How He Broke the Bank of England — 1994 Television Interview

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slug: boe-tv-1994 year: 1994 title: "How He Broke the Bank of England — 1994 Television Interview" source: https://www.youtube.com/watch?v=LJlXwF7ap7I type: interview

A 1994 American television documentary segment on the 1992 sterling trade: narration interleaved with interviews with Soros and Stanley Druckenmiller — the fullest on-camera account of the trade's risk arithmetic, the sizing ("go for the jugular"), and the 1987 Japan mistake. Machine transcript from the program audio (faster-whisper, 2026-07-29); speaker labels are editorial; the program title is unverified. The transcript may contain recognition errors — verify against the video before external use.

Narrator: This man made more than a billion dollars last year in a single week. That's right, a single week. That bet has been available for the last ten years. And it only paid off at that particular moment. Then he spent the next few months giving it away, sometimes a hundred million dollars at a time. George has always said that he makes his money in the West and spends it in the East. Meet George Soros and find out what drives one of the world's most successful investors. This program is made possible by a grant from MetLife with over 120 years experience in financial management. It sounds very, it certainly sounds something that one needs to look into. George Soros is a man of many paradoxes. He's a world-class speculator who sounds and writes like an Oxford philosophy professor. It certainly doesn't sound like a Wall Street fund manager. Last year he gave away more than a hundred million dollars in Russia, yet he thinks it may be too late to stop Russia from sliding into chaos. He's an expert in Soviet minorities. I spoke with George Soros last fall after his great currency coup when he made a billion dollars almost overnight. But the more I heard about his recent philanthropy, the more I wanted to talk to him again, I wanted to find out what kind of man would stake more than his entire fortune against the Bank of England and then give away so much of the winnings. They call it Black Wednesday, the day that currency speculators broke the Bank of England. The Bank and British taxpayers lost six billion pounds. The Bank got caught in a financial tug of war. Britain was in a deep recession and needed to lower interest rates to turn the economy around, but British interest rates and exchange rates were locked into the high rates of Germany and the European community. Something had to give. Soros acted. He borrowed pounds, converted them to other currencies and waited. When the pound finally did fall, Soros paid back his loans, but because pounds were cheaper, it cost him less to repay his debts and he pocketed the difference.

Druckenmiller: Stan Druckenmiller manages Soros's quantum fund. I asked him about the events last September. It was inevitable. It was a conclusion that could not be avoided under any intellectual thought process. And I must say, as the person actually managing the fund, that would have led me maybe to do two or three or four billion dollars. And that was where the combination of experience, courage, whatever you've heard about this man came into play because it was he who pushed very, very hard on me to take the position to where we took it and actually wanted to take it further, but we ran out of time.

Narrator: Soros leveraged his portfolio and ended up betting more than the entire value

Interviewer: of the funds he managed. But basically you took the whole quantum fund and bet one and a half times that.

Soros: That's really called betting the ranch. Well, no, actually in terms of the risks we take, it wasn't. It wasn't even a full exposure because the risk of loss was maybe two, two and a half percent. So if one and a half times two and a half percent would be, let's say, four percent loss, it wouldn't have killed us. So that really was a fabulous one-way bet.

Narrator: That was. It was a safe bet, but it's a question whether it was worth making it. That bet has been available for the last ten years

Soros: and it only paid off at that particular moment. So this is where this equilibrium reached the climax.

Narrator: It's really a once in a decade and that's when he is really, that's when he is George Soros.

Druckenmiller: That's when he just says you can't have enough of this. And if there's one thing I've learned from him is when you're right and you know something, you really feel it, you can't have enough. And the biggest mistake, if I had to sum up his investment philosophy in one sentence, it's that it's not whether you're right or wrong. You just have to have the maximum when you're right and that's his unique innate ability.

Narrator: What kind of man would go eyeball to eyeball with the Bank of England and bet his fortune that the pillar of financial establishment would blink? A man with an unconventional view of the world to be sure. George Soros' worldview was formed as a teenager during the Second World War when all the usual rules of normal life were suddenly fractured.

