In July 1983 an agreement was reached between the British government and the London Stock Exchange that was to transform the London securities market in October 1986. The result was a revolution that extended all the way from the design of the market to those permitted access to the governance of those who traded. Given the speed of change, it was termed ‘Big Bang’ by contemporaries. As the scale of the transformation became known, politicians were quick to claim credit for what had been achieved. Subsequently, Big Bang has been regarded as one of the crowning achievements of the Conservative government led by Mrs Thatcher, providing the foundation for the City of London's re-emergence as the leading international financial centre. However, only now is evidence emerging of the intentions of those involved at the time rather than as expressed in the light of hindsight, which casts doubt on what they were seeking to achieve, whether viewed from the perspective of either the politicians or those in charge of the Stock Exchange. Instead, the longer-term pressure for change in the London securities market, the chain reaction caused by abolition of fixed-commission charges, and the proactive role of the Bank of England appear to be of greater significance. What an examination of the process leading up to Big Bang in 1986 reveals is the complexity of political decision involving the financial sector and the danger of unforeseen consequences. One small change can create a tipping point if the result is to remove an essential element within a complex system.

We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasising the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes ([1930] 1971) labelled this positive relationship the ‘Gibson Paradox’. A number of theories have been put forward as possible explanations of the paradox but they do not fit the long-run pattern of the relationship. We find that a formal model in the spirit of Wicksell (1907) and Keynes ([1930] 1971) offers an explanation for the paradox: where the need to stabilise the banking sector's reserve ratio, in the presence of an uncertain ‘natural’ rate, can lead to persistent deviations of the market rate of interest from its ‘natural’ level and consequently long-run swings in the price level.

The collapse of the ambitious and experimental Ayr Bank (Douglas, Heron & Co.) was the central episode of the 1772–3 British credit crisis and served as a direct influence on Adam Smith's monetary analysis in the Wealth of Nations. This article identifies the issuance of redeemable annuities in response to the bank's stop of payments in June 1772 and the distressed nature of its asset liquidations afterwards as the main reasons behind the size of its losses. It furthermore uses primary manuscript evidence to reconstruct and extend the existing narrative of this famous episode, from the planning stages in 1773 while the bank was still fighting for its survival, to the retirement of its banknotes by the Edinburgh public banks in 1773–4, the legal and political manoeuvring behind the redemption of the annuities by Act of Parliament in 1774, and the over 40 years of asset unwinding that followed.

How could a primitive credit market finance the early industrialisation of an underdeveloped economy? To answer this question, we use a hand-collected data set of mortgage loans raised by industrial firms in the city of São Paulo during the period 1866-1914. These mortgages were debt obligations collateralised by land, improvements, machinery and equipment. We argue that the mortgage credit market was a key source of funding for early industrial investments in Brazil. We find that industries were mainly funded by non-banking and domestic agents. The empirical evidence suggests that mortgages were an important proxy for industrial investment.