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         Daily Blog - Tiger Software

                         November 28, 2007

     
Highly Profitable Currency and Forex Trading
       in An Age of Profound Weakness in The Dollar   

     
 
Gold or Gold Stocks?
                 106% TigerSoft Profits This Year


       Lessons of Famous Currency Speculators:
                        Keynes and Soros

       How Best To Trade The EURO and
                       The British Pound: 1990-2007

        TigerSoft Foreign Exchange Trading Using
                     >   TigerSoft Internal Strength Indicators,
                     >    Price Chart Patterns,
                     >     50-Day MA
                     >     Unusual Volume
                    and much more


     
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Highly Profitable Currency and Forex Trading
      in An Age of Profound Weakness in The Dollar



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How do you protect yourself when your country's currency goes
              down and down, at an increasing rate?
  If we lived in any other country
              where the trade balance was so bad and the national debt was so high,
              our currency would be much, much lower and interest rates would probably
              be set at 15% to attract foreign investments!  The Dollar has been going
              down steadily.  At any time now, its rate of descent could accelerate and a
              panic could start.  So, what do we do?
                       
Buying Gold or old stocks is the certainly the most commonly heard
              answer.
  We have been recommending this since December 2005.  Use the Tiger
              charts to trade them, if you like, and to decide which is better, Gold Bullion
              or Gold Stocks.                 

              ------------------ US Dollar and Gold Move Inversely. ---------------------------
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               -----------
TigerSoft Lets You Trade Gold Stocks Very Profitably. --------------------
                              
TigerSoft's automatic Buys and Sells have garnered 106% this past year.wpe2C.jpg (57434 bytes) 
                  
       ====================================================================================                   

                                                                        Introduction

                           
Besides gold bullion and gold stocks, there are other direct steps you might
                   take to avert personal financial disaster because of the developing collapse of the US Dollar.  
                   The easiest is to learn how to Buy foreign currencies or, at least foreign currency ETFs.  
                   This can be hugely profitable.  You will note that we are only considering the most liquid
                   forms of dealing with a weak dollar.  Buying Picassos or "Inverted Jennies" (rare US stamps)
                   works over a long time.  But it takes too much time to sell these.  In addition, we have
                   recommended foreign stocks and ETFs.  But these are very over-extended and could
                   contract sharply at any time.    So, we want here to consider only Gold, Currency
                   Speculation and Currency Exchange Traded Funds.  You will see that TigerSoft gives
                   you the advantage of many seeing what insiders ae doing, using the Tiger Accumulation
                   Index.

                           Currency speculation has increased dramatically.  It is estimated that in 1975 80%
                   of foreign exchange transactions were commerce related.  Currencies changed hands to
                   allow oil, cars, TV sets, etc to be imported or exposted,  Today, some estimate that number
                   to be under 10%.  Computerization is one of the key factors.  Transaction costs have come
                   way down.  Another reason is Nixon's taking the US off the Gold Standard and allowing
                   the US Dollar to float.
                   (  
http://64.233.167.104/search?q=cache:A1BVZ8pomrwJ:www.twnside.org.sg/title/nar-cn.htm+%22currency+speculation%22+fortunes+made&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a )
                  

 

  
1. Currency Speculation Has Made Some Very Famous
     People Rich: John Meynard Keynes, George Soros...

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Back in the 1920's, insider trading was a standard
           business practice.    Keynes was an adviser to the
           Chancellor of the Exchequer and the Treasury from
           1915 to 1919. Among his responsibilities were the design
           of terms of credit between Britain and its continental
           allies during the war, and the acquisition of scarce
           currencies.  He was the British Treasury's representative
           to the Paris Peace Conference of 1919.   His observations
           appeared in the highly influential book The Economic
           Consequences of the Peace in 1919, followed by
           A Revision of the Treaty in 1922. Using statistics provided
           to him by the German delegation, he argued that the

       
reparations which Germany was forced to pay to the victors
       
in the war were too large, would lead to the ruin of the
           German economy and result in further conflict in Europe.
           These predictions were borne out when the German
           economy suffered in the hyperinflation of 1923. Only a
           fraction of reparations were ever paid.
             ( http://en.wikipedia.org/wiki/John_Maynard_Keynes )


                 
John Maynard Keynes began his career as a speculator in August 1919, at the relatively
             advanced age of 36 years. Keynes traded on high leverage - his broker granted him a margin
             account to trade positions of 40,000 with just 4,000 in his account. He traded currencies including
             the U.S. dollar, the French franc, the Italian lira, the Indian rupee, the German mark and the Dutch florin.

