Chapter 70
Chapter 70
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Translator: MadScientist
Chapter: 70
Chapter Title: The Value of 1 Pound (1)
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What is the value of one pound?
The UK and Germany had agreed on the following value for it.
1 pound = 2.95 German marks.
Since they were members of the ERM, this was the exchange rate they had to honor.
To be precise, it could fluctuate down to about 2.778 marks. It wasn't a completely fixed exchange rate system, after all, so pinning it down exactly was impossible.
If the pound's value fell beyond that, it meant the UK government had to step in and adjust things.
But I had no intention of touching the UK just yet. Because there was another target.
Do you remember the causal chain of how the UK got fleeced by Soros?
[German interest rate hike → Mark appreciation → Pound depreciation → Need to defend the exchange rate]
If you think about this cycle carefully, you'll realize the formula holds even without targeting the pound specifically.
In fact... it's even more reliable. Even if the UK was facing negative growth, it was still the UK. Its economic weight class was different from other countries.
That's why, in actual history, once the UK abandoned the ERM, hedge funds that had tasted blood went on a rampage across Europe, attacking each country's currency. And they succeeded in a few places.
'The UK is a bit tough. A few months' difference could change everything.'
Short-selling like this was ultimately a game of who blinks first. If I kept attacking until my cash ran dry and I took a dive into the Han River, the others would just swoop in and feast on the remains.
And above all... I wanted more.
The $1 billion Soros reportedly made shorting the pound? That wouldn't even cover buying Barings Bank.
Anyway, my plan was to hit the Spanish peseta first.
This incident would properly twist history.
Because I'd make it happen.
◇◇◇◆◇◇◇ Nick Leeson's losses had now piled up to about $700 million. Just barely matching Barings Bank's equity capital.
It was a loss they could recover from with a bailout. But waiting for it to balloon to $1.4 billion like in the original history... that would be such a waste.
That's why I decided not to give them time for a bailout. By giving the Bank of England somewhere else to spend its money.
"Quantum Fund has replied. They're saying it might be better to hit the UK right away."
Ha Joo-seong, whom I hadn't seen in a while, calmly relayed Miller's response. Stanley Miller, whom I'd connected with during the Plaza Accord, had joined Soros's Quantum Fund.
I chuckled.
'As expected from the big leagues.'
Even without foreknowledge like me... they made these bold bets without batting an eye.
Challenging the UK of all things—something a mere mortal couldn't even dream of.
"Leverage?"
"They said that requires Soros's approval. They're willing to talk, but if we're generous, it looks like up to $2 billion is possible."
Ha Joo-seong was approaching it cautiously with common sense. Leverage a short sale and fail, and the damage would be catastrophic. It made sense.
$2 billion was already an enormous sum to begin with.
But... I knew Soros had mobilized $10 billion for the pound short. So I wasn't worried about his cooperation.
"Spain's fine with just us, so proceed as planned."
"Understood. Then when should we time the pound short?"
"Wait for their reply on that... and review the plans in the meantime. Yoo Seon-jun's in Europe, right?"
Lee Si-hyeon nodded beside me.
"Yes, at the Berlin Bank in Germany. He's interfering as an external director for now... but since your position isn't widely known yet, we need to coordinate with Alpha Fund."
"It's been ages since the acquisition... Tsk. Contact Ha Young-il and take additional measures. We can fire half the staff without issue."
Whew...
I let out a soft breath and straightened my clothes.
In the full-length mirror reflecting my image stood a proper financier in a black-and-white suit combo.
'Alright, let's do this.'
Time to twist history for real. My way, just how I want it...
-Swish.
My blazing eyes swept over the room. Now that I'd grown tall enough, I could look down on everyone gathered here.
They were all bowing their heads before me.
"Spain first, then Sweden... UK third. Everyone got that?"
"Yes!"
My loyal staff replied, tense and on edge. I grinned wide, thrust out my hand, and shouted.
"Yeah! Let's properly fleece Europe this time!"
◇◇◇◆◇◇◇ 📰 Breaking News [Alpha Fund throws down the gauntlet to Spain! Massive peseta short-selling declaration...] 📰 Breaking News [George Soros follows with peseta short declaration! Estimated short volume: $8 billion!] 📰 Breaking News [Shaky ERM... Germany calls in Wall Street speculators] I revealed our position first.
