Chapter 70: 1 Pound Value (1)

What is the value of 1 pound?

The UK and Germany agreed on the value of 1 pound as follows.

1 pound = 2.95 German marks

This is the exchange rate that must be observed as long as they are members of the ERM.

To be precise, it’s okay up to about 2.778 marks. It’s impossible to fix the exchange rate exactly unless it’s a completely fixed exchange rate system.

If the value of the pound falls beyond that, the British government has to step in and adjust it.

But I had no intention of touching the UK right away. Because there is another target.

Do you remember the causal relationship in which the UK was devastated by Soros?

[German interest rate hike -> Mark value increase -> Pound value decrease -> Need to defend exchange rate]

If you think carefully about this cycle, you can see that the formula holds true even if it’s not the pound.

Rather… it’s more certain. Even though the UK has a negative growth rate, it’s still the UK. The economic size is different from other countries, the size.

So, in actual history, when the UK abandoned the ERM, hedge funds that got a taste of money poked around various parts of Europe and attacked the currency values of each country. And they succeeded in some countries.

‘The UK is a bit strong. A few months difference might change things significantly.’

Originally, this kind of short selling is a last-man-standing fight. If I keep attacking and run out of cash and fall into the Han River, the remaining funds might be deliciously eaten by other funds.

And above all… I want to eat more.

The $1 billion Soros is said to have earned by shorting the pound? If I acquire Barings Bank, there won’t be much left.

Anyway, I planned to attack the Spanish peseta first.

With this incident, history will be properly twisted.

Because I will make it so.

***

The loss caused by Nick Leeson is currently about $700 million. A precarious amount that is almost equal to Barings Bank’s equity capital.

It’s a loss that can be recovered if bailout funds are received. But waiting until it grows to $1.4 billion like in the original history… is too wasteful.

Therefore, I decided not to give them time to receive bailout funds. By providing the Bank of England with a place to spend money.

“Quantum Fund has responded. They say it would be better to attack the UK directly.”

Ha Jusung, who I met after a long time, calmly delivered Miller’s reply. Stanley Miller, who had a connection with me during the previous Plaza Accord, was in Soros’s Quantum Fund.

I chuckled.

‘As expected, they’re amazing people.’

Not even having seen the future like me…, to make such a bold bet so casually.

To challenge the UK, it’s something that ordinary people can’t even imagine.

“What about leverage?”

“That… requires Soros’s consent. He said he would talk about it, but if you take it generously, it seems possible up to 2 billion dollars.”

Ha Jusung approached cautiously with a common-sense judgment. It was common sense because if you leverage and short sell and fail, enormous damage will follow.

In the first place, 2 billion dollars is an enormous amount of money.

But… I know that Soros mobilized 10 billion dollars to short the pound. Therefore, I wasn’t worried about Soros’s cooperation.

“Spain is fine with just us, so proceed as it is.”

“Yes, I understand. Then when should we set the timing for shorting the pound?”

“Wait until the reply comes for that… In the meantime, check the plan. Yu Seonjun is in Europe, right?”

Lee Sihyeon, who was next to me, nodded.

“Yes, he’s at the Berlin Bank in Germany. He’s currently interfering as an outside director… but since Young Master’s known position is still rare, it seems that coordination with Alpha Fund is necessary.”

“It’s been a while since I acquired it… Tsk, first contact Ha Youngil and take additional measures. It’s okay to fire half of the employees.”

Phew…

I let out a faint breath and straightened my clothes.

In the full-length mirror reflecting my appearance, there was a dignified financier wearing a black and white suit.

‘Okay, let’s do it.’

Let’s twist history properly. As I please, as I want…

-Whisk.

The blazing eyes sweep the audience. Now that I’ve grown to a similar height, I could look down on all the employees gathered here.

Because they were all bowing their heads in front of me.

“First, attack Spain first, then Sweden… The UK is third. Everyone is aware of it, right?”

“Yes!”

My loyal employees answered with a lot of tension. I smiled brightly, stretched out my hand, and shouted.

“Yes! Let’s properly rob Europe!”

***

[Alpha Fund, throws down the gauntlet to Spain! Declaration of large-scale short selling of the peseta…]

[George Soros, successively declares short selling on the peseta! Estimated short selling amount of 8 billion dollars!]

[Shaking ERM… Germany calls in Wall Street’s speculative forces]

First, I revealed my position.

Originally, it is extremely rare for hedge funds to reveal their positions. It’s like falling off a cliff if you get counterattacked.

Moreover, the target is a country, so it’s something that can’t be done without a strong heart.

