II. EFFECT IN THE CITY

MONDAY, 3rd September 1910, was indeed Black Monday for London.

By midnight on Sunday the appalling news had spread everywhere. Though the full details of the terrible naval disasters were not yet to hand, yet it was vaguely known that our ships had been defeated in the North Sea, and many of them sunk.

Before 7 a.m. on Monday, however, telegrams reaching London by the subterranean lines from the north gave thrilling stories of frightful disasters we had, while all unconscious, suffered at the hands of the German fleet.

With London, the great cities of the north, Liverpool, Manchester, Sheffield, and Birmingham, awoke utterly dazed. It seemed incredible. And yet the enemy had, by his sudden and stealthy blow, secured command of the sea and actually landed.

The public wondered why a formal declaration of war had not previously been made, ignorant of the fact that the declaration preceding the Franco-German War was the first made by any civilised nation prior to the commencement of hostilities for one hundred and seventy years. The peril of the nation was now recognised on every hand.

Eager millions poured into the City by every train from the suburbs and towns in the vicinity of the metropolis, anxious to ascertain the truth for themselves, pale with terror, wild with excitement, indignant that our land forces were not already mobilised and ready to move eastward to meet the invader.

As soon as the banks were opened there was a run on them, but by noon the Bank of England had suspended all specie payments. The other banks, being thus unable to meet their engagements, simply closed the doors, bringing business to an abrupt standstill. Consols stood at 90 on Saturday, but by noon on Monday were down to 42–lower even than they were in 1798, when they stood at 47¼. Numbers of foreigners tried to speculate heavily, but were unable to do so, for banking being suspended they could not obtain transfers.

On the Stock Exchange the panic in the afternoon was indescribable. Securities of every sort went entirely to pieces, and there were no buyers. Financiers were surprised that no warning in London had betrayed the position of affairs, London being the money centre of the world. Prior to 1870 Paris shared with London the honour of being the pivot of the money market, but on the suspension of cash payments by the Bank of France during the Franco-German War, Paris lost that position. Had it not been that the milliards comprising the French War indemnity were intact in golden louis in the fortress of Spandau, Germany could never have hoped to wage sudden war with Great Britain before she had made Berlin independent of London in a money sense, or, at any rate, to accumulate sufficient gold to carry on the war for at least twelve months. The only way in which she could have done this was to raise her rate so as to offer better terms than London. Yet directly the Bank of England discovered the rate of exchange going against her, and her stock of gold diminishing, she would have responded by raising the English bank-rate in order to check the flow. Thus competition would have gone on until the rates became so high that all business would be checked, and people would have rea