            His work as an economist led him to be bullish on the U.S. dollar and bearish on European currencies, especially
            the German Mark.   He traded accordingly, usually going long on the dollar and short selling European currencies.
            Easter 1920 found Keynes vacationing in Rome. He learned that his open currency trades had made him a profit
           of 22,000 on francs and a loss of 8,000 on U.S. dollars...
                     But he Keynes soon learned that short-term currency trading on high margin, using only his long-term
            economic predictions as a guide, was foolhardy. By late May, despite his belief that the U.S. dollar should rise,
            it didn’t. And the Deutschmark, which Keynes had bet against, refused to fall. To Keynes’s dismay, the
            Deutschmark began a three-month rally.  Keynes was almost wiped out. Whereas in April he had been sitting on net
            profits of 14,000, by the end of May these had reversed into losses of 13,125. His brokers asked Keynes
            for 7,000 to keep his account open. A well known, but anonymous, financier provided him with a loan of 5,000.
            Sales of Keynes’s recently published book The Economic Consequences of Peace had turned out to be
            healthy and a letter to his publisher asking for an advance elicited a check for 1,500. So, Keynes was able to
            scrape together the money he needed to continue trading, but he learned a valuable but painful lesson in trading.
            As he said, "The market can stay irrational longer than you can stay solvent.”  Determined to achieve
            financial independence, Keynes began trading again. He traded more prudently than in his dramatic early months,
            using shorter-term trading indicators and, by December, he was able to pay back the 5,000 loan to his benefactor.
            In the following four years, Keynes continued to trade using high margin. In 1921 he expanded his trading activities
            to include commodities - first cotton and then metals, rubber, jute, sugar and wheat - and stocks.  By the end of
            1924 he had amassed net assets of 57,797.  The Crash of 1929 hit him hard, but he soon recovered by using
|            his knowledge of currencies, which had acquired in an official capacity, and quite possibly using his
            many contacts
.    Bertrand Russell named Keynes as the most intelligent person he had ever known, commenting,
            "Every time I argued with Keynes, I felt that I took my life in my hands, and I seldom emerged without feeling
             something of a fool."  (Source: http://en.wikipedia.org/wiki/John_Maynard_Keynes )

              (Additional Sources: http://www.maynardkeynes.org/keynes/keynes-the-speculator/
                             R.F. Harrod -
The Life Of John Maynard Keynes, 1951 which I read years ago in
                             Graduate School.)
------------------------------------------------------------------------------------------------------------------------------------------------------

wpe2D.jpg (2978 bytes)          GEORGE SOROS

                                     
George Soros was born Jewish in Hungary 76 years ago.  He miraculously escaped the
                     Holocaust at the age of 17 when he fled to the West, completed his economics studies in London,
                     moved to the US, and quickly became part of the New York financial community.  Bright and daring,
                     he was one of the first hedge fund operators, set up for investors willing to take high risks.  His most
                     famous financial adventure was in selling short the British Pound in September 1992, at a time the British
                     were desperately, but unsuccessfully, trying to halt an inevitable devaluation in the sterling.   His move
                     made a billion dollar profit for himself and his clients in one day!

                                      Soros Currency Speculation - 
On Black Wednesday (September 16, 1992), Soros
                    became immediately famous when he sold short more than $10 billion worth of pounds, profiting from
                    the Bank of England's reluctance to either raise its interest rates to levels comparable to those of other
                    European Exchange Rate Mechanism countries or to float its currency.   Finally, the Bank of England was
                    forced to withdraw the currency out of the European Exchange Rate Mechanism and to devalue the
                    pound sterling, and Soros earned an estimated US$ 1.1 billion in the process. He was dubbed "the
                    man who broke the Bank of England."

                                    The Times October 26, 1992, Monday quoted Soros as saying: "Our total position by Black
                    Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when
                    Norman Lamont said just before the devaluation that he would borrow nearly $15 billion to defend sterling,
                    we were amused because that was about how much we wanted to sell."     According to Steven Drobny,[9]
                    Stanley Druckenmiller, who traded under Soros, originally saw the weakness in the pound. "Soros' contribution
                    was pushing him to take a gigantic position," in accord with Druckenmiller's own research and instincts.