Soros: It really started in 1944 when Hungary was occupied by the Germans and me being Jewish, I was in danger of life. His father, a prominent Budapest attorney who had lived through the Russian Revolution understood the art of survival. When the Germans came in, he said, this is a lawless occupation. The normal rules don't apply. You have to forget how you behave in a normal society. This is an abnormal situation. And he arranged for all of us to have false papers.

Narrator: Everybody had a different arrangement.

Soros: I was adopted by an official of the Minister of Agriculture whose job was to take over Jewish properties. So I actually went with him and we took possession of these larger states. That was my identity. So it's a strange, very strange life for everybody.

Narrator: I was 14 years old at the time. George, you've written, the Second World War gave me a lesson I've never forgotten.

Interviewer: What was the lesson?

Soros: The main lesson that I learned during the war is to expect the unexpected. The situations that you get into are so out of context with what you have grown up with that you have to examine the framework in which you think and then you realize that we all work with preconceived ideas and those ideas don't necessarily correspond to reality. So there is this gap between perception and reality and that's the gap that I have really kind of explored and also exploited. After the war, Soros left Hungary and went to England to the London School of Economics.

Narrator: There he discovered the works of philosopher Karl Popper. Soros was deeply influenced by Popper's views on the nature of science.

Soros: So I came to a conclusion that basically all our views of the world are somehow flawed or distorted and then I concentrated on the importance of this distortion in shaping events.

Narrator: Soros took Popper's ideas and applied them to the financial markets. He wrote a book explaining his theory of reflexivity that markets don't always reflect reality because they're based on faulty perceptions.

Soros: It really is the method of alchemy because the value of securities or the value of currencies is much more dependent on the kind of incantations or formulas that you are using and so you really are dealing with a process of alchemy rather than a process of science.

Narrator: If investment is a process of alchemy, Soros has found a formula that does bubble up gold. If you had invested $10,000 with him in 1969, you would have more than 10 million today. How did he do that?

Soros: By looking for places where he thinks perception and reality are out of whack. I'm basically interested in many years or what I call boom bust sequences. That is to say processes which are initially self-reinforcing but unsustainable and therefore eventually have to be reversed.

Interviewer: Give me an example. Does a little bell go off in your head when you read the morning paper?

Soros: How does it work? Well, it doesn't happen every day first of all because these processes occur infrequently and there are long periods in between when it's sort of, from my point of view, is noise and that's sort of just a normal kind of situation. You take for instance what I called Reagan's imperial circle when Reagan embarked in the early 1980s on an aggressive program of rearmament and was unwilling to pay for it and so it was deficit financing and you had a self-reinforcing process of a strong dollar, strong economy, strong stock market which was however unsustainable and had eventually to be reversed. So it was a boom bust kind of sequence. And I think that I understood it reasonably well. And the same thing would work on the downside and the depression. Is there a great depression anywhere in the world today that has to be reversed?

Interviewer: I think that we are in a great depression now in the world.

Soros: I think that we are in conditions very similar to what prevailed in the 1930s. I think that for instance for the first time since the Second World War the prices are actually falling in a country like Japan for instance. That is something that hasn't happened since the 1930s.

Narrator: From this small trading room in New York, Soros trades currency, stocks and bonds around the world. But looking for the unexpected on a global scale is not an easy job. Soros made one of his biggest mistakes in his own backyard.

Interviewer: You wrote that you saw the crash coming in the late 80s and 87 and yet you got caught like everyone else. How do you explain that?

Soros: I made a very big mistake because I expected the crash to come in Japan and I was prepared for that and it would have given me an opportunity to prepare for the follow-up in this country and actually it occurred on Wall Street and not in Japan. So I was wrong.

Narrator: Some estimate that that mistake cost Soros $650 million

Druckenmiller: since then the Soros funds have continued to grow. Even though Soros travels constantly he's still very involved in the day-to-day management of the funds. He is here maybe a third to a half the time because of his other activities. He's often in Eastern Europe or places when you're trying to talk to him on the phone it's very, very scratchy and maybe lasts a minute or so a day. The way I look at it is having the greatest financial advisor in history to help create and bounce off ideas on an ongoing basis.