An ardent fan of Milton Friedman’s neoliberal economic theories,
Thatcher was not a strong proponent of fixed exchange rates.
However, in actuality, her Treasury adopted exchange rate targets
that followed the German mark in the second half of the 1980s,
only to withdraw from them shortly thereafter when the pound
began to lose value. In 1990, she reluctantly joined the European
Community’s Exchange Rate Mechanism (ERM), which formally
pegged the pound to the mark. But this policy faltered when
German reunification fuelled inflation and drove up interest rates.
Faced with the possibility of a serious economic downturn
Thatcher’s successor, John Major, withdrew from the ERM in
1992. This decision filled the coffers of shrewd currency
speculators like the billionaire George Soros, who had wagered
enormous sums against the British pound.