Goals: connect monetary history → today’s markets; practice concise explanation via mini-presentations; solidify inflation, exchange-rate regimes, and speculative attacks.
Core skills: identifying anchors of the system, reading incentives, spotting arbitrage/inefficiency, separating noise from information.
Feudal/metal era → Gold → Dollar→ Debt/Fiat
Pre-1944: National gold standards (uneven, crisis-prone).
1944–1971 (Bretton Woods): USD fixed to gold at $35/oz; other currencies pegged to USD. Institutions created: IMF (stability & surveillance) and World Bank (reconstruction & development).
1971–today (Nixon Shock): USD leaves gold; major currencies float. The system’s de-facto anchor becomes credibility + central bank policy + deep USD markets. Debt and capital markets explode in scale.
Central Banks: Federal Reserve (dual mandate: price stability + employment), ECB (price stability ~2%), BoE, BoJ, etc.
Supervisors/Market Police: SEC (US), ESMA/CNMV (EU/Spain), etc.
Global bodies: IMF (exchange-rate surveillance, programs), World Bank (development finance), BIS (banking standards like Basel).
Inflation = loss of trust in the currency’s purchasing power (more than just rising prices).
Price stability = peace for planning, contracts, and growth.
Arbitrage: exploiting price/ information inconsistencies; your profit pushes prices toward efficiency.
Market efficiency (EMH) layers:
Weak form: prices reflect past prices/volumes → pure technical analysis can’t systematically beat the market once exploited.
Semi-strong: prices reflect all public info → fundamental/value edges get competed away.
Strong: prices reflect all info (even private) → generally false; insider trading is illegal.
Exchange-rate regimes:
Hard pegs / currency boards
Soft pegs / bands (ERM)
Floats
Crisis defense toolkit (for pegs): raise policy rates, spend FX reserves, capital controls, communication/credibility.
Cause: war reparations + fiscal deficits → money printing.
Mechanics: prices doubling in hours, savings wiped out; money cheaper to burn than firewood.
Social results: distrust, anger, radicalization → fertile ground for extremism.
Stabilization: Rentenmark + fiscal reforms (e.g., Dawes Plan).
Lesson: Inflation is a trust problem; once trust collapses, fixing it takes credible anchors + discipline.
Design (1944): USD = gold ($35/oz); others peg to USD; IMF/World Bank born. Goal: stable FX to rebuild trade.
Strain: US fiscal/military spending (e.g., Vietnam) + other countries redeeming dollars for gold.
1971: Nixon suspends gold convertibility → move to floating rates.
Lesson: Pegs require consistent policy + adequate reserves; when the anchor (gold) can’t cover the money stock, the peg breaks.
Setup: UK pegs the pound to the Deutsche Mark within ERM bands while UK macro didn’t match Germany’s.
Attack: Hedge funds short GBP; BoE hikes rates multiple times within hours and spends reserves—still exits ERM.
Outcome: Speculators (famously Soros) profit; UK regains monetary autonomy.
Lesson: You can’t fix your FX to someone else’s policy if your domestic conditions diverge. Markets force the adjustment.
Index concentration: The Magnificent 7 (NVDA, AAPL, MSFT, AMZN, GOOGL, META, TSLA) drive a huge share of the S&P 500’s gains. “S&P up” ≠ “broad market up”.
AI investment boom: Partnerships (e.g., NVIDIA ↔ model labs) often mix services/in-kind commitments with capital. Signal: risk-on momentum continues—until it doesn’t.
Interpretation skill: Distinguish headline noise from structural information (policy, liquidity, earnings, concentration risk).
Present value intuition: higher rates ↓ present values (bond prices, long-duration equities).
Real rate (approx): real ≈ nominal − inflation.
Uncovered interest parity (intuition): in flexible FX, higher rates often come with expected depreciation (not a free lunch).
Peg defense logic (fast checklist):
Are rates high enough to deter outflows?
Are reserves sufficient?
Is fiscal consistent?
Is communication/credibility intact?
Explain why inflation is fundamentally a trust issue, and how central banks restore that trust.
Compare Bretton Woods vs. post-1971 regime: pros/cons for trade, policy autonomy, and crisis dynamics.
Given a country in a soft peg with weak growth while anchor country tightens policy, predict the sequence of market pressure and policy options.
Describe weak/semi-strong/strong efficiency and map technical/fundamental/insider approaches to each.
AUM: Assets Under Management.
ERM: Exchange Rate Mechanism (pre-euro bands).
BIS/Basel: Global standards for bank capital/liquidity.
Risk-free rate: Policy-anchored reference (e.g., US Treasuries).
Sovereign wealth fund: State-owned investment pool (e.g., Norway).
Arbitrage: Risk-limited profit by exploiting mispricing.
Upload your slides (Hyperinflation; Bretton Woods & Vietnam; Black Wednesday) to Moodle.
Bring one current example of a “system anchor under stress” (FX peg, inflation target, bank balance-sheet duration) and explain it in 3 bullets.
Read a short IMF note on exchange-rate regimes + a case summary on the 1992 UK ERM exit.
Skim a credible timeline of SVB (2023): uninsured deposits, duration risk, Fed facilities (why speed mattered).
Anchors change, but the need for trust and stability doesn’t.
Pegs break when domestic policy and the anchor diverge.
Arbitrage is how markets correct errors—profit with public service.
Concentration risk means “the index” can mislead about broad conditions.
Central banks are the system’s firefighters; credibility is their oxygen.
Are you guys Adam, Brandon. Alfonso.
Alice here.
Alice, I like the second one, I think. Yeah. But both of you are here. No, Alice.
Amy, I am Audrey, Canton.
Charles gato.
Claire duban. Oh, nice to meet you. Hi, Conor hallenbeck. OK.
