Late that day, the hedge-fund trader Louis Bacon called Stan Druckenmiller. The two talked about how the drama might play out, and Bacon said he was still finding ways to dump sterling.

"Really?" Druckenmiller blurted out. He told Bacon to wait, and a few seconds later Soros joined the call.

"Where did you get the market?" Soros demanded furiously.

Around 2 the next morning, Druckenmiller returned to the office. He wanted to be at his desk when London trading reopened and the Bank of England would be forced to resume purchases of sterling. Before he had even taken his coat off, Soros checked in by telephone. Druckenmiller hit the speaker button, and his boss's disembodied East European accent filled the office, urging him to redouble sales of the British currency.

When the markets opened in London, the Bank of England did its best to boost sterling, acting on the plan that Lamont had authorized the previous evening. It intervened twice before 8:30 AM, each time buying £300 million. But the buying had absolutely no effect. Druckenmiller was manning his cockpit on the other side of the Atlantic, clamoring to sell sterling by the billion. The Bank of England carried on intervening, not realizing how completely it was outgunned. By 8:40 AM it had purchased a total of £1 billion, but sterling still refused to budge. Ten minutes later, Lamont told Prime Minister John Major that intervention was failing. Britain would have to raise interest rates in order to protect sterling.

To Lamont's frustration, Major refused to authorize a rate hike. He had been responsible for taking Britain into the exchange-rate mechanism. He feared that his credibility would collapse if the policy was seen to be failing; he might face a leadership challenge from a member of his own cabinet. Major pleaded that new economic data would come out later that day. He told Lamont to hang tough in the hope that the markets would subside eventually.

Every hour that went by, hedge funds and banks sold more sterling to the Bank of England, which was being forced to load up on a currency that seemed sure to be devalued. Britain was presiding over a vast financial transfer from its long-suffering taxpayers to a global army of traders. At 10:30 AM Lamont called John Major again to urge a rise in interest rates.

While Lamont was calling the prime minister, British officials did their best to project confidence. Eddie George, the number two at the Bank of England, went ahead with a long scheduled meeting with David Smick, a financial consultant who fed political intelligence to Druckenmiller and Soros. Smick showed up at the Bank of England's exquisite building on Threadneedle Street to find George in apparently fine form, decked out in a checkered shirt and striped tie in the manner of a London banker. "We have it all under control," George said cheerily; in the extreme case, which was unlikely, to be sure, the Bank of England would raise interest rates by a full percentage point to see off the speculators. Smick wondered whether George understood the weight of the hedge-fund selling that was forcing down the value of the British currency. The avalanche had begun. It might be too late to stop it.

Smick summoned up his nerve and asked George straight out: "Aren't you worried that you may have slipped too far behind the curve on this thing?"

George betrayed a look of mild annoyance. He was about to respond when the telephone rang. After a minute of intense conversation, he hung up.

"I've learned we've just raised interest rates by two hundred basis points," he said softly--a full two percentage points. Then he rose and shook Smick's hand and left the room running.