September 16, 1992, was not a good day to be overly enthusiastic about your job "The early bird trashes the business" is a saying that we've just made up, but could easily apply to the Register reader behind a currency calamity in today's episode of Who, Me? Our hero, Regomized as "Mike", was working as a "data entry operative" for a tourism company in 1992. The company ran bus tours to the then brand-new …
"Everyone had to leave," he recalled. Although he was offered an extra £1,500 ($1,800) a year to return
Never understood how or why this happens.
If a business can be affected by something like this in the short term then frankly it hasn't planned for jack shit. The fact that he was offered more money to return - when money was apparently the problem in the first place - highlights this as the absolute piss take that it is.
"Let's lay everyone off so we can ... save some money to save the business"
* Can't operate business. Can't generate revenue. *
* Business collapses *
They obviously had not heard of hedging, pretty basic stuff in their line of business, what with them agreeing to buy/sell stuff in the future in foreign currencies. Bit like all those energy companies that could offer lower prices (mostly by the saving you get when you don't hedge like a pro)
Hedging wasn't relevant while the Pound was in the European Exchange Rate Mechanism, which kept fluctuations very small. The problem was caused by the Pound dropping from the ERM (aka proto-euro).
Apart from that, I'm not sure hedging is available for relatively small transactions like they were doing. But definitely an option when you're building an oil refinery.
A Dutch colleague mentioned that they'd concluded a contract with a UK customer the week before Black Wednesday, fortunately for them the contract was in guilders (remember those?).
Hedging in this case is essentially:
Borrow money in pounds, deposit the money in a French Franc bank account.
When the customer pays, repay the loan.
Pay the supplier from the French Franc bank account.
If you buy a hedging contract from a bank, that is essentially what is happening behind the scenes. You might get a slightly better interest rate on the loan portion of the contract that way because it is effectively secured on the bank deposit portion, which reduces but doesn't eliminate the risk of non-payment.
Norman Lamont did say that we would never leave the ERM. And any time a politician says something will never happen, it is going to happen.
Norman Lamont did say that we would never leave the ERM.
A statement that came across as; "Fill your boots" to George Soros and his mates.
I still have no idea why the hell a Conservative government nailed its colours to the mast of the ERM, given that the result should have been obvious to anyone with a passing interest (hah!) in economics.
We should have bailed as soon as it became obvious we were expected to pump in cash to preserve the artificial exchange rates.
At the time I had a fixed rate mortgage, so I could enjoy watching the fallout on TV.
"Norman Lamont did say that we would never leave the ERM"
Trillions of dollars were put into destabilising the ERM and Pound to deliberately break the link between them. The long-term cost to the British economy was high and was one of the factors which drove the madness of brexit
Hedging is absolutely a thing for travel agents, especially "Bucket shops"(*) - which is what's being described
(*) Wholesale aggregators - these guys bulk book entire hotels and transport fleets, build up the packages and sell them on to high street retail chains
WRT contracts being in guilders - this was the norm for virtually _ALL_ international telecommunications contracts until the Euro was created as the guilder was traditionally the most stable currency on the planet and more importantly it was apolitical, unlike USD, which made settlements on both sides of the Iron Curtain or with "3rd World" countries markedly easier than it would otherwise have been
"* Can't operate business. Can't generate revenue. * * Business collapses *"
Hire engraver to add "(2022)" to the building's nameplate, have new stationery and website designed, make your dog CEO of the new company, then buy up your old company's 'assets' - minus debts - for £1.
To save time you could have most of this all sorted out ahead of time...
On this side of the Atlantic, layoffs are usually just a way for companies to push out older workers so they can hire younger, cheaper, employees.
A company I worked for once upon a time, that likes to claim "do the right thing" and "treat people with respect" as core values did this multiple times. First they told some nice lady in the Finance department that she was going to be laid off, but she was less than a year from retirement so I guess they worked out some kind of compromise where she retired a couple months early, and then maybe a month or so later they hired someone new to replace her. Then a little later, my boss' boss was laid off, only for the company to change the job title and description ever so slightly and hire someone new.
Legally, and not sure if this is a federal or state thing, but when you lay someone off you're effectively saying that you don't need the position anymore and then cannot hire anyone to fill it for a full year. The fact that they quickly replaced the Finance lady and then just slightly tweaked the job title and description tells you that it was all just age discrimination. It's hardly an uncommon thing over this side of the Atlantic. Just look at all the stories El Reg has done on IBM doing exactly this sort of thing. No one every considers anything beyond salary rates, like older employees probably make fewer expensive mistakes, have a lot of institutional knowledge, etc, it's purely about how much someone is being paid annually and if they can get someone in to do the same job for less. Then any time someone starts agitating for a union, like you European folks have, they get branded as job killers or some other nonsense. We Americans are a strange lot sometimes, actively working against our own best interests.
Beware the custom job title, due to minimal conversion effort to redundant role at company convenience.
Stick to something nice and generic, preferably were there are a lot of the same role already in existence; project engineer, sales person etc. no need to make it easy for them.