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                          The man George Soros is talking to "used as much as RM30 billion of tax payers' money
                   and colossaly lost it all in the Bank Negara's Forex scandal between 1992 to 1994.  The chapter has
                   not closed as the money has never been accounted for. Ten years later, in 2004, the same
                   Malaysian-born money speculator, aka Top Cat, was made a Finance Minister.
                   ( http://www.jeffooi.com/2006/12/two_money_speculators.php )

                                  Soros' Malaysian Speculation Made Him Enemies.   In 1997, during the Asian financial crisis,
                   then Malaysian Prime Minister Mahathir bin Mohamad accused Soros of using the wealth under his control
                   to punish ASEAN for welcoming Myanmar as a member. Later, he called Soros a moron.[10] Thai
                   nationals have called Soros "an economic war criminal" who "sucks the blood from the people".[11]
                   ( http://en.wikipedia.org/wiki/George_Soros )  It is a fair question, I think, how much damage is done
                   by short selling collapsing currencies.  Mexico is close by where I live.  People there are poor.  Driving
                   down the currency of a poorer, underdeveloped company creates a "fire sale" for that country's assets.
                   So, making their currency go down even more - and momentum players always push things to an extreme -
                   poses real moral problems for me.  I understand the temptations of short selling a weak currency.  Currencies
                   collapse faster than they rise.  Our Tiger Accumulation Index often works better at finding currencies that are
                   going to advance.  Canadian Prime Minister recognized the truth: "We cannot simply expect those famous
                   currency speculators to shut off their computer terminals, hang up their red suspenders and get a life."
                   (See http://www.iht.com/articles/1997/07/30/baht.t_19.php )

                                A Canadian New Democrat wrote: "Speculation not only destabilizes financial systems, it also is
                   an economic virus that kills real investment. It is estimated today that only 5 to 10 percent of financial and
                   currency transactions are related to trade and production, while 90 to 95 percent of these transactions are
                   purely speculative. Instead of chasing productive investments, money chases money to yield paper profits.
                   Paper entrepreneurs, "the guys in red suspenders", have taken over and diverted money to unproductive
                   activities. The economy becomes a casino where money is made on money simply because someone guessed
                   it right. What is accomplished, at best, is of no value to society.  ( Lorne Nystrom, MP, " Taming Currency
                   Speculators", May 1999, The New Democrat:
http://globalpolicy.igc.org/socecon/glotax/currtax/ndp.htm )
                               
                                 While I was writing my dissertation in the late 1960's in London, I frequently heard reference
                   to the currency speculating Gnomes of Switzerland.  They were blamed for forcing Harold Wildon's
                   Labor Government to devalue the Pound.  The French refer to self-interested "Anglo-Saxon" currency
                   speculators.   Consider how easy it is for any nation's politicians to blame foreigners for financial
                   problems the politicians have really created.

     

                                             Soros' Economic Philosophy and His Quantun Fund's Traders to watch on TV: 

                               George Soros's most successful partners at Quantum fund have been Jim Rogers, Victor Niederhoffer,
                  and Stanley Druckenmiller, all of whom are famous traders in their own rights.  Soros warns that "the current
                  system of financial speculation undermines healthy economic development in many underdeveloped countries.
                  Soros blames many of the world's problems on the failures inherent in what he characterizes as
                  market fundamentalism.  He warns of irrationalism in the markets and dangerous follow-the-fashionable-
                  trend excesses. This is called "dynamic disequilibrium" by Soros and "irrational exuberance" by Greenspan.
                  Others call it a "bubble".  I like the term "piffle".

                                Corporations are big currency traders.  They usually are hedgers.  To ensure that they
                  are paid what they expect to be paid in contracts involving millions, they may sell short the foreign
                  currency.   If they do not, a 10% reduction in the currency during the time it takes to deliver, say,
                  a steel mill and be paid, may turn a profit into a very big loss.  The wilder a country's currency
                  swings up and down, the more hedging is likely.  Foreign corporations. and certainly the Chinese
                  corporations, are undoubtedly trying to lessen the losses incurred by the declining dollar by selling
                  the currency short.  The high degree of leverage that they can use readily invites this.  

2. Central Banks Can Strengthen A Currency:
     Raising Interest Rates and Buying Their Own Currency.
     But Outright Protectionism Backfires and Can Make for
     Violent Currency Swings.
    