Then young the money. Yeah, Dustin. Same same then. Do you know Claire?
Do you know Claire Claire? Do you know him? Claire? Last team. Claire. Nice boy. Nice, nice people. See Dylan. Dylan.
It was Dylan. ABBA. What’s your name? How do you call yourself Dylan? Perfect.
Dylan. Elena.
If Eva.
Francisco.
Frederick. She’s here. Gabriella major. No. Gabriella Gordon.
Gordon Grace Morgan.
James less, let’s me.
You know, I see. Who’s you know. OK, you know, you miss some.
We said.
No then.
Sean, yes, Austin.
Laura Logan. William.
Ariel. Oh, yeah. Ariel. Sorry, Luke. Yeah, Marco.
Arco cavallari. No.
Natalia de La Plaza Natalia.
Noah burka, Olivia.
Priya Karim.
Really.
Robbie Stein.
Tim Kim.
Simon Battrice, Sophie Brown, Dalia truska.
Victor, victor.
Yeah.
It.
Daniela Danila asera.
I think certain things all of you are in Moodle. Is there anyone who is not in Moodle?
You know what is mother? You have other courses, so.
I mean.
Till this point now I can consider that the course is OK. I mean reaching to this point there is you are people you came from different parts of the world. You have different courses. Yes. Now I feel as if all the anyone who I did not mention.
In my head, Yalang Yang is not here and she will not be here anymore. Then Young Filippo Hiruli also, he’s not here and he’s not be here anymore. And so a lot to boys. So a lot to go to boys that sees from Mac Hill University or he.
He’s from McKee University. He’s not here. OK, I’m talking about other courses. Yes, if you are not in Moodle in any of the other courses, I recommend that is an issue, yes.
So now is the moment to to solve it. I am here to help. I know how to do things with mother. One week ago I didn’t knew it. I didn’t know it. So. So if you need help.
Personally, you don’t know that. I don’t care too much about lot of lot of things.
This goes on one hand. Are you doing with pain? Feel comfortable. Careful with your belongings.
General, but I think that Spain depends where you get from, but Spain is is a nice place to stay. I mean it’s very large. You can be in the street at night without too much problems.
I think you you should be enjoying yes, Italianize an Espanol. A lesson. Pocket to Espanol, pochito.
Or recommendo that there is that la en Espanol?
For using the model in English comfortable, comfortable is yes, being with American students not going far beyond in order to talk to studies that I I recommend you to go a little, but not just because of language. Because of culture, because of understanding the other.
Because of learning, because of the developing attitudes, yes.
And I think that in this sense, Spanish people are friendly. If you try to talk with them in Spanish, I don’t know your feel regarding this.
What else? What else? Give me e-mail. Give me e-mail. All of you know what I’m talking about. Give me e-mail is back.
Days Wednesday and yesterday was back results. He’s back. Hey, he’s back. Yeah. Yesterday. That’s. Did he apologize?
I think that no, no, I think that no.
But did you? Did you see what he said?
Did you see what he said about Charlie Kirk? Yeah, no, I just heard about it because I think I I saw it. And I think that he didn’t say anything regarding Trump. He say regarding Trump and and Trump.
Trump’s reaction after Charlie Kirk public execution?
But I mean, he didn’t say anything regarding Charlie Cook. He talked about Trump that personally. I mean, he said. Personally, I think that what Trump Trump’s reaction was not appropriate.
He said that in in a joke mode and personally after having seen the images.
And also, he said that Republicans has tried Republicans has tried to say that the shooter.
And this is true that the shooter has had a girlfriend, a trans girlfriend, or that that Republicans during the weekend has tried to introduce political things in the in the shooter and by doing this he introduced politics also.
Yeah.
I I I don’t know if there is a reason to apologize. Please. I think it’s freedom of speech. Nope. But I mean, there is freedom of speech. But for example, if I say.
Yeah.
I don’t know. I have freedom of speech, but I can insult you. And if I insult you or without being my intention to insult you, if you feel offended by what I said because of ignorance or for example now.
I’m talking about Charlie Kirk and I don’t you know him much better than me. And you know what had happened? Much better than me. And if I am saying something that could be incorrect. Or do you feel offended because of whatever I can say? Oh, please let me apologize because of what I have said.
In this sense, I don’t see there is a point in.
Trump didn’t get offended. He he didn’t said he just said. Trump said. This is stupid. He has not audience and see he. He should be fired.
And and it’s a Poly, I mean this freedom of speech or one oh, oh, it’s freedom of speech.
Regarding e-mail.
I need freedom of speech also regarding.
Tony Kirk.
Of course, regarding Charlie GIF.
But.
They don’t, Powell talk. They don’t. Powell talk. And I feel as if there are not too much news regarding the states or regarding.
Trump said something regarding Ukraine war, but but now I feel as two weeks ago, before, before Charlie Cook assassination, yes, there were news regarding your political things. Now I feel as if there were not.
News or too much news? Let me let me go quick. In order to check if there is something. Oh, yeah. Yes. There is one piece of new. There is one piece of new open eye, you know, open eye.
All of you know. Open eye, open AI, open AI, you you get in. You know what is LinkedIn?
I have gone to LinkedIn because in Spanish we say LinkedIn and in the state you will say LinkedIn, LinkedIn, LinkedIn. But because we are used to say LinkedIn is almost impossible to find one Spanish teacher 1 Spanish professor saying LinkedIn the way you do it.
So probably in class there has been teach professors that has a LinkedIn and you say why? What are you talking about? Oh LinkedIn with open eye in Spanish we say open eye and it’s open AI. What is the piece of you regarding open AI?
Yeah.
Play gaju.
Yeah. And do you have something, any thoughts regarding this?
Any thoughts and media is gonna write a check for.
