Harold Wilson on the July Crisis +

from Geoff Coggan "Once again the screeching of brakes, the scorching of tyres, jolt and jerk. Bank Rate at 7% is almost the highest in our peacetime history. Have we not learnt by experience? .... We face an immediate run on Sterling. The economy is so weak that last year we avoided disaster only by borrowing on a vast scale from the International Monetary Fund .... and by .... attracting ‘hot' money here by high and costly interest rates. Of course, the immediate effects of doing this were predictable. Once the Chancellor made clear to the speculators that Sterling would not be devalued, once he buttressed his scanty reserves by massive borrowing, it was obvious that the 'bears' would run to cover and the immediate crisis would be solved for a time. .... "But,of course, he had to satisfy the international banking community by harmful restrictions and by masochistic and irrelevant cuts in our standard of living, because he believes that international speculators are impressed only by actions which, in the long term, harm the economy. It is quite obvious that the 7% Bank Rate, apart from its harmful effects on our internal structure, adds tens of millions of pounds to our annual outgoings on invisible accounts through the increased charges paid across the exchange. ...i In so far as the tax measures and the Bank Rate have their intended effect on the mass production industries, such as motor cars, the effect of course will be to raise unit costs and to make us less competitive."