The moment power shifted to the markets But traders scented blood and redoubled their attack. At 11am, Major and Lamont raised interest rates from 10 to 12 per cent - to no avail. At 2.15pm, in desperation, they raised them again to 15 per cent. Meanwhile, there was frenzy in the City's "derivatives" markets. The London International Financial Futures Exchange - an "open outcry" arena - went "berserk," said one observer, as 886,000 sterling contracts were traded in the day. At 4pm, having spent £15 billion, the Bank of England stopped buying, but the sell-off continued unabated. For some it was a profit opportunity, but for many institutions around the world it was a matter of protecting themselves against losses on sterling holdings. For British banks such as Barclays that were foreign-exchange market makers, it was a nightmare. "All our clients were trying to sell to us," Percy recalls. Whatever we bought we had to dump straight away. Few knew how the markets worked: the sellers were reported as winners, Britain as a whole the loser. I watched a news bulletin in which a young trader from an American bank said his team had notched up £10 million of profit. "B------," spat an elderly neighbour watching with me. But that was before we all heard about Soros, the offshore investor who saw sterling's fall as "an obvious, one-way bet." With incredible sangfroid, he had committed £10 billion to his hunch, having borrowed heavily to do so, and his winnings roughly matched the Bank of England's net losses. By 7pm, when Lamont stepped blinking into the cameras on the Treasury pavement with the young David Cameron behind him, it was all over bar the City cork-popping and Westminster recriminations. Having fallen from a target level of 2.95 Deutschemarks through its ERM floor of 2.78, the pound slumped to 2.50 by the end of the month. The Major government's credibility never recovered, but we now see that the sellers did Britain a service by releasing us from the ERM stranglehold. A more competitive pound and the freedom to set our own interest rates were the foundation of what we now look back on as a golden period of growth in the mid-Nineties. Yet it was a moment of deeply disturbing realisation. Stampeding markets could overwhelm the firepower of the central banking system in a matter of hours. Invisible investors like Soros, owing no allegiance as citizens, could place bets big enough to change economic outcomes for entire nations. That was how the future was going to be, and 20 years on it should still frighten us all. Martin Vander Weyer is Business Editor of 'The Spectator