I don’t remember if it is 100 or 10,000,010 millions or 100 million. I think 100 million, 100 million video is gonna write. That’s it.
You see, you understand the question. The piece of new is 100 billion from NVIDIA to open AI, yes.
He’s gonna pay NVIDIA 100 million to open air.
But the agreement and media is going to place money, physical money or digital money into open AI accounts.
You understand the question. In the past, Microsoft has reached a similar agreement with open AI. All the Microsoft paid open AI in a food.
Tokens. Do you know when he’s up to me?
Athude athude. Do you know what is afude? Afude? I don’t know. What is? Isn’t it just a cryptocurrency? No, no, no, no.
Cars. This is a car. This is not a car. This is a car. This is a car and I’m not.
Azuri.
None.
Do you know where is that today?
Cloud services, computing, cloud services.
Microsoft didn’t pay, didn’t pay open AI. What Microsoft did is gave.
A food services make sense. Do you understand that it’s not the same?
Paying with money than paying with services.
It’s not the same. The agreement, the agreement between the media and open AI. Open AI, sorry and media will pay with services.
With services.
What does this mean? What is NVIDIA target cap?
What is indeed a market cap? Anyone. Do you know what is market cap?
What is market cap 4.34 trillion U.S. dollars? But what is market cap? It’s the shares outstanding times the share price and 4.344 point 3-4 trillion US three. I mean, one week ago, two weeks ago it was 4.
I mean it’s higher than 4 trillion. Any thoughts what is total SP 500 market market cap? I will bet that it’s around 55 zero trillion more than 500, but not too much, not higher.
57.57 trillion.
500 SP 500 all SP 500 market cap 57 just NVIDIA 4 trillion upper 4 trillions will bet more than three.
3.7 Apple if you add magnificent 7, all of you know what are magnificent 7 no magnificent 7 are the biggest SP500.
Stocks alphabet. You know alphabet. All of you know Alphabet.
Frederick alphabet.
Alphabet is Google, Google, Microsoft, apple.
In media.
Mehta.
Tesla.
Who is missing like a an Amazon an Amazon?
These seven, these seven companies worth in terms of market cap, I will bet that more than 14.
14 trillion I don’t know if it is around 51, five if you can ask Gemini or what is market. The total market cap of magnificent 7.
Probably 16, I don’t know, but I want to have the number.
Yeah.
Yeah.
1919 As of August 1425, yeah, it’s growing at an incredible high speed 19 No 19.7.
If you heard these numbers, what do you think? Do you have any thoughts?
Do you have any thoughts?
SP500 includes Colgate, Colgate, I don’t know how to say, how do you say Colgate in the states Colgate, Colgate, Colgate, Colgate, the the truth point.
Procter and Gamble, if you Add all these 500, it worth 5957 trillion, but among these 57 trillion magnificent 7 is are almost 20 trillion.
Speed 500 now is in maximum.
Maximum SP500 if you take out magnificent 7.
It’s in mining, it’s in mine is it has decreased. What I’m trying to say, SP500 is going up or down if you just SP 500 is going up. But if you consider magnificent 7 impact, if you take out magnificent 7SP500 is going down.
You understand what I’m saying?
Imagine that from this, imagine that instead of being 60 people, you are 500 people and instead of being three people sitting in the front, there are seven 507, yes.
General development has to do with seven people.
You understand? I’m talking about something that is absolutely crazy, crazy.
Is there a bubble? Is there a bubble regarding AI?
Is there a bubble regarding AI? Personally I don’t know.
Personally I am, I am absolutely sure about that, but I cannot say that because I should be.
Persia.
Impartial. Sorry, I should be impartial. I should be impartial. Yes.
But after looking at all these numbers, there is a bubble.
And if you think about last NVIDIA, an open AI agreement.
What is my conclusion? We’re gonna get richer and make more money.
They are biking, they are, they are not stopping, not stopping. I don’t know if they are going to make return or not, but with this movement what they have done is let’s continue the party.
Are they going to get return but now because of if you compare their market cap with their incomes, market CAP is much, much, much higher than incomes. But by doing this movement.
What NVIDIA has done?
Has played the disco again and said let’s continue the party.
How long is the party going to land? It’s going to last, we don’t know, but you understand the point, no.
Today we are not going to talk about that. We will talk about Silicon Valley bank crisis, Silicon Valley Bank crisis that happened year 2023 two years ago. What Federal Reserve discover with Silicon Valley bank crisis.
That if you act really, really, really quickly.
You can close a party without making too much noise.
And it’s another important where you are aware about before I talk with you, you are studying finance. No, where you are aware about all these numbers that I gave you.
Were you aware that there is or there could be a bubble regarding AI.
Were you aware? Not too much. So the question is if you are studying that and you don’t and you are not aware, who cares.
Who cares? At the end, if there is a bubble, the bubble is about to stop to to explode. What your power is gonna do.
You know, power will press 1 button, he will bring money.
And when there was a hole?
There won’t be the whole there will not. There won’t be the whole anymore. Makes sense.
We will talk about this at the end of not today’s class next next week, next week, week class. When talking about monetary policy.
But what I want to share with you is I like to think about what is going on. I like to think about what is going on in order to connect what I’m saying with what is going on after Charlie Kirk assassination.
Yeah.
There was the I I don’t want to talk too much about Charlie Kirk assassination. Why? Because I have already talked and I think that we should move on and.
And at the end it has to do with finance, but not too much.
But it was the funeral. Yes, the funeral. It was two days ago. And personally, I think as like if, like, Charlie Kirk assassination was like a whole that took all news that has appeared during these days. Yes.
And be the agreement has been an important piece of new.
Pedro Sanchez, you know, all of you know Pedro Sanchez.