> if he worked extra hard, came in extra early, and kept the in-tray clear, then his efforts would be both noticed and rewarded with promotion and a bump in pay.
Noticed, definitely. Rewarded? Why
In the real world t'management identify people like this and instantly know that they are far too valuable to promote away from their existing job function.
True, but once you've occupied that space for a certain length of time it can be amazing what you can get a company to do to ensure you stay there.
One large company I worked for ended up allowing me to move my workplace to another country rather than accept my resignation. My entire team was made redundant, and the company was caught in a nasty situation where my name was also on that list, but they found they couldn't let me go. Then there was the time they sent around a stack of company policy documents, saying that it was mandatory to sign them. Two of the four were a whole load of bollocks about how the company treated staff well, stuff like how they paid at least industry rate on all roles when they quite measurably didn't. I refused to sign them. After a bit of wrangling they decided to turn the other cheek, which was fine by me.
In short, it became very apparent that they'd carved out one large exception and it had my name on it.
I've twice left a company and been replaced by two people.
And once left and was replaced by three!
On all occassions manglement didn't believe me when I said there was too much work. I made sure that was in my reasons for leaving letter and copied upper manglement.
I would like to have been a fly on the wall when upper manglement asked my ex-manager "why do you need to replace this one guy with two/three?"
I remember one guy who thought he was top notch, but was all talk. He would "work" long hours to get the job done (and claim the overtime) and told every one how hard he worked (He spent more time talking than working).
At one status meeting he was said he was half way though a piece of work, and it would take him only another 6 weeks to finish it. I spoke to his manager saying "You can either do this all by hand, or a write script to do the heavy lifting" I wrote a script in about a day.
The manager had a conversation with the employee. The employee decided that retirement might be a good option. It was that or be exposed at a status meeting.
After he left every one became more productive, because they didnt have to listen to him!
I can top that, I was replaced by about 10 people and they still couldn't do the workload I was doing, and I spent half my time cruising the internet while working. I'm with another company in the same industry and occasionally have to deal with those same people and they still can't handle the job. But, the 'ol company hired those seat fillers for about what they were paying me so I guess it's al right for them, eh?
Problems that took me 15 minutes to troubleshoot and 2-3 hours to fix via diapatched field tech takes them a couple of days at a minimum and sometimes up to a week. My 2-3 hours was 20 minutes when I worked 8-5 and the sites were manned, but it takes a little extra time when you have to call them from home.
> In the real world t'management identify people like this and instantly know that they are far too valuable to promote away from their existing job function.
Way back when, I worked for a company which had experienced a fairly major share price crash as a result of the dotCom bubble burst, and was actively trying to ease out older staff to reduce their pension liabiities.
As a result, they were offering some impressive redundancy packages - I can't remember exactly what it was, but I think it was a lump sum plus 1 month per year of service, uncapped.
Which, after 15 years, would have been a pretty big chunk of money, except that I was deemed too important. Twice.
And that's how I ended up twiddling my thumbs for the best part of a year, acting as "support" to the large team of contractors who were brought in to take over the various roles which had been trimmed.
But that's another story altogether...
A trading system I was working on to integrate with our internal systems was connected to the London Stock Exchange. In testing everything was just dandy.
In production a *small* glitch occurred - it received prices in GBX (Pence) and though they were in GBP (Pounds). Critically, the balance validation worked correctly, seeing GBX prices as it should, but when trades were collected or paid, it had already passed that step so just blindly transferred a sum that was 100 times more than it should have been. If you've ever dealt with unhappy stock market traders, you might guess how miserable they made everyone for a while. As bad as it was, with got off not too badly, but in the order manager system team some heads ended up rolling.
No, I think you'll find that chancellor Norman Lamont's antics cost them the money, and unless Mike had been instructed to continually monitor the exchange rate (and why should he when the £ was still in the ERM, until later on that day when it wasn't any more) he should be absolved of all blame here.
When you look at how the GBP moved against the FFR during September 1992 the change on Black Wednesday wasn't really that much. 9.45FFR - 9.01.
ISTM the greater damage done was by the company cancelling all those contracts, losing the revenue from them and destroying the trust of tour operators, who would have gone elsewhere after that.
Also, by September the schools would all have gone back. The major earning would have already finished (from trips during the summer). It sounds more likely that the company was already on the rocks and that this was just the final straw.
If I remember the day, and the following couple of days correctly, the problem was originally attributed to the currency dealers.
We had joined the ERM, and one of the requirements was to keep your currency within a set of bounds against the other ERM currencies, defined at the date of entry. When the pound started to wobble a bit, the currency market started trading in the pound, as there was money to be lost and made, but this forced the price of the pound down against other currencies.
The chancellor tried to stabilize the pound by buying them back from the market using foreign currency reserves, but could not keep up with the amount of sterling available that was driving the price down.
