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World War One's Financial Crisis Parallels with 2008

By Hugh Pym
Chief economics correspondent, BBC News

Former Bank of England Governor Mervyn, now Lord, King said at the height of the 2008 banking crisis that it was the worst since August 1914.

An expert on economic history, King liked to point out that there was nothing comparable in the 1930s which many saw as the obvious parallel to the financial implosion triggered by the collapse of Lehman Brothers.

Markets wake up
King believed there were clear similarities between 2008 and 1914 - a flight to safe assets, a drying up of liquidity and market interest rates soaring.

In the final days of July 1914, financial markets woke up to the alarming reality that a European war was inevitable.

Queues built up at the Bank of England, as investors scrambled to change their paper money for gold (with sterling on the gold standard, the Bank was obliged to provide convertibility for the currency, though the government quickly opted to suspend the link to gold).

The Bank of England's official rate for lending operations soared from 3% to 10% in a matter of days. On Friday, 31 July, the stock exchange closed and commercial banks shut their doors for a week.