Lights out for darker skies: The First World War started with a crash

For the City, the Great War began with a financial crisis. Even before Britain committed itself, Europe’s great powers ranging against one another spelled disaster: the collapse of the magnificent, peaceful edifice of international trade built between the empires.

As told in Jerry White’s riveting account of London in the war, Zeppelin Nights, on Friday 31 July 1914 the London Stock Exchange closed indefinitely. Lloyd’s of London refused all business except to insure war risks. The bank rate suddenly doubled from 4 per cent to 8 per cent – its highest level in 40 years. Long queues formed outside the Bank of England, eager to exchange notes for the harder currency of gold.

The drumbeats came faster and faster. Panic buying of supplies by householders began. On Saturday, stores started refusing to give out gold in change and the bank rate rose again, now to 10 per cent. On Sunday, by royal proclamation a one month moratorium on payment of bills of exchange was declared, slight relief for those in the business of international trade.

But there was no real let up. In the debate in the House of Commons on Monday, the foreign secretary Sir Edward Grey warned: “We are going to suffer, I am afraid, terribly in this war whether we are in it or whether we stand aside. Foreign trade is going to stop, not because the trade routes are closed, but because there is no trade at the other end.”

Monday’s bank holiday was extended until Thursday while a paper pound note was rushed into circulation by the Treasury, a thin and poorly etched substitute for gold sovereigns of the past.

On the second day of that long bank holiday, a century ago today, Britain joined the war. And with it, the worst hopes of all were realised. A world was ending, and the financial catastrophe already underway only foreshadowed the bloody horror that lay ahead.

Men of the City would join the ranks who paid this price too, as the many memorials in the square mile attest. The lamps, as Grey mused to a friend in his office, were going out all over Europe.

With Europe at peace again, it is hard to appreciate the scale of the disaster, economic and human, of the first world war – so large that, even now, UK taxpayers are still paying off the debts incurred. But today is a moment to remember with sorrow and gratitude the generations who paid the ultimate price. The debt we owe the fallen for their sacrifice will never end.

First published: City A.M., 4/8/14

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Filed under Economics, History

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