In a desperate attempt to keep the pound up, the base lending rate was jumped to double digits, which scared the shit out of almost everyone who had a mortgage (fixed rate mortgages were not that much of a thing back then), but finally the government admitted defeat, allowed sterling to be removed from the ERM, and brought the base rate back to something more reasonable.
All of this happened over 2-3 days, and at the end of it, the pound had found a stable, if lower, position again, and almost everybody who borrowed money heaved a huge sigh of relief while licking their wounds.
If the base rate had remained at it's peak, my mortgage, which was pretty much at the limit of what I could afford at the time, would have nearly doubled. It was a huge embarrassment to the UK government, and probably laid the grounds for us staying out of the Euro, as later Gordon Brown was worried that the same thing would happen before any entry to the Euro.
There is also a long term irony - George Soros was 'the man that broke the Bank of England', by making a fortune on the currency speculation that drove the UK out of the ERM. Soros is very pro-EU (anti-BREXIT), but by being the principle driver behind the UK's ejection from the ERM, he played a big part in the UK not adopting the Euro.
Had the UK stayed in the ERM, it is likely that the UK would have adopted the Euro (that was the intent).
Had the UK adopted the Euro in the 1990's, it's highly likely that BREXIT wouldn't have happened. Hence, George Soros (to some degree) enabled BREXIT.
Blaming Soros is easy but there was a lot of manipulation going on behind the scenes - as others have pointed out currency traders were at it like gangbusters. He was just the highest profile head above the parapet
Nailing the pound (or other currencies) to a fixed position on the ERM mast was a fundamental error in the first place, as many observers pointed out at the time. The pound wasn't the only currency targetted but it was the most easily manipulated
I don't know if it can be attributed to the currency dealers, but I certainly remember the week. I'd just started working for a bank, developing and supporting trading floor IT systems. My main memory is all the currency dealers knocking off at midday on the Friday, and going down to the pub, where they spent the afternoon drinking champagne.
"as later Gordon Brown was worried that the same thing would happen before any entry to the Euro."
Can't really think of any reason why he would have been wrong on that. Seeing the (artificially low) exchange rate for the Dutch gulden/guilder and Deutschmark at the introduction (and the Euro forex rates since) I get the strong impression Britain would have gotten equally shafted if not even harder had they decided to join the Euro.
"Gordon Brown was worried that the same thing would happen before any entry to the Euro"
Had it been Gordon Brown instead of Lamont he'd just have sold off the gold reserves instead of foreign currency.
At the time the UK had had a long-running problem with interest rates. A rate that would avoid inflation in one part of the country would cause depression in another. Brown's solution was to partially wash his hands of the situation by handing it over to the BoE and then specifying that they aim at 2% inflation but carefully eliminating most people's biggest purchase, their house, from counting towards the measure of inflation. No inflation here, just a wildly overheating housing market.
> the UK entering the ERM at a politically chosen ludicrously high rate for the GBP
It is also plausible that the other ERM countries: in particular Germany, would not have allowed entry at a lower rate. As that would have had £-denominated exports undercutting german output.
IIRC a certain ferrous female politician declared we would enter at a GBP:DM level, which made the economists say WTF, based on the very reasonable economic argument of who won the war then ?
And then expected the German central bank to support the pound
As a junior(ish) accountant many years ago had to buy yen for the year ahead - and fat fingered the number of zeros in the transaction.
Rather than £20m worth he bought £200m worth (this is back in the early 1970s). By the time it was spotted the market had moved slightly, fortunately in his favour.
"The early bird trashes the business" is a saying that we've just made up
Just like the early bird catches the worm, the early cat catches the bird ~ Del Amitri, 1985
I can't claim to have brought down a business, not for the lack of trying, but I did my best to contribute. On Black Wednesday (Oden's Day) I was working for Unisys which shut down and moved to Ireland soon after for better goverment subsidies. Working in 'Silicon Glen' became island hopping as even the IBMs and Compaqs relocated. There were a few moderately successful startups by excellent engineers, but with the emphasis on few and moderately.
I'd go into Unisys early because I was new and trying to get to grips, and the place was empty apart from one engineer in the toilet brushing his teeth. There was meant to be a full shift on but the supervisor just clocked them all in and then went home. Because they were unionised they got away with a slap on the wrists, albeit later redundancy during a recession. I assumed the engineer brushing his teeth first thing was saving personal time but he turned out to be OCD, he brushed his teeth every hour or so. Mentally ill, but dentally healthy.
Graffiti in the toilet read, "Doing a good job here is like pissing yourself in a dark suit - it gives you a warm feeling but nobody notices." It made me distrust management and unions, but is good advice if you fear pissing yourself.
At the time we were living in New Zealand.
We'd gone out early 1992, and returned late 1993. We bought a boat for $23,000 (IIRC) July 1992 and sold it for less when we left, around late 1993.
However, when converted back to sterling, we got more back than we'd taken out with us.
For once...
And once again, the great benefactor behind in this case the collapse of the British pound was George Soros. Fascinating how this shrewd businessman and these days migration driver managed to paint himself as a great benefactor to mainstream journalists and thus the rest of the world.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
