremors affected infrastructure, leading to damages in homes and disruptions in transportation.
Continue ReadingSpike in Lending Rates Triggers Fed Repo Operations
In mid-September, an unexpected spike in overnight lending rates in the U.S. financial markets prompted the Federal Reserve to intervene by conducting repurchase agreement (repo) operations. This action was aimed at providing liquidity to ensure that the banking system remained stable and to alleviate the pressures in the short-term funding markets. The Federal Reserve took this step to boost the effectiveness of its monetary policy tools amidst rising borrowing costs.
Continue ReadingMajor Earthquake Strikes Illapel, Chile
An 8.3 magnitude earthquake struck the Chilean city of Illapel, causing significant destruction and loss of life. The earthquake resulted in the deaths of 15 individuals, with another 34 suffering injuries and at least six reported missing. In addition, a fatality occurred across the border in Argentina, highlighting the widespread impact of the quake. The extensive damage included collapsed buildings and infrastructure challenges, prompting emergency responses in both countries.
Continue ReadingISIL Launches Kobani Offensive Against Kurds
On September 16, 2014, the Islamic State of Iraq and the Levant (ISIL) initiated an offensive against the Kurdish city of Kobani in northern Syria. This move was part of a broader campaign to seize control of strategic territories in the region. The offensive sparked fierce resistance from the Kurdish forces, who were defending their territory against ISIL's expansionist ambitions. The battle for Kobani gained international attention due to the humanitarian crisis that unfolded as civilians fled the area amidst intense fighting.
Continue Reading