Who does not know Pedro Sanchez?
Is this?
You know who is Pedro Sanchez? No.
I took a good place.
Is Spanish Prime Minister Spanish Prime Minister Pedro Sanchez yesterday was in New York sitting with Larry Larry Flynt, who is Larry Flynt.
Do you know Larry Flynn?
Anyone knows Laura? Glee. No one. No one knows. Laura. Glee.
** magazines, ** magazines. No, no, no, no. Larry. Oh, Larry Flynn. No, Larry. Oh, sorry. I if I have misunderstood Larry Flynn. No.
Whoa.
Aye.
Thanks a lot. Oh, you said someone else would say everything. Don’t tell him or tell him.
Tell him that I have so you know him. Everything.
OK.
Another word, do you know? Let it be we see. Do you know?
They own all the they own, like single family homes. They they’re like they’re it’s like a real estate. No, you are misunderstanding Black Rock with Blackstone Black. No. But Blackstone has to do with real estate.
Black Rock, we will talk about Black Rock. We will talk about Black Rock. We will talk about backward. We will talk also about we will talk about they are a financial holding.
That manage assets and assets, black rope assets under under management, black rope assets under management. Yes, one second. Oh, she’s taking the yes. One second, one second. Don’t move there. Don’t move. Don’t move.
BlackRock AUM, yes.
No 2025 the move the move.
Yeah, I know, I know. It’s in order to make more. Most, more most the class.
12.5 trillions.
12.5 careful because in Spain 12.5 trillion you can go. You can go. Billy be Jones in Spanish stands for trillion. Be Jones in Spanish stands for trillion.
12.5 trillions.
12.5 trillions.
I have been talking about NVIDIA capitalization. I am talking about assets under management. How many dollars are printed? What is the monetary base from Federal Reserve around 7 trillion?
Do you see how big is this number?
Who is Larry pink? Why is Black Rock Black Rock?
Let me exaggerate. Yes. What I’m going to say is not true. What I’m going to say is not true. And I want you to understand what I feel when I hear Black Rock, who is Black Rock? I’m going to lie. Yes. I’m going to lie. But who is Black Rock?
The owner of the war.
Who owns the war? Black Rock banguard the Norwayian home, the Swiss.
You were not Swiss or you were. No. Who is the? Where is the Swiss? Your central bank. I mean, you understand what I mean? There are incredible big sovereign funds like Rock is a sovereign phone. No, your central bank is a sovereign phone.
No, but no. No way. Your phone is so many phone yet, but at the end what I mean is that these people.
Man at man at the war, these people owns more than.
5% of Spanish BlackRock, itself of Spanish biggest companies, more than 5% and if you are what owns Bangor? All the the rest of big investment funds they own.
Of some of the most important Spanish companies, banks thinking about banks, more than 50% of banks.
You see what I mean?
Who is the person?
With most power in the world, you see the media. You could think about, see Putin or Trump.
I will bet that Larry think has more power than Trump, I will say.
Or at least I don’t know who has more power once Trump.
Was the president, was Trump 20 of January? Yes. What is one of the first thing from this in Panama channel from tall Black Rock, you should pay here a lot of money. Why? Because it was a way of Trump saying to Black Rock to everything.
I am your boss. What did Larry thing did? He paid. He paid.
But at the end, personally everything.
I repeat fruits. Thanks. Any questions, we understand what I’m saying. It’s important what I’m saying.
Yeah. Why? Because we are manipulating, we think that Trump or we think that governments or we think that justice and at the end there are more bigger forces with low profile.
That do things.
OK. We were talking, we were talking.
Yeah. We are just one second.
None.
None.
We were talking about money and we were talking about monetary policy, yes.
Can we open this for one second?
We were talking last class about how much money there was in the war.
And before that, let me go step by step.
No.
Let me go.
Step by step. Alice, Olivia. Floor is yours.
I I don’t know if I’m gonna write.
I think that’s it. Perfect and yeah.
OK. Hi everyone. I’m Olivia, police. And we’re going to be talking about Germany’s hyperinflation.
OK. So just for some historical context. After Local 1, Germany lost the war and they signed the Treaty of Versailles and they were forced to pay huge revelations to the Allies and the economy was already weak since they just went through a war. But then they also saw like a lot of.
Conversation and then also loss of territory. So this image here shows what Germany was before then sort of a different land that they lost after the war to different countries.
So from inflation to hyperinflation, as we discussed previously, the government printed massive amounts of money to pay the debts. However, once you print a lot of money, the dollar lost its value very rapidly and then therefore all the prices rose.
And then by 1923, hyperinflation spiraled out of control. Here, you can kind of see.
OK, so in daily life in crisis also because like, it went up so quickly, prices were doubling in hours to not days. And it just kept going out of proportion. And it says we used to use bitten Wheelers and money to buy breads and kids are playing with like stacks of money. And this guy’s probably going to go buy.
Something like not that special, but he has like stacks of cash as well. So also people’s like, saving the ones out. So this also relates like I had family in Germany that had to move into the Netherlands. They had like a bunch of savings. Just cash. They got to the Netherlands and.
The mark was like lost all their value, so they were poor. So all fun, hunger, homelessness and desperation also spread. And then for the social and political consequences, all the trust in the government collapsed and then extreme groups gained to the followers. And this is when political.
Instability set stage with the rise of the.
And then lastly, so stabilization. So in 1924, the Daws plan like took place, which basically was the US that loaned money to Germany to help stabilize the economy. And this was a very like temporary solution, but they ended up making a new currency called the which replaced.
The worthless mark from the four, and so they called this this time the golden 20s because it was better. Until, of course, the 30s came along. And then thank you so much. Thank you.
OK, perfect. You have family there or you you have family that. Yeah. And have the you can see you can see. Have you been told stories regarding this? Yes, it’s because.
