Streetwise — Chapter 8: De-Vals and Re-Vals

1. 1. In the mid-1980s, fixed or semifixed exchange rates under the European Exchange Rate Mechanism created predictable devaluations and revaluations that offered lucrative trading opportunities.
2. 2. The Plaza Accord in 1985 effectively devalued the dollar, creating a major currency trading opportunity.
3. 3. Goldman Sachs leveraged its brand and client base to build a forex business, differentiating from traditional commercial banks by offering innovative products like currency options and M&A-related derivatives.
4. 4. Goldman Sachs hired top economists like David Morrison and Gavyn Davies to provide research and forecasting, which gave the forex sales force credibility and drove proprietary trading.
5. 5. Goldman Sachs gained a competitive advantage in hiring by recruiting strivers from non-traditional backgrounds, such as scholarship students from state schools and Korean-descended bankers in Japan.