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George Soros : « The Man who caused the fall of the pound sterling »

Born in Budapest in 1930, George Soros became world famous for speculation of the pound sterling on a grand scale! He became a legend in finance and today is retired.

Article also available in : English EN | français FR

George Soros is the son of Hungarian writer and lawyer Tivadar Schwartz (who took the name Soros in 1936). Thanks to his father, he managed to leave Hungary the day after the second world war and following his father?s advice, settled in England where he followed a course at the London School of Economics. He did various menial jobs (swimming instructor, porter, representative, seller of second-hand goods...) and began to work in London in 1952 in a small brokerage, founded by two Hungarian associates.

He began his finance apprenticeship in arbitrage and quickly made his own financial investments. Thanks to a colleague, he was employed in 1956 as an arbitrageur by a small brokerage in Wall Street and settled in New York.

At first, he was interested in high-end petrol markets because of the Suez crises, and then in alternative energy resources. During the 1960?s, restructuring and mergers and acquisitions gave birth to huge industrial conglomerates in which Soros became more closely interested.

Towards the end of 1960, he decided to enter a new stage by creating the “Quantum Fund”, a speculative off-shore fund operating from New York, which would soon make his fame and fortune. Soros?s true ambition was to become an intellectual in the most purest of european traditions and to rely on his financial gains to finance his writing, but his talent always lay more in finance and the business world.

On the 16th of September 1992, Soros (nicknamed “Black Wednesday”) became famous for speculating against the pound sterling : Great Britain was forced to withdraw the pound from the european monetary system, while, according to the press, Soros earned about 1 billion dollars from the process. He was subsequently dubbed “The man who broke the Bank of England”. The Prime Minister of Malaysia equally accused him of having a negative influence on Malaysian money since the Asian crisis in 1997.

Since the 1980?s, George Soros invested in many charities, the most well-known being “The Open Society Institute” which he financed with his own money and which operates in more than fifty countries in the world. He states that he does not take part in philanthropy through guilt nor for his public image, but because not only is he able to do it but it also helps him to grow as a person. He gives more than 500 million dollars to the Open Society each year and over the last 20 years donated more than 4 billion dollars to encourage and develop philanthropic activities.

Soros bases part of his market philosophy on the concept of “reflexivity” which he explains as follows: the financial markets are not as rational as their theory. For him, investors influence both each other and share prices, redeemable stock depends upon the people who sell them, who often react in an emotional way rather than on the basis of logical calculations.

His fortune is estimated at more than 7 billion dollars.

George Soros who became a financial legend, took his retirement in the beginning of 2000. According to him, the current financial speculation system hinders healthy economic development in several developing countries. A huge part of the world’s problems come from what he calls “fundamentalism” of markets : The idea that the free market system always benefits society is false. He is a firm believer in a mixed economy with State intervention.

However it is not really a close contradiction as he commends the revision of financial rules but at the same time declares (responding to criticism that he should be held responsible for the fall of the Thailand money and the Bank of England) that “an intervening market does not concern itself with consequences of their actions.”

Paul Monthe , September 2008

Article also available in : English EN | français FR

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