Catherine Dominguez
Appearances
Planet Money
George Soros vs. the Bank of England
It's a little misplaced. You know, we can blame George Soros or say that he made money off governments, but I guess I wouldn't really put it in moral terms. It is one of the fundamental costs of a fixed exchange rate. You're setting yourself up for the potential of a run. I would say economic incentives were such that this was largely inevitable.
Planet Money
George Soros vs. the Bank of England
If you didn't want hedge funds to come in in this way, then you could have... restricted their ability to do so. If you have basically free mobility of capital, then I think you have to assume that if a price doesn't seem like the appropriate price, that there is going to be an attempt to make money off of that mispricing.
Planet Money
George Soros vs. the Bank of England
Well, unfortunately, at the same time as the UK decided to join, Germany started to reunify East and West Germany.
Planet Money
George Soros vs. the Bank of England
Part of the reunification involved a lot of transfer payments to the East and a lot of new investment to try to bring the East closer to the West.
Planet Money
George Soros vs. the Bank of England
If they want to invest in Germany, they have to move out of whatever currency they're currently holding into marks.
Planet Money
George Soros vs. the Bank of England
Exactly. That's exactly what was happening during this time period. The mark was strengthening and that meant... On the flip side, that all the other currencies were losing value.