Doing this.
Well, I’d love.
No, no, no, sorry. No, I mean, I also I can write.
But no. Will this in your money?
It’s a crime. I mean, probably in class. You can do it because of freedom of speech or I’m doing this with a pedal pedological intention. Yes, I am. I have written this because I am talking.
I am talking about.
I’m talking about.
One moment? Yes. Talking about this or. Sorry, not talking. Talking in an explicit way.
About this.
East.
I I will not recommend anyone to do it, yes.
Have you been told too much stories regarding Nazis? Oh, because they they went out. Your family went out. Yes, but there was a persecution. What I mean is that.
They haven’t. They have not told you any stories regarding this from there’s from the German side. It was from the so side.
All of you know what is sure.
So I it’s a Hebrew word. Hebrew, Hebrew, Hebrew. So I know it’s the word. So I stands for Holocaust. So I stands for Holocaust. What I’m saying is that German people normally.
German people don’t talk too much about Nazis, but they talk about hyperinflation, why they talk about hyperinflation, because who are Germans and what Germans in class. I feel sad for that. Who are normal German people? Are serious people? Absolutely.
Spanish people, probably. We are a little bit more disorder than they. Yes, they are straight for what? Some mentality. You look German cars, German cars.
Are nice cars. Yes, what this person.
That’s there, all right.
Probably he has there the bats. The result from 1 to one week of work. He stayed with this. And how much?
All this money he has been working one week in order to get that he has working one money in order to get that and how much?
All this money, worth less than the effort, is making in order to carry it. You see what I mean?
Yeah.
It was cheaper to put money, worse than to buy paper. It was cheaper to burn money than to burn wood.
Yeah.
You see what I’m saying?
What I’m saying is that you are a worker and you work for nothing.
Don’t you get angry?
Don’t you get angry populism? What does populism need in order to reach power?
What that for police need anger.
Anger. Are we now in a moment where there is polarization, social polarization, anger.
I think that yes, I think that, yes, are there people looking? I don’t know if people are looking for the fight, but.
Palestine. Israel Charlie Kirk.
All these topics.
Helps dividing the population.
Is there, I mean, last year I’m looking for one student from, oh, I I cannot because I have been teaching people from Israel for two years and two years, and I have a when you have a student from Israel in class.
Normally, he’s three years older than the rest of the group because he has done the military service and I have had four students and they know each other and and I really love them as a student and I’m looking for the Israeli that is the year. He’s not in my class, but I’m looking forward to him.
And also.
As a student.
Your yes, it was yours, yours, your health minister. Fall down two weeks ago and I told you. I feel sorry for her.
Do you understand that no matter what is going on, we should take care one of each other?
I I don’t know. I don’t know. I don’t. I don’t know. But if there were a trans person here in this class.
E or C?
We’ll have all my support in general always as as other student, but now.
This person has more reasons to be afraid of things. I think that yes.
So no matter politics, I’m talking about politics.
I I think that no, I think that no, I’m talking about taking care that taking care is something transversal, that not has to do with.
What I’m saying that once the economy start not working once the economy gets broken, it’s easy to say, oh, I cannot teach because you are.
It’s it’s easy to find one enemy from outside and all of you want to have the best grade and.
I throw her out of class.
Do you want to have a best grade A in this course and the only thing we need is to throw her out of class. You are. You start smiling.
Yeah.
If there is misery, if there is misery, and you are a *** with all respect to people that know, don’t know where they came from or what is, or who is her mother or his dad. But I’m using *** as an insult, yes.
If there is misery and you are a ***, it’s easy to take advantage of that.
And I’m talking with respect.
To everyone, because Germany is a big country, but at the end.
And I’m not talk. I mean, I’m talking about this period of time because it has an absolutely big impact in the history.
But it applies to almost everything. Nowadays we have Internet, we have social networks and this applies to almost everything, yes.
Yeah.
Kennedy, this is the first thing my professional life that I have think about. Kennedy this week. I mean, I have used. I have thought about Kennedy in terms of the how do you say going to the moon?
When Kennedy was assassinated, 609061, I think yes, Kennedy.
You are. He was murdered in 1961. One one of the last things. Can we say this before the 60s are finished. We will be in the moon.
When?
When Neil Armstrong stepped the Moon 1969, this is this was a race against USSR. Yes, this was a race.
Against USSR. But what happened after Kennedy assassination that Kennedy was transformed into a St.
You know why this week I have thought about Kennedy assassination? Yes, there has. The First World War. First World War started first. How did the First World War started?
Assassination of yeah.
Yes, yes. Careful with smoking in a gas station something.
Relatively small an assassination is not something small, but you understand what I’m saying? No, something relatively small can cause a big big fire.
Something coughing in Wuhan. Yes. One person in Wuhan.
Can has an absolutely big, big impact. What I’m talking about. I’m talking about the butterfly effect. I’m talking about a war that in just one moment, everything can change your family.
Once they reach the Netherlands, they have all their savings. The savings from one life in marks.
And how much did it worth? Nothing. Nothing.
Can you imagine being whole life working for nothing?
This is history. Those who don’t know their history are doomed.
Repeat those who don’t know the history are going to repeat.
I’ve been talking about German hyperinflation for more than 10 years in class. Why? Because European Central Bank unique aim is control inflation. And where is the European Central Bank?
Where is Europe and Central Bank located?
OK.
Where is transport? Yeah, man, it’s not like as well.
But Germany has power in Europe.
Is the biggest economy for three-year make sense?
Thanks.
I mean, did did German hyperinflation caused the Second World War?
It was one more cows, probably from perspective, if we have perspective.
Second World War was a continuation. The 1st and the First World War was a continuation of the French Revolution. Why Luis the 16th?
