It’s a gamble. If the pound had increased in value, he would have had to buy back the pounds he sold for more dollars than he sold them for, after which he would have had to return them and have less dollars than he started with.
Yup, but most people will be betting the opposite way. Soros was able to borrow enough pounds that selling them would flood the currency market and drop the relative value of the pound.
99.999% of people do not have the connections or resources to pull that off. A normal American will come out ahead by betting that the pound will increase in value relative to the dollar, buy some pounds, and sell them when the value of the pound increases. This hypothetical person’s action will infinitesimally reduce the value of the dollar, but that effect will be overwhelmed by all the other global economic activity.
How do you do that cost-effectively, its not really free to do that is it?
It’s a gamble. If the pound had increased in value, he would have had to buy back the pounds he sold for more dollars than he sold them for, after which he would have had to return them and have less dollars than he started with.
Can any random person do something like this on a (n obviously) smaller scale?
Yup, but most people will be betting the opposite way. Soros was able to borrow enough pounds that selling them would flood the currency market and drop the relative value of the pound.
99.999% of people do not have the connections or resources to pull that off. A normal American will come out ahead by betting that the pound will increase in value relative to the dollar, buy some pounds, and sell them when the value of the pound increases. This hypothetical person’s action will infinitesimally reduce the value of the dollar, but that effect will be overwhelmed by all the other global economic activity.
If or when all those people betting on it “become” wrong, how does the error correction generally come about?