I'm not an economist, so a lot of the fine detail of the Northern Rock near-catastrophe
has passed right over my head. But I watched it start.
I saw Robert Peston on News 24 breaking the news that the Northern Rock had borrowed funds from the Bank of England to tide itself over in the crisis. Now, Peston made the point - made over and over again, with a decreasing sense of credibility, in the following days by various people in authority - that if the Bank of England had at any time thought the Rock was going to go tits-up, it wouldn't have lent them the money. But the tone of the News 24 report was...shall we say, a little hysterical, underlining again and again how unusual this was and questioning whether the Rock was still a going concern.
A lot of people with money in the Northern Rock saw that article. And many others heard about it or saw other, even more hysterical, articles about it. And the next morning they were queueing outside Rock branches to take their money out. And the media were there to interview them and stoke the hysteria even further.
As I type this, things seem to be recovering. The Government guaranteed all deposits at Northern Rock and the Bank of England pumped another £4.4 billion into the financial markets and said it would provide short-term funding to other banks to stop the crisis getting completely out of control.
(Incidentally, where are the Bank of England when I'm
having a financial crisis, eh?)
But for a little while it looked as though the people who rushed to take their money out could have crashed the Northern Rock. I don't suppose I can blame them, but for a while it looked as though the news stories had sparked a self-fulfilling prophecy by panicking people into withdrawing - as I write this - getting on for four billion quid from a bank that was already having financial problems.
As an aside, and this is just idle pondering, does any of this seem kind of familiar
to anyone? In the early days of the Blair government we had foot and mouth, the 2000 petrol crisis - caused by panic buying - which only ended when the Treasury stepped in, and the 9/11 terrorist attacks.
The only thing we haven't had so far in the early days of the Brown government is a Royal killed in a car crash...