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Black Wednesday/Big Mac notes
What happened on Black Wednesday in 1992? (UK and Exchange Rate mechanism)
Black Wednesday, 16 September 1992, was the day Britain crashed out of the ERM - a system for tying the pound and other currencies' values to that of the German mark, and was a precursor to the creation of the single European currency. Prime Minister John Major and Chancellor Norman Lamont raised interest rates during the day from 10% to 12% to 15% and authorised the spending of billions of pounds in a doomed effort to keep the pound within the range allowed by ERM.
The UK's two year membership of ERM was suspended and the second interest rate reversed. The UK never rejoined the ERM. By hitching the pound to the deutschmark, it was hoped to get a German-style economy, with stability and low inflation. Although the move did give us low inflation, it did not provide a stable economy. Following German interest rates, combined with the fact Germany needed tighter monetary policy than Britain at the time, meant the ERM prolonged a painful recession in the UK.
Things turned out better than might have been expected. The pound fell, but then rose again. And inflation has been rather benign since we left. The ERM may have helped set a low-inflation foundation for the subsequent decade, however the ERM did prolong the British slump, by preventing UK rates from being cut to the levels justified by the UK economy. George Soros had borrowed heavily to bet that sterling would be devalued. Mr Soros showed the amounts of money that could be made by well capitalised, risk-taking traders.
Why has there been a dispute between China and USA regarding China’s currency?
The U.S. trade imbalance with China exceeded $200 billion in 2005. Many of the Chinese imports were the outputs of light manufacturing ventures. U.S. industries being pressured by China are pushing Congress to address particular aspects of the imbalance, such as the value of China's currency and the insufficient enforcement of

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