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EDITIONS
Russian rouble Friday, 14 August, 1998, 18:33 GMT 19:33 UK
Fortune-hunters, crisismongers and scapegoats
George Soros
George Soros: Demands devaluation of the rouble
By Economics Correspondent James Morgan

The international financier George Soros has called for a devaluation of the Russian rouble.

When men of such stature make such proclamations they are bound to have an effect on the market and that effect may well be to achieve the ends recommended.

And it may be that those who say a currency is overvalued have a vested interest in seeing it decline.

Mr Soros is famous for having made a billion dollars when the British pound was humiliatingly ejected from the fixed European exchange rate system in 1992.

The markets knew which way Mr Soros was placing his bets and his reputation helped push the pound down.

Predecessors

It is rare for an individual to influence markets in the way Mr Soros does. But there are parallels.

One of the first members of the Rothschild dynasty speculated in effect pushed sterling down in 1815: he reported that Napoleon had won the battle of Waterloo when he knew the contrary to be the case.

That pushed down the value of British government bonds and Rothschild bought them cheaply.

In the late1970s and 1980s, Henry Kaufman of the New York brokerage Salomon Brothers could move markets by giving his views on what the money supply figures would show every week.

It was assumed that his employers would be employing their knowledge of his views for their benefit.

Gnomes of Zurich

In general, however, it is groups of people or speculators who are accused of deliberately manipulating currencies for their own ends.

One of the most celebrated examples came shortly before the devaluation of the pound in 1967. The then Prime Minister, Harold Wilson, spoke of the "Gnomes of Zurich" as being responsible for sterling's troubles.

That phrase has entered common parlance as a kind of longhand for self-interested currency speculators - the gnomes were Swiss bankers in this case.

In recent years the French have cast "Anglo-Saxon dealers" in the same role.

The "Anglo-Saxons" were said to have been anxious to block the road to the single European currency because that development would eliminate so much of Europe's traditional foreign exchange trading because the currencies involved would disappear.

Government responsibility

The tendency to personalise the great movements that take place on currency markets in particular has unfortunate results.

It has often allowed governments to pretend that the problems which they themselves have generated are the result of malice.

The truth is, however, that when currencies are in turmoil the responsibility normally lies with those who issue it.

See also:

14 Aug 98 | The Economy
14 Aug 98 | The Economy
14 Aug 98 | The Economy
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