Both his head off his body.
Because he was talking with the Austria Imperium Imperium, he was talking. He was trying the Austria imperium, the Archie the what, the one that was later from Ferdinand. Yes, he was talking Luis the.
Steve was talking with the Grand Grand Grand grandfather of Ferdinand of Fran Ferdinand. You see what I mean in the 70?
Yeah.
7089 the French Revolution, no.
The car, the head of Louis, 16, fell from his body in 1791. I will bet. Makes sense and why this happens because.
Ruiz, if he says.
With this, he says, was dealing with Austria in pain that were.
Then it comes Prussia and then it comes Germany. Yes, but what I mean is that in French Revolution, then first War, War, second war, war. This is the same story. And at the end it’s a fight regarding.
Play song Javed.
Regarding something new and something old, what is that thing? Old kings and petals?
An old thing, an old way of doing things. What is this thing? New things regarding Burghacy Democrats, democracy, the division of power. Masons, nations.
Yep. Make sense. My son. How do you say my son in English nation?
Amazon, do you know what is Amazon?
Sean.
What do you say?
Son, have you heard about these people? The illuminati? The illuminati? Not the illuminati? I mean Masons are I mean illuminate.
These are secret societies. I mean, if they’re workings and people wants to get organized, they should be secret. Now, with the Internet, there are no secrets. Now, now. Now, with the Internet, there is no point in making a secret society. But when they’re workings.
People that were manufacturing cathedrals have knowledge and they put all together at the end. What I’m what I’m talking about is that.
This is historical and this is the mass I don’t know in English massones English.
Measures measures are called yes, at the end. What I mean is that.
What I mean is that here here what we have is a transition from from. I’m summarizing a lot. Yes, vocalism vocalism.
There is a transition from a feudalism world into a into an industrial world. We are moving from a feudalism world into an industrial world. Makes sense.
And.
And at the end, these revolutions, let me include also the Russian Revolution.
All these things.
Means we are moving from one world into another world. In this new world.
In that world, what was here? Religion. Religion. The Pope. The king? Yes. What is here? Central banks. Central banks has. I mean, is there are there still religions?
Absolutely yes. And now?
Who?
Sorry for what I’m gonna say that is true. Who should we listen to? Who we should listen to? I have told you in almost all classes you know about or Christine Laga.
Yeah.
Why we should listen to him today? Because they have to do with the risk free asset they have to do with monetary policy. What they have to do with interest rate who?
Cares about inflation, central banks, and let me finish just with this and move into the next step. What is inflation? What is inflation?
The value of currency? Yes, losing buying power with the same one? Absolutely, but something deeper. Let me go deeper. What is inflation? Inflation, please. All of you. Yes. One second. One second. One second. All of you, please.
Inflation is a lack of confidence in the system.
A lack of trust in the system.
On one hand, inflation is a problem you have in your pocket, but at the same time, inflation is a lack of confidence into the system. Once there is inflation in Venezuela, in Argentina, in Germany, yes.
What is the real problem that people don’t trust the government? Their system? Yep. What is inflation? A lack of confidence in the system, what does to control the inflation means trust.
Rest.
Peace. Do we need peace?
Personally, absolutely. I need peace. Do I need silence in order to talk? Do you need silence in order to study you? Do you need peace in order to enjoy your family? Do you know peace? In order to think about Thanksgiving?
Or to think about Christmas or to think about whatever Rosa Rosa yesterday, not yesterday. Monday start. Something that will finish in Yom Kippur.
I mean, I have talked about Christmas, I have talked about Thanksgiving and I think that now we are in a news party, not party in a new celebration that is right now, whatever.
Rosa Sana Rosa. Sana. We are now Rosa Sana. No. Do we need peace? Stability.
In order to be happy, I I think that yes, I think that yes, this is impression makes sense.
Now, first, second war. What happened? Second war. What happened and.
Yeah.
Second World War happened.
Second World War happened.
Is it OK?
Are you going to talk about the Second World War or not? No, we were just told. Brett, what’s agreement at the end of?
No, no, no. I mean, they don’t agreement. Oh, yeah. We talked about it. How that’s like, the the idea is yes, immediately after the Second World War was finished, people was concerned regarding inflation.
People was concerned regarding inflation. People was concerned regarding stability just immediately. The Second World War finish. What the whole world tried to avoid this happening again, yes. And in 194748 Breton good agreement was signed.
But also United Nations was founded. Human rights was founded. The Israeli state was founded. What else? International Monetary phone was founded. Yes, immediately after the Second World War was finished.
In these two years, a lot of things happen and this is Bretton Woods Agreement was is one of the things that had happened. I’m Ariel. I’m IFA. This is Bruce Woods agreement in the Vietnam War.
Yeah.
So first, they’re just what a definition of a gold standard is is because we’re going to be talking about this a lot in our presentation is a fixed monetary system where currency is linked to gold. So therefore the amount like in America at the time, like the amount of money there was, was based on the gold. And so any the theory is anytime.
If you wanted to, you could switch out your currency for gold, and then I kind of tried to keep in in case there’s like an issue. Like let’s say there was some crisis that it would they the goal of it is that it would keep it stable. And then So what the Bretton Woods Agreement was is an agreement which decided that the gold, the gold.
Standard was the basis for the US dollar and all other currencies were pegged to the US dollar’s value. So kind of what that meant. Let’s say I had drums, for example, and I wanted to like switch it to yen. I would have to 1st transition it into the US dollar to then transition my.
Durham, from dollars to yen.
So the agreement itself, so this was held in 1944, the United Nations Monitoring Financial Conference. So this is where it was held with Bretton Woods, New Hampshire, hence where it got the name. This agreement was negotiated by 730 delegates from over 44 different nations.
