Economic Developments: Black Wednesday Flashcards
When was Black Wednesday? (To the month)
September 1992
What caused Black Wednesday?
The ERM
Why did the ERM cause Black Wednesday?
The pound was at too high of an exchange rate
Why was the Pound at a high exchange rate?
It’s exchange rate was aligned with the German Exchange Rate
What did it mean if the ERM was in control of the British Exchange rate in terms of control over economic issues?
Britain would be less able to deal with economic issues
How did people respond to the pound being at a high exchange rate?
They started to sell it
What was the event called of rapid large-scale selling of the pound?
Black Wednesday
What would have been a solution to prevent a continuation of Black Wednesday?
Increase interest rates
Why was Major initially wary of increasing interest rates?
It would be political suicide
What did Major put interest rates up to at first?
12%
How did the public respond to the first interest rate increase?
They continued to sell their money
What did Major put interest rates up to after the continued selling of the pound?
Put them up to 15%
How much did the Bank of England spend an hour to protect the pound?
£2 billion an hour
How did Britain have to respond to Black Wednesday?
They had to leave the ERM
Name a newspaper Major lost support from with Black Wednesday
The Sun
