A huge credit binge by all classes of people desperate to invest goes horribly wrong. Many are ruined when share prices, after being inflated to improbable levels, collapse.

The panic which follows is compounded by short selling – putting borrowed shares on the market with a view to buying them back at a profit if the price falls.

The pre-crash hysteria had clouded judgment so much that many investors were happy to sink their money into a business which advertised itself as "a company for carrying out an undertaking of great advantage, but nobody to know what it is".

It sounds like a description of those toxic financial derivatives whose value no-one can properly quantify which have brought down the mightiest banks and sent shock waves round the world.

But this scenario is not Wall Street 2008. It's England in 1720 reeling after the bursting of the South Sea Bubble. One of those who carried the can for this financial disaster was the Chancellor of the Exchequer, a principal promoter of the cause of the crash, the South Seas Company. His name was John Aislabie, the MP for Ripon and owner of the Studley estate.

As he stepped down, his son William Aislabie stepped up and took the family seat in Parliament. He also picked up where his father left off on beautifying Studley Royal. He went on to extend further to Hackfall, a ride from Studley Royal of about seven miles along what's now a public footpath.

At Hackfall, 117 acres of ancient woodland clings to the south and west sides of a steep-sided rocky gorge that plunges 120 feet down to the river. The Ure flows through it in a series of sweeping bends lined with narrow beaches of sand or gravel.

This spectacular setting was to be William Aislabie's big project for 17 years from 1750 and 1767. Ignoring the great names of landscape design like Capability Brown, William used his own imagination and skill to create within this wilderness setting a series of follies, fake ruins, water features and surprise views.

Hackfall stirred the Romantic imagination of enthusiastic visitors like Wordsworth and Turner. It became internationally celebrated. When George III wanted a suitable gift for Catherine the Great of Russia, he commissioned a tea service from Wedgwood carrying illustrations of England's most famous English scenes – the only one to be depicted twice on the cups and plates was Hackfall.

Some 30,000 a year arrived to walk and marvel here. One visitor in 1769 reflected that "nothing can exceed the taste, variety and beauty of this landscape".

But 18th and 19th century enthusiasm did not survive into the 20th century. Hackfall's trees were felled twice, in 1909 and probably again in 1919. A timber merchant who bought it in 1932 chopped down most of the mature trees again. Denuded of its principal glory, Hackfall fell into obscurity.

In the mid-1950s, the Rt Hon James Ramsden came to live half a mile away. Elected as the Tory MP for Harrogate in 1954, he found on his doorstep this deeply appealing place where he enjoyed clearing some of the paths in his spare time. But the whimsies of an 18th century local aristocrat – the cascades, rustic temples, ruined castles, grottoes and ponds were either badly damaged or apparently lost forever under a mass of vegetation. This hidden heritage started coming to light in the 1970s and 80s, largely through the efforts of an American academic who mapped the ruins and published a mass of documentary information about Hackfall from researching into things like old estate accounts. In 1987, there was talk of turning the area into a theme park. James Ramsden promptly set up the Hackfall Trust with the aim of restoring the place instead. Progress was made when the Woodland Trust, who are good at raising money, bought it. The York-based Landscape Agency got the job of bringing Hackfall back to its days of greatness and the Heritage Lottery Fund stumped up £1m – about 90 per cent of the cash needed. A team of conservation architects, landscape historians, hydrologists and ecologists spent six years working on designs. Work on the ground will continue into next year but is sufficiently complete for Hackfall to be nominated for the RIBA Yorkshire White Rose Awards for Design Excellence, the winner to be announced on October 24. The woods are also listed as Grade I on the English Heritage register of parks and gardens of historic interest.

To make the most of a visit, allow at least a couple of hours. Treading these often steep and twisty paths makes you admire the pluck of Georgian ladies who ventured down them in inconvenient costumes and without the benefit of cleated Vibram soles.

Aislabie's ingeniously-contrived vistas offer a new visual distraction at almost every turn.

It's home to Blackcap and Spotted Flycatcher and the need to watch your step while keeping an eye out for the many diversions, flora and fauna makes for a stimulating experience.

From the terrace starting point there's an eastern panorama where on a clear day to the left you can make out Roseberry Topping.

To the right, tradition has it that York Minster is visible. Patrick James doubts this was ever true, even in pre-industrial days. He's the director of the Landscape Agency and he found bringing this famous perspective back into being to be a tortuous business.

"It took 10 separate meetings, just to agree to clear the view," he says.

For the sake of the bigger picture, half a dozen beautiful mature beeches had to be sacrificed, along with four others trees. Cutting through them was simplicity itself compared with hacking through the thickets of red tape which swathed Hackfall.

Few sites in the country have so many stakeholders and interested parties entitled to be consulted at every turn.

The sensitivity is due to the location – adjacent to a World Heritage Site, within the Nidderdale Area of Outstanding Natural Beauty, a Harrogate council conservation area and a Natural England Site of
Special Scientific Interest. It must have seemed like forever before they secured the 30 consents required and work could begin last year. Patrick James is philosophical about the delays. "This is a Grade I listed landscape. It's in the big league. You have to be patient."

One of the delights, once the work started, concerned the restoring of a fountain in a silted-up pond. The water pressure for the fountain was cleverly delivered in William Aislabie's original designs from a little reservoir high on the slope through 150 yards of pipes made of elm. A remnant of elm pipe was found intact when they cleaned the pond which they were able to re-use.

Patrick, who comes from Helmsley, where his mother runs a livestock farm, created the Landscape Agency eight years ago. It helps to restore historic landscapes and has worked on Chatsworth and the Royal Parks in London. It drafted the conservation management plan for Great Dixter, the Sussex garden made famous by Christopher Lloyd and is preparing a master plan for Harlow Carr and the Royal Horticultural Society's three other public gardens.

Patrick reckons the prime time to come to Hackfall is April and May when the bluebells and the wild garlic are out. To improve access, they have constructed a small car park and he sees a time when there might be shuttle bus to Hackfall from Fountains where there is a shop and all the others things visitors expect from a day out. Keeping commercialism at arm's length is key. It maintains the specialness of Hackfall.

As chairman of the Hackfall Trust, James Ramsden, now 84, is still to be found down here most days – sometimes with his chainsaw. He's also busy running off maps because they haven't got as far as guide leaflets yet.

"When we first came here, we just thought of it as a nice wood and enjoyed it," he says. "It was through an American professor that people became aware of its history. It was in private hands and their commercial people wanted a theme park, a sort of Alton Towers. We've already got Lightwater Valley on one side of us and we didn't want another.

"The Woodland Trust did the buying and nothing much happened for quite a long while. The National Trust took a look and did a feasibility study. They thought it was beyond even them because of the steepness of the sides to get it to Studley Royal standards. I'm rather relieved about the low-key approach which we've taken. I marked all the trees for clearing the views and someone has to be on the spot to keep an eye on the work. Under the Heritage Lottery Fund, if you work as a volunteer you get a credit for your project. "We got the whole thing done by local contractors. We were lucky with the stonemason, John Maloney from Ripon, who is a specialist in old buildings and Graham Wilson, who did the ponds, also did Studley Royal ponds.

"Everyone working on site came from within about five miles. It's a lot more economical to do it that way.

"The HLF contract ties us to maintain it for 25 years and when I wink out, my son Tom will take over." James was the Harrogate MP until 1974. Are the slippery gradients of Hackfall a bit daunting to an octogenarian? "No, I've taken lots round, of all sorts of ages. Because of its steepness it won't attract large numbers. Too many visitors will spoil the wildness."