However…

Almost all European countries were struggling to defend their currency values, so everyone on Wall Street knew that it would be difficult to defend their currency values.

In fact, it was safe to say that Alpha Fund declared war on Spain.

In the form of a $5 billion short sale.

“…The other side used more leverage.”

Ha Youngil, who was exhausted from persuading Soros, muttered. There was a tone of subtle competitiveness.

“Still, it’s a bit less than I thought? Is it because they judged it to be different from the UK?”

“…Less? 8 billion dollars?”

Ha Youngil looked at me with an absurd look. Even though he had obediently listened to all my bizarre orders and predictions, he still seemed to be unfamiliar with the enormous amount of money.

“Well, it’s enough with this much, so it’s okay. If I put it all in now, it’s hard to take the money out…”

That’s why I only put in 5 billion instead of 10 billion. If events occur simultaneously, opportunity cost is the most important variable.

And just one day after I declared short selling…

All the speculative forces on Wall Street gathered. Led by my Alpha Fund and Soros’s Quantum Fund, all kinds of hedge funds on Wall Street invaded Spain with bundles of money, and… the tidal wave of money swept everything away.

[50 billion dollars in short selling of the peseta! Money ghosts occupy Spain!]

[Spain declares withdrawal from the ERM… Credit rating plummets]

Spain raised the white flag. They quickly chose to surrender in the face of an unbearable disaster.

Current profit…

300 million dollars.

The next target was Sweden. I immediately put $1 billion into shorting the Swedish krona.

***

One of the reasons I chose Sweden was that, in my past life, Sweden did something incredibly crazy in this situation and chose to defend the ERM.

By raising interest rates like crazy.

Of course, at that time, the Bank of England had already collapsed, so they surrendered quickly, but… now only Spain has collapsed.

[Swedish central bank, raises short-term interest rate to 25%…]

As expected, Sweden was driven to the edge of a cliff, but… unlike Spain, they did not give up easily.

That’s what I wanted.

“If they raise interest rates that much… Ha.”

Lee Sihyeon swallowed, as if at a loss for words.

If interest rates rise, the stock market, as well as the economy, will sink. Who will borrow money, and who will invest in stocks with poor returns?

Moreover, swaps and various derivatives related to interest rates take a big hit. Of course, the interest rate on the krona borrowed by short selling also rises, so the interest rate soars.

The Swedish central bank was aiming for this. Even if it crushes its own economy, it will surely kill you.

In common parlance, you could say they were pissed off.

“Change the position. In Sweden, temporarily go in the opposite direction. Short Swedish bonds, and especially focus on attacking foreign exchange swaps. If interest rates rise further, we’ll be forced to liquidate.”

“Yes? It’ll only take a moment, won’t it? They won’t be able to hold on anyway!”

“That’s right, they won’t be able to hold on anyway. But… maybe the other side won’t be able to hold on either.”

If a country is determined to destroy speculative forces with all its might… you might die before that.

Especially if you’ve used a lot of leverage.

Sweden will do crazy things to protect its currency.

The next day, Sweden additionally raised the short-term interest rate to 75%.

Sweden, which was driven by evil, seemed to be willing to do anything now. The krona temporarily rebounded as an enormous amount of short selling was instantly offset.

When the unprecedented vs. play of nation vs. company was established, the media, which had come running excitedly, reported on this incident one after another.

-With interest rates rising this much, it’s a natural result. Haha, the speculative forces of Wall Street have been hit hard.

-Oh, then will Sweden be able to remain in the ERM?

-Hmm… I don’t think they’ll be able to hold on. Sweden’s size isn’t that strong.

Everyone thought so. That they wouldn’t be able to hold on.

Probably everyone except Sweden thought so.

Of course, I thought so too, but… I know that Sweden will hold on a little longer.

As a result, I, who only pretended to attack by putting 1 billion dollars in short selling, bet 2 billion dollars on Sweden’s short-term interest rate hike using derivatives.

“This… doesn’t even hedge, does it? If the krona plunges here, we’ll get a little from that side, but because of the maturity difference, the 2 billion dollars will evaporate as it is. If interest rates rise further here, are you saying it will go above 100%?”

To Lee Sihyeon’s question, I answered obediently.

“Yes, it will rise further.”

***

The next day, Sweden raised interest rates again.

In a crazy way that no one except me expected.

The fact was so shocking that even the news anchor momentarily stuttered.

-“500… The Swedish central bank has raised the short-term interest rate to 500% by absorbing liquidity and raising the emergency loan interest rate.”

That’s right.

A whopping 500%.

The Swedish central bank raised the short-term interest rate to 500%.

Now… in Sweden, the annual interest is 5 times the principal.