Hedge funds rarely publicize their positions. It was like inviting a counterattack that could send you straight off the cliff.
Especially when the target was an entire country. Only someone with nerves of steel could pull that off.
However...
Almost every European country was struggling to defend their currency values, so Wall Street knew it would be hard for them to hold the line.
This was basically Alpha Fund declaring war on Spain.
With a $5 billion short sell.
"...They went with more leverage."
Ha Young-il muttered, exhausted from persuading Soros. There was a hint of rivalry in his tone.
"Still less than I expected? Maybe they figured the UK was different."
"...Less? $8 billion?"
Ha Young-il stared at me in disbelief. Even after blindly following my bizarre orders and predictions, he still wasn't used to the sheer scale of the money involved.
"Well, it's plenty. Dumping everything now would make it hard to exit..."
That was why I'd committed $5 billion instead of $10 billion. When events hit simultaneously, opportunity cost was the biggest factor.
.
.
.
And just one day after I declared the short...
Wall Street's speculators mobilized en masse. Led by my Alpha Fund and Soros's Quantum Fund, every hedge fund on the street invaded Spain with bundles of cash... and the tsunami of money swept everything away.
📰 Breaking News [Peseta shorts hit $50 billion! Money ghosts occupy Spain!] 📰 Breaking News [Spain declares ERM exit... Credit rating plummets] Spain waved the white flag. Facing a disaster they couldn't handle, they surrendered swiftly.
Current profit...
💰 CURRENT PROFIT 💰 $300 million Next target: Sweden. I immediately threw $1 billion into shorting the Swedish krona.
◇◇◇◆◇◇◇ One reason I chose Sweden was that in my past life, they did something utterly insane to defend the ERM in this exact situation.
By jacking up interest rates like madmen.
Of course, back then the Bank of England had already collapsed, so they surrendered quickly... but now, only Spain had fallen.
📰 Breaking News [Sweden's central bank hikes short-term rates to 25%...] As expected, Sweden was backed into a corner... but unlike Spain, they didn't give up easily.
Just as I'd hoped.
"Jacking rates that high... Ha."
Lee Si-hyeon swallowed hard, at a loss for words.
Raising rates tanks the stock market and the economy. Who'd borrow money? Who'd invest in low-return stocks?
Plus, swaps and derivatives tied to rates take a massive hit. Naturally, the interest on borrowed krona for the short skyrockets too.
That was the Swedish central bank's play. A declaration: Even if we wreck our economy, we'll take you down with us.
Crude terms: They were pissed.
"Switch positions. Go the opposite way on Sweden temporarily. Short Swedish bonds, focus on FX swaps. If rates rise more, we'll get force-liquidated."
"Huh? It'll be over quick anyway! They can't hold out!"
"True, they can't hold. But... they won't be able to either."
If a nation gets serious about crushing speculators... you might die first.
Especially with massive leverage.
Sweden would go insane to protect their currency.
.
.
.
The next day, Sweden hiked short-term rates to 75%.
Furious, they seemed ready for anything. The massive short volume got offset in a flash, and the krona rebounded temporarily.
As this unprecedented nation-vs-firm showdown ignited, the media swarmed with coverage.
📺 Media Commentary - Anchor "Rates this high are only natural. Haha, Wall Street speculators just took a big hit." - Expert "Oh, so Sweden can stay in the ERM now?" - Analyst "Hmm... Probably not. Sweden's not that sturdy." Everyone thought that. That they couldn't hold.
Probably everyone except the Swedes.
I thought the same... but I knew Sweden would hold out a bit longer.
In the end, after pretending to attack with a $1 billion short, I bet $2 billion on their short-term rate hike using derivatives.
"This... isn't even a hedge. If the krona crashes here, they make a little, but with maturity differences, the $2 billion evaporates. You think rates go over 100%?"
To Lee Si-hyeon's question, I answered plainly.
"Yeah, they'll go higher."
◇◇◇◆◇◇◇ The next day, Sweden raised rates again.
In a way no one but me could have predicted.
The shock was so great that even the news anchor stuttered.
-"500... The Swedish central bank has raised short-term rates to 500% through liquidity absorption and emergency lending hikes."
That's right.
A whopping 500%.
Sweden's central bank had jacked short-term rates to 500%.
Now... in Sweden, annual interest was five times the principal.