How to avoid an economic disaster - Grexit

In 2010, I wrote about financial disasters – the South Sea Bubble, the bear market of 1972-4, the Great Crash of 1987, and the banking crisis that began in 2007 – for my book, London’s Disasters. Now I’m watching another – the attempt to keep Greece in the Eurozone.

Greece only got into the euro thanks to some heroic book cooking, but as long as the world economy kept growing, no one worried. A bit like the South Sea Company. It was worthless, but as long as the share price kept going up, everything was fine. But bad times reveal the truth, and the house of cards comes crashing down.

Over the last five years, more than €200 billion has been spent trying to keep Greece in the Eurozone. But you cannot make water flow uphill. Greece cannot pay its existing debts. Loading it with more debt would be crazy. Grexit will not be easy, but the alternative is worse. The sooner Greece leaves the euro, the better it will be for Greece and for the rest of Europe.

Greece cannot live with the euro rate of exchange. It desperately needs a devaluation. That cannot happen inside the euro. It is time to stop throwing good money after bad.

Simon Jenkins argues the case well - http://www.theguardian.com/commentisfree/2015/jul/08/greece-catastrophe-eurozone-grexit-default

London's worst ever riot

The riots of the last few nights have been frightening enough, but fortunately they have, so far, been nothing like the worst ever to have disfigured London.   It came in June 1780 as people got angry over a very minor dilution of the laws discriminating against Roman Catholics.

The ringleader was a young MP on the make, named Lord George Gordon, and what became known as the Gordon riots began with an invasion of Parliament, then soon developed into an attack on anyone or anything connected with Catholicism, like the Bavarian and Sardinian embassies, priests’ houses, homes owned by Catholics, a chapel.

Then the target list broadened to take in the homes of magistrates who had imprisoned rioters, and French Protestant refugees.  Well, they were foreign weren’t they?  How was a fellow supposed to tell the difference between a Protestant Frenchman and a Catholic?   The rioters destroyed  four prisons, and released the inmates, plus a distillery where they released the gin.

The authorities faced heavy criticism over what was seen as their initial rather relaxed attitude to the disorder, and after five days the army was turned out, while even the great radical, John Wilkes, took up arms against the mob.    By the time order was restored, nearly 300 had been killed.    For the full story, see London’s Disasters; from Boudicca to the Banking Crisis.

Black Thursday + 81

This day…..81 years ago was dubbed “Black Thursday” – generally regarded as the start of the Great Crash of 1929. During the 1920’s, US share prices had gone mad, as investors piled in – many of them buying shares for just a few dollars down and borrowing the rest of the price.

It was all fine so long as stocks kept climbing, but in September 1929, they began to stall. Thursday, 24 October was the first real day of panic, with a record 12.9 million shares traded. As the market began to fall, banks and investment companies piled in, buying huge blocks of shares to try to hold the line.

But even they did not have the money to stave off the inevitable. October 28, “Black Monday”, saw the market fall by 12%, and it was followed by a similar fall on “Black Tuesday.” Politicians fell over each other in the rush to proclaim that there was no problem, but this was actually the beginning of the Great Depression, which overhung the world’s economy for a decade, and blighted millions of lives.

Last week, the governor of the Bank of England, Mervyn King, warned that Britain faces a grim decade was we try to recover from the banking crisis.

Chile - disaster averted

Just back from Turkey in time for the wonderful news of the rescue of all 33 of the trapped Chilean miners, after 69 days underground. There are some dental and eye problems and one case of pneumonia, but overall they seem in remarkably good shape.

When it was first discovered they were still alive after 17 days, it was thought that it might take until Christmas to get them out. The dramatic reduction in the time needed appears to be thanks to the drafting in of a drill normally used in the oil industry.

Two other drills, which each start with a small, pilot hole before widening the shaft, were also used, but the Schramm T-130 starts with a wide hole, and soon outpaced the other two. Chile’s president, Sebastian Pinera, has promised “very radical” improvements to health and safety regulations in mining and other industries.