            
Before we speculate on a currency's fluctuations, we would do well to know the degree to which
                  government policies can suddenly move a currency.
  This makes currency trading much riskier. 
                  Governments like to surprise, even punish, speculators in its currency
When they suddenly raise
                  interest rates or pour hundreds of million into efforts to buy up their own currency in the Foreign
                  Exchange Markets, they make financial waves that change technical trends that many speculators
                  rely upon
.  T
heir intent is usually to shore their currency up, in part, because they try to make their
                  financing responsibilities easier to discharge.  They want their country's bonds to be attractive and easier
                  to market.  Hot international money will flow to where it can get the best rates.   That influx usually stops
                  currency speculators cold.  Similarly, when word gets out that interest rates are going to be lowered, expect
                  that currency to be under pressure.  That is partly why the US Dollar is in such a steep downtrend now.
                  Speculators expect more Fed discount rate cuts to help prevent a recession before next Presidential
                  Election.   (Elsewhere I shown that the Fed's activities before the Presidential Election year are
                  highly political.)  ( http://www.gata.org/node/5723 )

                       Usually a nation's banks want a strong currency.  The US Treasury Secretary, whoever he is,
                  always gives it lip service.  Not to do so, would start making traders and bankers alike believe
                  it was US policy to drop the dollar intentionally.  That would start a run on the dollar. 

                         It is a sign of how bad the US Dollar's current situation is that US banks now want "cheap money"
                  to let them get past the enormous lack of confidence in financial institutions owing to years of easy loans
                  to poor credit risks, all to make short term profits. This is quite remarkable.  In writing my dissertation,
                 which was about British Chancellors of The Exchquer from 1919 to 1937,  I found that the preferred policies
                 of London's financial community were always upheld by the Bank of England and always promoted by
                  the Chancellor, no matter what party he came from.  The "view of the City" was always that they wanted a
                  stronger British Pound.  Of course, it meant more profits.  The more hot money that came into Britain, the
                  more they could lend out and make profits from.  They featured the strong Pound every time they flew the
                  nationalist and pro-Empire Union Jack banner.  Always they sought reduced government spending,
                  balanced budgets and interest rates that were tight enough to make the British Pound seem the paragon
                  of enduring stability.

                         Consider some cases.  In June 2001, Brazil's Central Bank President, Arminio Fraga, suddenly
                   hiked Brazil's interest rates by 150 basis points (1.5%) to 18.25%.  This was "
three times what the market
                   had expected. The move, quickly followed by the bank's purchase of an estimated $320
                   million in Reals on the local market, stopped a run on the Brazilian currency dead in its
                   tracks. "It was a master stroke," says Marcelo Mesquita, head of equities research at UBS
                   Warburg in Sao Paulo."

                          ( "Sparring with Currency Speculators" -
http://www.businessweek.com/magazine/content/01_28/b3740158.htm )

                                In another case, currency speculators in the Japanese Yen were warned by the Prime Minister:
                    As you can see in the TigerSoft chart below,  when the Japanese moved to an 18-month high of Y109.
                    13 to the US dollar in mid November on Monday night, Mr Fukuda said: "In the short term, yen
                    appreciation would certainly be a problem. Any kind of sudden change in exchange rates would not
                    be desirable."   He stopped short of threatening Japanese intervention in the currency markets, but
                    said: "Speculative movements need to be kept in check. What I am saying is: 'Be careful, so that it
                    [intervention] will not happen.'"  Earlier his Cabinet Secretary had helped the Japanese Yen rally
                    by saying "a high yen is basically good for Japan."  We would simply have bought the yen twice
                    in the chart below, where the Buy shows that prices crossed back above the 50-day mvg.avg. and
                    on the breakout B23 after massive insider buying in October.  A 10% profit in five months makes
                    a nice currency trade.  Breakout buying gets you much quicker action.  But use the Tiger
                    Accumulation Index to authenticate the breakout.

                   

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                             Protectionism Usually Fails

                      
The US Government may also try to protect the Dollar and US jobs by restricting imports through
                   tariffs, quotas or import regulations.  US governments have done little to protect the loss of blue collar
                   manufacturing jobs in my life time.  With off shore outsourcing, white collar jobs are being lost in the
                   millions. Protecting the remaining US jobs will inevitably become an issue in the next Presidential Election.
                   Perhaps, the debate will stay focused on illegal immigration.  But if it turns to US jpbs lost overseas,
                   there will be a groundswell for protectionism, as people feel more jobs are preferential to the possibility
                   of higher imported prices.  So long as China does not revalue its currency vis-a-vis the US, job protectionism
                   will to be very politically expedient campaign platform in 2008. 

