Daily Junction.mobi portalThe truth is that Black Wednesday showed the limits of fixed exchange rates in a world of free capital flows. Currency speculators like Soros could move billions in minutes, overwhelming government defences. This lesson applies to any fixed exchange rate system, whether the ERM, the euro, or a hypothetical post-Brexit currency peg.
Black Wednesday — 16 September 1992 — was one of the most dramatic days in British economic history. The government spent £27 billion and raised interest rates to 15% trying to keep the pound in the Exchange Rate Mechanism, but was forced to crash out in humiliation. The crisis destroyed the Conservatives' reputation for economic competence, made George Soros £1 billion, and contributed to Labour's 1997 landslide. Paradoxically, leaving the ERM allowed the UK economy to recover through devaluation and lower interest rates, and kept Britain out of the euro. Black Wednesday remains a textbook example of how rigid economic policies can collide with market realities, and how political reputations can be destroyed in a single day.