And it went on for around 3 weeks, even though the ideas that were held in the conference were started way before that, the US dollar was based on gold and all other currencies were pegged to the dollar. Hence, what I said before and then so gold was worth.
$35.00 an ounce and then they had monitors who bought and sold U.S. dollars to achieve this goal.
None.
OK, so in this agreement, so their goal is to create an efficient foreign exchange system that promotes economic growth in international trading also. So it’s for currency stability, stabilization and finance for trade goods and services.
Another goal of this was to prevent competitive devaluations of currencies, and then in this agreement it created two important organizations, the International Monetary Fund, also known as IMF, as well as the World Bank.
So what were these two organizations for? And their key functions? So the International International Monetary Fund monitors exchange rates and identifies nations that need support. This was the main one in charge.
Of making sure that the like Bretton Woods agreement system that was the one in control of monitoring that and then at the same time it created the World Bank which manages funds to give to the nations that were affected by World War 2.
So the end of Brenton Woods agreement, he was going to go a little bit more into this after me, but it only lasted from like the early 1940s. Sorry. Like mid 1940s to early 1970s.
So in 1971, the gold supply could not be covered by the amount of money currently in circulation because they ended up printing more money. Therefore it couldn’t. They couldn’t be pegged together anymore. So this came to an end during the presidency of Richard Nixon.
Where he said that US would not trade gold for currency anymore, mixing the value of the US dollar to the gold. And even after the system ended, the International Monetary Fund, IMF and the World Bank are still existing today.
OK, so now we’re going to kind of talk about how this ties into the Vietnam War and then, like, the United States specifically. So the Vietnam just a little background, the Vietnam War lasted from 1955 to 1975, but US combat units.
The the sorry US combat units were sent to Vietnam starting in 1965 and this war was a Cold War era proxy war between North Vietnam and South Vietnam, ending in victory for North Vietnam.
And the US was, like, fighting on the side of South Vietnam and then US involvement in the war was met by protest by U.S. citizens at the time. And then the US then approximately $1 trillion on the war. And this is adjusted for, like today’s inflation.
And then additional spending from domestic programs like Lyndon B Johnson’s Great Society were also going on at the time. This was to fight like racial injustices and homelessness in the United States.
Did you go back to the beginning?
Yeah, yeah, yeah, that’s it. OK. And then so this kind of this, this war definitely put a strain on the Brentwood system and LED to the its fall. See, the United States increased spending on the Vietnam War led to high level.
Inflation and over evaluation over evaluation of the US dollar like Ariel was saying, and this is because of the growing supply of U.S. dollars in circulation because of all the money the US spending on the war sending and like sending money abroad. And the US did not have enough gold to back the dollar at the fixed rate $35.
Ounce of gold like say it in the beginning and then so other countries like France and Germany saw how much the US was spending and started to doubt the system. So they cashed in their dollar reserves for US gold, which is like a fixed exchange rate. You’re able to just cash it in for the gold at any point. So they started to do this and it’s during.
The US gold reserves, even more than it already was being drained, making the Bretton Woods system even more unstable.
All right. And then so this kind of ties back to what we were saying, what Ariel was saying before about the end of Bretton Woods. This is initially this is called like the Nixon Shock when President Richard Nixon suspended the dollar to gold convertibility and transition to a floating currency.
Which means that the currency is based on supply and demand relative to other currencies as opposed to being pegged to the US dollar or gold.
Yeah.
Thank you.
Where is, where is somewhere.
You have done it perfectly. There is gold. There is a storage of money. No. Then there is dollar pay to gold.
And all currencies in the world pay dollar. Make sense?
What does this mean? This means stability, at least in monetary terms. This makes all currencies.
See.
So you don’t care to have dollars or you don’t care to have pounds, or you don’t care to have francs. Makes sense.
This is.
Stability.
And then why all this stability was broken? Because Nixon, not Nixon. I mean, Vietnam War lands 20 years.
The expenditure why German? Why Germany start printing marks during German hyperinflation? Because they need to pay by Nixon and previous governments bring more money than the money they can afford with gold because they need to pay. Make sense.
It’s a really simple story that repeats again and again and again. Why? Why they?
Prince, Prime Minister, resign.
Because of public deficit, what is one of the most important problems nowadays we have in Spain, at least in the US.
Public expenditure. All public expenditure is financed with that.
Let me summarize quick history. Recent history of humanity.
Second World War, yes, finishing 1944, then 1971.
And today, who? Who rules out one one thing before?
What was before dollar what was before dollar?
OK.
What was before dollar? No, I mean we put it on good agreement, USA becomes.
The centre of the wall dollar becomes the most powerful tool in terms of monetary terms. Yes, monetary terms, sorry. Dollar becomes powerful. What was before dollar? We used to have the power before dollar.
OK.
Oh, sorry UK, the oh, sorry you are. You are gonna say the pound British pound.
And if you think you know casimira, you know what is casimira. Casimir, I think I have talked in this class about Casimir is the most military. I said tone in the planet is between India and Pakistan. I talk about it. You look Palestine.
Have you have a Palestine?
Palestinians, the name one of the British colonies used to have Palestinians the name of and Palestine after the Second World War, was divided into two parts. One was given to Palestine and the other part was given to Israel.
Rwanda has to do with belts, but what I’m trying to say that after the Second World War, UK was not destroyed but was hard hard.
And after the Second World War, the war Reorganized USA, but the power and Britain will is a proof of that.
And there was there was the soy. I mean, youth has suffered a lot in the Second World War. And in just one, two years, a lot of movements, movements were done and Palestine were given part of Palestine. You understand what I’m saying?
In just one, two years, there were a lot, a lot, a lot, a lot of movements in just two years. These two years are absolutely important.
