Will 2007 repeat the madness of 1987?

If you remember 1987 at all, it is probably for the October hurricane and the stock market crash. Because they coincided, they are inextricably linked as though one caused the other. In fact, despite falling 23 per cent, the market was back on its feet before the debris of the storm had been cleared. Share prices ended 1987 higher than they began, making the crash a downward blip on a rising graph — unlike the turn-of-the-21st-century meltdown that has left prices well below their dotcom levels after six years.

As the 20th anniversary of 1987 looms, rather than remember the October storms we should look back to the preceding months of market madness — and the subsequent era of corporate disasters. This was the year when Tie Rack was floated to raise £12 million — and equity-mad punters subscribed more than £1 billion. It was the year when the Saatchi & Saatchi advertising group — fresh from giving Margaret Thatcher her third election victory — proposed a bid for Midland Bank, which had once been the world’s biggest bank. To anyone too young to have witnessed it or so old they fear their memory is playing tricks, that must seem unbelievable.

To jog your memory a bit more, this was the year of Jeffrey Archer’s libel case against the Daily Star, of the sinking of the Herald of Free Enterprise, the Hungerford massacre and the King’s Cross fire. For those who like hist­ory to repeat itself, there was a Gulf War and a coup in Fiji, the pound was at a four-year high and the Bank of England was giving stern warnings about debt levels — not least to those who were borrowing to buy shares. This was a debt for equity swap on a grand scale. Savers were withdrawing £7 billion a month from building societies — so much that the big societies had to cancel a rate cut before they implemented it because of the cash outflow.