As former Prime Minister Harold Macmillan famously never said (or
perhaps he did – who can know, now?), the greatest danger a politician faces is
‘Events, dear boy, events’.
Central bankers sometimes adopt a similar approach, and in just six months
following the Great Crash of October 2008, the Bank of England dropped UK
interest rates six times in response to 'events' happening in the
world at large and the UK in particular. No-one questioned whether or not it was necessary, and perhaps it was.
Yet, in the 103 years (yes, one hundred and three YEARS)
between April 1719 and May 1822, the UK steadfastly refused to budge on base
rate, which stayed rock solid at 5%. Of course (you might say) there wasn’t so
much mayhem in the world economy, or indeed in the UK economy, during those
halcyon days, surely?
Er, actually, yes.
Whilst the Bank of England stayed true to 5%
for 103 years, Britain experienced a long list of exciting ‘events’, including:
28th September 1720 : Bursting of the South Sea Bubble
23rd October 1739 : Start of the War of Jenkins’ Ear
16th April 1746 : Battle of Culloden
14th September 1752 : Adoption of the Gregorian Calendar
18th September 1759 : French surrender of Quebec to the British
10th February 1763 : Treaty of Paris, ending the Seven Years War
16th August 1765 : Acquisition of Bengal by the East India Company
29th April 1770 : Captain Cook landing in Australia
16th December 1773 : Boston Tea Party
4th July 1776 : American Declaration of Independence (from us)
9th October 1779 : First Luddite riots
28th February 1784 : Wesley breaking from the Church of England
28th April 1789 : Mutiny on the Bounty
14th July 1789 : Storming of the Bastille
1st February 1793 : Beginning of the Napoleonic Wars
22nd February 1797 : The last invasion of mainland Britain
26th February 1797 : Bank of England becoming insolvent
9th January 1799 : William Pitt’s introduction of income tax
15th May 1800 : George III’s survival 2 assassination attempts
21st October 1805 : Battle of Trafalgar
25th March 1807 : Abolition of the slave trade across the British empire
11th May 1812 : Assassination of Prime Minister Spencer Perceval
16th June 1812 : American declaration of war on Britain
18th June 1815 : Battle of Waterloo
6th February 1819 : Founding of Singapore by Sir Stamford Raffles
16th August 1819 : The Peterloo Massacre
There seems a particular irony in 26th February 1797 not having any effect on the base rate.
One wonders what the Bank's MPC would have made of those 'events',
and just how much Quantitative Easing the populace might have enjoyed
had they been in charge of the Old Lady of Threadneedle Street in the 18th
century.
Or perhaps we really were made of sterner stuff then.