                              But, all protectionism invites a backlash and retaliation.  Trade wars make currency trading more
                    difficult becuase of frequent sudden changes in prices as each new governmental action is suddenly
                    factored in.  Republicans have since the 1830s been more pro-tariff than the Democrats.
President McKinley
                    stated "Under free trade the trader is the master and the producer the slave." But in the 1930's, the
                    the very protectionist Hawley-Smoot Tariff Act exacerbated the Great Depression,  Republicans in the
                    White House and Congress since Eisenhower have mostly become free traders.  But that may change.
                     Or else, the Democrats will shift places on this issue witht he Republicans.  The main point is that
                     protectionism will probably be a growing force politically in the US.  And that will disrupt trade
                     and currencies, especially as the possibility of trade wars edges into sight. Proectionism makes
                     for more violent swings of the pendulun of currency prices, and that, itself, makes for more
                     protectionism.

                             The BBC reported this month that: "the US Government was planning to introduce more punitive tariffs,
                    this time on a range of textiles and lingerie products manufactured in China, triggered fears about a return
                    to protectionism and the impact that this might have on the recent recovery in the US economy. Retaliatory
                    action Traders are fearful that America's actions could spark retaliatory action by China. A week ago the
                    World Trade Organisation ruled against similar import tariffs that the United States had imposed on steel
                    imports from around the world. China - already been hit hard by the US steel restrictions - responded
                    immediately by calling off buying a shipment of US soybeans.



==================================================================================

 3. Trading Foreign Currencies: EURO: 2000-2007

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           I want to show you how to trade the EURO using TigerSoft tools, especially the Tiger
       Accumulation Index, the 50-day moving average and chart patterns that show resistance
       or support
. Start with the weekly chart.   Trade with the trend.

               
Now let's begin here with some basics about trading foreign currencies.  If you think a currency is going
      up you can but the currency outright, using the FOREX, or you can buy ETFs for that currency.

                FOREX Trading.  The Forex market is a non-stop 2  trillion dollars per day cash market where currencies
     of nations are traded,  typically via brokers. Foreign currencies are constantly and simultaneously bought and sold
     across local and global markets and traders' investments increase or decrease in value based upon currency movements. 

               1. The "Forex"is the abbreviated form of Foreign Exchange; it is also referred as the "Spot FX" market.
     In Forex trading, the currency of one nation is traded for that of another. Therefore, Forex trading is always traded
     in currency pairs. The most commonly traded currency pairs are traded against the US Dollar (USD). The major
    currency pairs are the Euro Dollar (EUR/USD); the British Pound (GBP/USD); the Japanese Yen (USD/JPY)
    and the Swiss Franc (USD/CHF).

              2. 24-hour trading, 5 days a week with non-stop access to global Forex dealers. 

              3. An enormous liquid market making it easy to trade most currencies. Order are executed at
     the fourth decimal point for the EURO.  Example the EUR/USD might trade at 1.4607 dollars per EURO.

              4. Leveraged trading with low margin requirements.
One of the big reasons that Forex trading is an entirely
    different animal than stock trading or futures trading is leverage. Forex trading leverage can be enormous,
    as high as 400:1, and in most cases you get to choose the amount of leverage or gearing you want to trade with
.

    You can control $100,000 with only $250.  Hold this many EUROs, on a  move of the Euro from 1.23 to 1.249,
    or 2%, and you make $2,000 from only $250.  But nothing is quite that easy,  if the price drops by very much you
    will automatically be sold out by your broker, unless you have a lot more money in the account.  Still, you could
    easily have made many trades like this, using the tools TigerSoft offers.

              5. In some cases, no commissions.  But you have to buy from brokerage's Dealer.
     
              Here are some randomly selected links on Forex trading:

                     http://www.finweb.com/forex-trading/
                     http://www.traderslog.com/forex-leverage.htm  

                ETFs     In June 2007, the
Rydex Group created six more currency-based exchange-traded funds to
     add to its immediately popular EURO ETF - FXE. These are "exchanged traded funds" which are bought and
     sold on the New York Stock Exchange. These ETFs -- the CurrencyShares Australian Dollar (NYSE: FXA),
      British Pound Sterling (NYSE: FXB), Canadian Dollar (NYSE: FXC), Mexican Peso (NYSE: FXM),
      Swedish Krona (NYSE: FXS), and Swiss Franc (NYSE: FXF) funds -- were created to track the price
      movements of these currencies. These new creations follow the first-ever currency ETF, the Euro Currency
      Trust
(NYSE: FXE), which Rydex launched at the end of 2005. These are designed to rise in value when the foreign
      currency strengthens relative to the U.S. dollar and fall when the euro weakens.

