The collapse of the South Sea Bubble, 1720, by William Hogarth © AKG-Images
St John Brodrick, an Irish MP, tells his father, the Irish Lord Chancellor, of the collapse of the South Sea Bubble in 1720. The enterprise was founded in 1711 to consolidate and reduce the cost of national debt: “Various are the conjectures why the South Sea directors have suffered the cloud to break so early... They have stretched credit so far beyond what it would bear, that specie proves insufficient to support it. Their most considerable men have drawn out, securing themselves by the losses of the deluded, thoughtless numbers, whose understandings have been overruled by avarice and the hope of making mountains out of molehills. Thousands of families will be reduced to beggary. The consternation is inexpressible—the rage beyond description, and the case altogether so desperate that I do not see any plan or scheme so much as thought of for averting the blow, so that I cannot pretend to guess what is next to be done.”
Claud Cockburn, a British journalist in New York, recalls Black Thursday in the Wall Street Crash on 24th October 1929: “On the subway to the City Hall Square the change [in the atmosphere] was as evident as a notable change in the weather. At the Sun office [a now defunct New York newspaper], there was just that nip in the emotional air which you get on the day after a big air raid, when people have grasped that the bombers really did get through last night and may do so again today. It was a situation in which nobody says much, but everyone knows what everyone else is thinking and knows that everyone else is a little frightened too. "As the electric clocks ticked off the minutes until the opening of the market, the tension was nearly intolerable. I do not mean that any of us had much idea of what was really going to happen except perhaps Louis Hinrichs [a financial journalist and Cockburn’s immediate superior at the Times]. None of us, I am sure, thought, ‘This is a turning point, one way or another, in the history of the 20th century.’ There were some very smart people hanging over the ticker at the opening of the market that morning in the Sun office, but none of them was quite smart enough to know that, as they saw in those first few astounding minutes shares of Kennecott and General Motors thrown on the market in blocks of five, 10 and 15 thousand, they were looking at the beginning of a road which was going to lead to the British collapse of 1931, to the collapse of Austria, to the collapse of Germany—and that at the end of it, there was going to be a situation with Adolf Hitler in the middle of it… "It seemed pointless to go through the usual routine of telephoning to ‘contacts’ and informants and asking for their comments on the situation. There was no sensible comment that anyone could make, and furthermore you had the feeling that there was no question you could ask which would not strike the man at the other end as some kind of affront. Even so, I scarcely began to guess how bad the situation really was until Hinrichs, in a low voice, said to me, ‘Remember, when we’re writing this story the word ‘panic’ is not to be used.’”
Barbara Castle, minister for transport in Harold Wilson’s Labour government, writes in her diary on 16th November 1966: “As soon as [the Cabinet meeting] started Harold said, ‘The chancellor and I have an important statement to make. We must make it first and then deal with any other items for which there is time.’ We all stiffened and Jim [Callaghan, the chancellor] began heavily, ‘I have decided that the pound must be devalued. If Cabinet agrees, the necessary machinery will be set in motion and devaluation will be announced on Saturday. This is the unhappiest day of my life.’ We all sat very still. “He then elaborated on the recent run on the pound. We could arrange another massive loan, but the thought of going through the whole process again was sickening. He and the PM therefore recommended 14.3 per cent devaluation. This was the only alternative to further deflation, which would be intolerable... “In conclusion he said, ‘This is the most agonising reappraisal I have ever had to do and I will not pretend that it is anything but a failure of our policies.’”
Niall Ferguson describes Britain’s exit from the European Exchange Rate Mechanism (ERM) on 16th September 1992: “Moonlighting as a newspaper leader writer while I was a junior lecturer at Cambridge, I became convinced that speculators like George Soros could beat the Bank of England if it came to a showdown. It was simple arithmetic: a trillion dollars being traded on foreign exchange markets every day, versus the Bank’s meagre currency reserves. Soros reasoned that the rising costs of German reunification would drive up interest rates and hence the Deutschmark. This would make the Conservative government’s policy of shadowing the German currency—formalized when Britain had joined the ERM in 1990—untenable... So sure was Soros that the pound would drop that he ultimately bet $10bn, more than the entire capital of his fund, [on it]... I was equally sure that the pound would be devalued, though all I had to bet was my credibility. [One night] I went to the English National Opera, to hear Verdi’s The Force of Destiny. It proved a highly appropriate choice. Someone announced at the interval that Britain had withdrawn from the ERM. How we all cheered—and no one louder than me (except possibly George Soros). His fund made more than $1bn as sterling slumped.”
