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Chapter 11. Black Swans and Rogue Traders > Breaking the Bank of England

Breaking the Bank of England

Currency meltdowns don't hit just poor or developing countries. They can rock the wealthiest and most powerful governments in the world, and they provide vivid examples of what happens when even a strong government with resources battles the will of the markets.

Consider the history of the European Union. As preparation for eventual monetary union and to prevent ruinous swings in currency value, the nations of Europe entered into an agreement called the European Monetary's System's Exchange Rate Mechanism (ERM). Under the ERM, Europe's currencies were weighted to the region's most powerful currency—the German mark. No currency was allowed to fluctuate more than 2.5 percent in either direction.


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