               The ETFs do not provide any cash income.  It seems they could and should.  Someone should
      ask Rydex why that is.  They apparently keep the income as profit.  There is also no ETF for the Japanese Yen, yot.
      You will make money buying FXE (Euro Currency) when the Euro rises versus the Dollar.  This can be
      demonstrated below.  Compare the moves of FXE and the EURO. For all practical purposes the EURO
      and the FXE are identical.  Even our internal strength indicators (the OBV Line, the Tiger Accumulation
      Index and the ITRS are very similar. The two main problems with the FXE are that it is more thinly traded
      the currency and is not traded 24 hours day.  As a result, there is slippage.  You are apt to lose the
      difference between the bid and ask with each and you will have to trade only when the NYSE is open.

      ------------------------------------------------ EURO -------------------------------------------------------------------------------
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      ------------------------------------------------ FXE (Euro ETF traded on NYSE) ---------------------------------------------
     
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                                                                   More will be added later.
      


     


            http://www.cartoonstock.com/directory/s/spends.asp
      
  
            
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                Currency Warfare: The Pound, The "Gnomes" and How The US Stopped The
             Anglo/French Invasion of Suez in 1956 by Threatening Not To Support the Pound..

                         "In 1956, after bombing Egyptian airfields and destroying its airforce, British and French forces
                 began landing at Port Said and Port Fuad on November 4th in an attempt to seize the Suez Canal
                 which the Egyptian leader, Colonel Nasser, had nationalised earlier in the year. The troops were
                 making good progress moving south down the waterway, occupying both banks, and were only two
                or three days from reaching their objective, Port Suez on the Red Sea, when, all of a sudden on
                November 6th, they were ordered to halt. Less than four weeks later they began to withdraw and
                by December 22nd, they were all gone.
                        "So what happened? How was the invasion stopped so quickly? The answer is that the
                Americans pulled the monetary plug - a technique that can now be used on them.
     

Britain in 1956 was in a much healthier financial state than the US is today when you consider that its exports exceeded its imports whereas America's imports now exceed its exports by a massive 50%. Nevertheless, the Bank of England was having to fight off currency speculators - the famous Gnomes of Zurich - who were borrowing pounds and using them to buy dollars. Their aim was to run down the country's dollar reserves to such an extent that sterling would have to be devalued from its fixed rate of $2.80 to the pound.

Such a devaluation would have been highly profitable for the Gnomes because afterwards they could have used some of the dollars they had bought to purchase enough of the now-cheaper pounds to repay their loans and pocketed the difference. Even if the Bank of England was able to resist their attack, they would not lose much because, thanks to the fixed exchange rate, they could always buy sterling to repay their pound debts at the price they had received for those they had sold - apart, that is, from the currency dealers' commission. So the most they could lose was the commission plus the difference between the interest rates they had to pay on their sterling loans and the rate they had earned on their dollar deposits. They were taking an almost riskless bet.

The Bank of England reckoned it could fight off the Gnomes' speculative attacks if it had at least $2bn.in foreign exchange in its war chest. By September 1956, however, as a result of the speculation its dollar holdings were slipping uncomfortably close to the danger level. The speculators knew this, of course, which caused them to redouble their efforts. Accordingly, the British Chancellor of the Exchequer, Harold Macmillan, decided that the country had to borrow a sum so large that it was bound to cause the Gnomes to back off. He asked the IMF for a $1.3bn. loan.

US approval was needed, however, as it would be the biggest loan the IMF had ever made and far above Britain's automatic entitlement. But when the attack on Egypt brought matters to a head by increasing the speculative attack with the result that the reserves fell sharply, the US Treasury Secretary, George Humphrey, made it clear he would not give his approval unless Britain not only obeyed a UN resolution calling for a cease fire but pulled its troops out as well.

The British Cabinet regarded giving in to the speculators and devaluing the pound as a worse fate than losing the Suez Canal, so the Prime Minister, Sir Anthony Eden, felt he had no option but to order the invasion to stop. On December 3rd, the British told the Americans that all the troops would be withdrawn by December 22nd and the full $1.3bn loan was approved the same day. The crisis was over and the pound was saved.

      
                       



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