What Bretton Woods Agreement meant peace. Stability with gold. What?
Nixon Deed with Vietnam, agree with Vietnam War. He broke his agreement. He could not pay all the all the all the gold, Germany and France especially France was demanding. Makes sense.
So here between 1944 and 1971.
There was.
Peace, stability and public big public institutions matters. Yes, what happened after 1971? A lot of things we are going to see all these things in detail.
But what happened after?
That we we move, we move from gold to death.
We move from gold to debt. You want to bring money? What? You what? You used to. What did you need before 1970? You want to bring money? You need gold. After 1970, whole people start printing money.
I issuing debt. I owe you money and I will free or I buy your debt. I buy your debt and I have power over you.
Makes sense. Do you understand this transition nowadays? Who rules the world? The World Bank, United Nations or BlackRock? NVIDIA. All these companies.
You see that we have moved from a war after the Second World War, where everything was clear or less. Not only was clear we could reach the moon in 10 years.
This is an incredible reaching the thinking think that in the Apollo there was less power than in this phone computing power. I’m talking about computing power.
This was an incredible powerful.
Step regarding economy and after that.
Breathe, ambition and all this stuff. We get ready and this crazy things start. Yes. Yeah. Do you have? Do you have the phone one you want?
Do you want to? Where is my UK friend?
Are you prepared? Excuse me? You have sent it to me. Perfect. Sorry for not knowing.
Sure.
Oh.
Yeah.
The Florida Josh.
For the.
My name is John. I’m Alfonso, and this is all about George Soros, quote UN quote. Broke the banking of England back in 1991.
So this is George Soros. It’s not a great image friend, but that is him. He was a hedge fund manager for a quantum fund born in 1913. For the past, he studied at LSE, the London School of Economics in London.
And he, I believe, studied economics. I don’t exactly recall, but he studied a bachelor’s LSE. He then moved to New York to become a banker and was also a trader as well. In New York as well, and also opened open society foundations.
As a philanthropist, so that’s a small little insight into large.
So this is kind of the beginning of it all. The UK decides to join the ERM, which was the exchange rate mechanism in 1990 and it was pegged to the butcher mark at the time the German.
The the German currency and the biggest problem at the time was that the UK was experiencing high amounts of stagflation, so no amounts of growth and high inflation.
And as we’ll see later, this caused as the interest rates of Germany increased and many of that the UK had to follow or was either force to follow suit or would mean that the UK currency would be undervalued or be overvalued because.
Of hot money inflows for the German currency as people wants to buy the German the Deutsche mark as higher interest rates means that more people want to buy your currency because it means that you’ll get higher returns. And and yeah, we’ll talk about that later.
So as you can see, the Germany raised interest rates around here and the UK economy was too weak to match this in this rising interest rate. And as Germans decides to raise interest rates the.
British interest rate decided to keep it at level 8 or slightly decrease by about 25 basis points. I believe it was and it meant that a lot of people wants to buy the German mark because of hot money and furs. As I explained earlier. And that meant that they were the.
Price of the job mark increased and it meant that the power became overvalued.
So George Soros decided to shorting the pound by using derivative strategies in the quantum fund to borrow a very large amount of such pounds. And essentially he was betting on the pound’s eventual.
Instability and volatility as the UK economy continued to experience a lot of inflation and in comparison specifically to the German economy, the German economy was starting to do incredibly well and the Deutsche Maker was proving to be a very.
Like unsustainable marker to be tied against and many other hedge funds also saw this, George Soros just got out and do it earlier than other folks and was able to secure a $10 billion contract. Initially, it wasn’t 10 billion, but as.
He was closing in on 1991 when this again he he like gradually built his position before the massive short.
And so the the the Bank of England did what it could to try to save the pound as the pound. The pound started rapidly up the drop. So they initially first raised the interest rates to 10% and on the timeline they kind of ended up going to 12 percent, 50%. And then they used almost.
All of their reserves to try to buy back such pounds and save the currency, but they went through all their funds and they were unable to actually completely like salvage it and the pound fully collapse.
So Soros, due to this profit of about $1 billion in one day, and the UK lost 3.3 billion in their total reserves. And so that’s that’s how he was calling the man that broke anything.
Yeah.
So this is like a classic specific attack case of exposed risks, which is what hedge funds really leverage or try to make, including sources hedge fund as well, but as.
Johnson as well, that it was a lot of other headphones as well. You’ve noticed a lot of economists noticed that the panel was overvalued and this meant that a lot of the headphones as well, but.
The palm would drop them. Besides the shorter plan as well. But the other day it was a very large case of markets versus policy like, I mean policy that was put into place was just unstable and and.
The economies at the time were not suitable for such marking, and the and the market simply just reacted. George Soros could be pinned as a man who tried to damage a country’s economy, but in reality the entire markets were just reacting based off of.
Their efficient theory.
Perfect. Yes, please. With this you can see and I’m going to go so quick. It’s something really hard to explain. You have to be great.
And you have done it absolutely great. What your sort of thing was help, not you. It was going to happen and your service make it happen sooner. Personally I prefer things and things has to do with.
Suffering, I prefer things to happen quickly. The quicker the better. It was not your source fault, just one quick one quick question.
How long did the Bank of England took to drop interest rates? Sorry to increase from 11:50 and from 12 to 15%. How long did it take?
At 10:00 in the morning, all these things happen at night at 10 in the morning when when they show the attack it was being produced against the pound.
They increase attend from 11:50.
At 10:30 they showed that they were still being attacked and they increase again interest rates. This increase in interest rates happen in less than one.
Hour. Think about one car. You press the brake, the car stop. No. Think about the same car just falling down in a Cliff. You press the brake and nothing happened. Have you understood what I’m saying?
We will continue talking about these next day. Thanks a lot.