For other stories of people trapped for long periods underground, see my blog of August 24.

*Latest articles on London’s Disasters: from Boudicca to the Banking Crisis – Fire News (Aug/Sept issue) and H&F News (Hammersmith & Fulham) Sept 21 edition.

Financial disasters 3 - the banking crisis

Earlier this month, the BBC’s business correspondent, Robert Peston, revealed that the new Basel rules designed to prevent a repeat of the banking crisis have been watered down into ineffectiveness. http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/08/basel_allows_banks_to_play_the.html.

That’s a shame. In London’s Disasters, I tell the story of the crisis, and of how the bail-out of Britain’s banks had cost £850 billion by December 2009. That’s about £14,000 for every man, woman and child in the country.

I mentioned in my blog of Aug 13^th that those responsible for the South Sea Bubble in the 18^th century had their estates confiscated. (They got off lightly. One MP wanted them to be tied up in sacks and thrown into the Thames.)

No such problems for those responsible for the banking crisis. We all know the story of Sir Fred Goodwin’s pension, and of how in February 2010, RBS announced that even though it had lost £3.6 billion in 2009, it wanted to pay out £1.3 billion in bonuses. (See also my blog of Jan 20, Feb 10 13, 16, 18, 2009.)

*More coverage of the book from the Wandsworth Guardian:-http://www.yourlocalguardian.co.uk/news/local/wandsworthnews/8331276.Wandsworth_s_past_disasters_revealed/

and Docklands 24 http://www.docklands24.co.uk/content/docklands/news/story.aspx?brand=Docklands&category=news&tBrand=docklands&tCategory=znews&itemid=WeED17%20Aug%202010%2015%3A35%3A37%3A037

London's Disasters - my new book

Sorry about the lack of blogs over the past few days. I’ve been working on publicising my new book – London’s Disasters: from Boudicca to the banking crisis, published by the History Press. http://www.thehistorypress.co.uk/products/Londons-Disasters-from-Boudicca-to-the-Banking-Crisis.aspx. It is an update and expansion of my Disastrous History of London which was first published seven years ago as Capital Disasters.

I was interviewed this morning on Time 107.5, the local radio station for Havering, Barking, Dagenham and Redbridge http://1075.timefm.com/ about the sinking of the Princess Alice on September 3, 1878 on the Thames close to the Barking Creek sewage treatment works.

About 640 people drowned after the pleasure steamer collided with a collier on a lovely evening. It is perhaps not surprising that this was the worst shipwreck in London’s history. When you think of the fierce storms that strike our coasts, and the treacherous rocks around them, it is more surprising when you realise this was one of the worst shipwrecks in British history.

One of the consequences of the disaster was a tightening up of the rules of navigation on the Thames. Confusion over how vessels should pass each other was one of the factors that caused the accident. For the full, dramatic story, see London’s Disasters.

Financial disasters

Apologies for the silence over the last few days. I have been updating The Disastrous History of London which will appear, with a new title, later in the year.

The main update covers the London bombings of July 7, 2005, which happened after the book was written. I have also added a fresh chapter on financial disasters, which includes the South Sea Bubble of 1720, the stock market crashes of the early 1970’s and of 1987 (“Black Monday”) and the banking crisis of the last couple of years.

The South Sea Bubble is great fun to write about – a story full of fascinating characters like the wonderfully named Sir John Blunt of the Sword Blade Company, who played a key role in ramping the share price through misinformation and bribery. Then, among those who made a mint were two mistresses of King George I – one enormously fat, the other spectacularly thin.

As with house prices in the banking crisis, so long as the South Sea Company share price kept climbing, the powers that be never noticed there was a problem. And, in spite of the havoc that its collapse wrought, the company carried on happily for another 130 years. Who would bet against the same thing happening with the banks today?