BACKGROUND: On the 10th of September 1992 John Major gives a speech to the Scottish CBI. The very next day the Italian government tried desperately to protect the Lira from devaluation. The cause of this attack on the Lira was due to a rise in German interest rates. This rate increase resulted in a lack of confidence that the currencies in the European Exchange Rate Mechanism (ERM) basket would be willing to match Germany. They would be required to raise rates to maintain their peg to the German Deutsche Mark and remain in the ERM. Only 6 days after this speech, Black Wednesday occurs costing the British government billions of dollars and forcing the pound sterling to come crashing out of the ERM. For historical context please see Black Wednesday (BBC 1997).
TWIST: John Major’s speech occurred on a Thursday evening and the attack on the Lira occurs on a Friday. In the play these two events are reversed. The attack on the Lira happens first and then the Ghosts of Economies Past, Present, and those Yet to Come visit John Major on the night of Sept. 10th. After this prophetic vision he gives his speech to the Scottish CBI but it has been completely changed given the events of the previous day and the vivid nightmare and persistent daymare which continues until the moment when he delivers his speech.
John Major sees the news reports as to the attack on the Lira, has several discussions with the finance ministers of both Italy and Germany. He then goes to bed troubled and meets with the ghosts who provide the requisite prophetic visions. The most critical of these visions involves the death of innocent British children.
He awakes the next day and wishes to forget about the visions. Unfortunately he finds himself in a persistent state of mixed reality where echos of the visions persist telling him that he knows what he must do. He is driven to find a radical economic theorist to ask him about his theory of monetary policy. The theory proposed is one of “selective interest rates.” This teaching is 100% in diametric opposition to anything John Major ever did believe or currently believes. The professor “enlightens him” and he becomes a changed man, with the help of the daymares of course.
Yet, he has strong reservations, he questions his sanity. He knows that this will end his entire political career and his reputation as a respectable member of society. The only reason why he believes it is worth it is because, he knows that the Bank of England cannot defend its currency peg, he feels certain of this inevitable fate. Any attempt to defend the peg is to line the pockets of the speculators at the cost of the British taxpayer. This he finds to be absolutely repugnant and appalling.
His defense of the peg to the German DM is the opposite of Robin Hood. It is to rob the poor in order to give wealth to the super rich outside of the country. To defend the peg is to allow wealth to leave Britain. Given his conviction that the economic downturn will result in a loss of life if the Bank of England does not maintain reserves to sustain its own economy, he becomes convicted the sacrifice is worth it.
His speech starts off tame initially but quickly becomes fiery but always proper and within character. He denounces the previous days speculation on the Lira and casts blame on the traders for attempting to bankrupt the Italian central bank. He accuses the traders of greed and corruption. To the absolute shock of his party, he warns that the same thing will happen to Britain if it attempts to defend the pound. He proposes that parliament pass new legislation immediately over the weekend before the speculators have a chance to crash the market which would protect the pound from being shorted by traders. These market controls run contrary to everything he had once believed about a free market but he fees he has no choice.
In his denouncing of free market policies for theories which he himself previously labeled as radical quack medicine those within his party start to rise up against him interrupting his speech. But he is Sir John Major, he is the prime minister. People feel duty bound to respect him, they let him finish.
Those in his party feel forced to pass this detestable anti-free market legislation. It passes by one vote. In the aftermath there is still just as much financial chaos and turmoil as there was on Black Wednesday. The GBP still crashes out of the ERM. But, because the Bank of England never attempted to defend its currency peg it was not forced to give up the tens of billions of dollars of foreign currency in its reserves. By imposing controls upon the free market which raised interest rates to astronomically high levels of 30% for those outside of Britain or those who sought to borrow amounts greater than 1 million pound sterling some of the pain is lessened. This prevents some traders from shorting the pound.
This doesn’t avert the crisis but it allows for greater reserves which provide more relief through social welfare programs to Britain’s affected by the crisis. Thus John Major calls George Soros’s threat that began with him shorting the Lira. He does so not by defending the pound and keeping it in the ERM but by retaining reserves rather than allowing speculators to profit off of Britain’s misery. No profit is made by the speculators that day.
In the light of the current BREXIT events, there is need of political will. Politicians must do the difficult thing which is good for people, yet bad for long held established traditions. It doesn’t say what this is either leave or stay, just that difficult choices must be made that violate our previously held beliefs.