Where did the ECU go?

The ECU was first adopted by the European Union in 1979. ECU, which stands for European Currency Unit, was the basket of currencies that is the predecessor to the Euro as we know it today. It was the predecessor, but does not represent the same currencies that the Euro currently represents, which right before launch was tied to the ERM – or European Exchange Rate Mechanism. This was the range in which currencies had to trade prior to moving to the Euro. While remembering the currencies of yesteryear – the French Franc, Deutsche Mark, or the Spanish peseta – does that memory include the moment that sparked an inordinate amount of wealth for George Soros? Who is Norman Lamont? What was black Wednesday?

Black Wednesday was 16 September, 1992, when Norman Lamont pulled the Pound Sterling from the ERM and let it devalue. At the time, England was in a recession and the only way to prop the currency would have been to continue to raise rates, which that day topped at 12% - a rate hike to stave off speculators in the markets - with a promise to raise the rates to 15% to lure Sterling buyers. However, Lamont’s bluff was called and at 7PM that evening, he announced the withdrawal of the Pound Sterling from the ERM. This decision made George Soros $1B. It is said that Soros sold Sterling all day driving the Pound out of the ERM. Read More