By 7pm, when Lamont stepped blinking into the cameras on the Treasury pavement with the young David Cameron behind him, it was all over bar the City cork-popping and Westminster recriminations. Having fallen from a target level of 2.95 Deutschemarks through its ERM floor of 2.78, the pound slumped to 2.50 by the end of the month. The Major government’s credibility never recovered, but we now see that the sellers did Britain a service by releasing us from the ERM stranglehold. A more competitive pound and the freedom to set our own interest rates were the foundation of what we now look back on as a golden period of growth in the mid-Nineties.
Yet it was a moment of deeply disturbing realisation. Stampeding markets could overwhelm the firepower of the central banking system in a matter of hours. Invisible investors like Soros, owing no allegiance as citizens, could place bets big enough to change economic outcomes for entire nations. That was how the future was going to be, and 20 years on it should still frighten us all.
Quite why it should frighten us that the politicians cannot set inefficient prices for the rest of us I\’m not sure.
Recall Canute\’s real lesson: those tides of the markets are the reality, the protestations of the \”rulers\” ineffective in the face of them. Accept this and build your plans for the world around this fact rather than protest like Lear upon the blasted heath.