If one insists on bookending history, this date marks the centenary of London's decline as the world's preeminent financial center.
From Navellier's Gary Alexander at Investors Hub July 27, 2009:
...On Thursday, July 30, the rush to sell stocks and buy gold escalated. Panic selling on the New York exchange reached 1.3 million shares, the highest volume since the Panic of 1907. Many blue chip stocks crashed, falling 20% to 30% that single day. GM fell from $59 to $39 (-34%). Even Bethlehem Steel, which figured to profit from making war armaments, was down 14%. That night, exchange officials met to decide whether or not to close the exchange on Friday.HT: Eddy Elfenbein a few years ago.
• Early in the morning of Friday, July 31, the London Stock Exchange announced that it would suspend trading until further notice, the first time it had done so in its centuries-long heritage. If the New York Stock Exchange opened for trading on this final day of July, it would have been the only open stock market in the world. Since markets were now connected by undersea cables, all the world’s sellers would converge on Wall Street. In fact, the overnight sell orders “at any price” were lined up for the opening bell, so the NYSE governors decided to close for only the second time in its history. The NYSE was totally closed until the middle of December, 1914, but only a few stocks traded then. The full board only re-opened in April, 1915 – nine months later.
However, U.S. banks stayed open, and the rush to convert cash to gold wiped out many banks. From July 27 to August 7, 1914, $73 million in gold was withdrawn from New York banks alone....
London was closed until 4 January 1915, New York until December 12, 1914.
For more on the immediate causes see yesterday's naked capitalism:
The Forgotten Financial Panic of 1914, and the Eternal Recurrence of Short-Term Thinking
Or the Oxford University Press blog:
The unknown financial crisis of 1914
The mounting diplomatic crisis in the last week of July 1914 triggered a major financial crisis in London, the world’s foremost international centre, and around the world. In fact, it was the City’s gravest-ever financial crisis featuring a comprehensive breakdown of its financial markets. But it is virtually unknown. The reason is straightforward: it is simply absent not only from general texts but also from most of the specialist literature.
The financial markets took the assassination of Archduke Franz Ferdinand of Austria in Sarajevo on 28 June in their stride. After all, the diplomatic crises of the previous three summers had been defused. But Austria’s presentation of an ultimatum to Serbia on Thursday 23 July transformed perceptions of the risk of a major European war. This “Minsky moment” triggered a scramble for cash. Continental stock exchanges were deluged with selling orders and banks besieged by depositors. They closed their doors. Governments mobilised for war and imposed drastic controls to safeguard their banking system and national finances.
The week beginning Monday 27 July saw the breakdown of the City’s foreign exchange and discount markets, and culminated in the closure of the London Stock Exchange on Friday 31 July. It stayed shut for five months. Long queues formed at the Bank of England of people changing Bank notes for gold sovereigns. It looked like a run on the Bank was underway. And it was believed that a run on the banks had begun.
There had been no pre-war planning for such a crisis. Time was bought by the declaration of an unprecedented four-day Bank Holiday. During the break, at 11 pm on Tuesday 4 August, Britain went to war. The initial emergency containment measures were massive infusions of liquidity by the central bank plus a hike in the discount rate from 3 per cent to 10 per cent, following established crisis management doctrine.
Then came novel policy measures: a “general moratorium” on contracted payments (which allowed banks to refuse to pay out deposits), and the introduction of hastily printed small denomination currency notes issued by the Treasury (not the Bank of England). When the banks reopened on Friday 7 August there was no run. The crisis had been contained.... Had worst fears been realised – mass failures among City financial firms and the banks requiring state bail-outs — the crisis might have assumed the magnitude and prominence of a financial catastrophe. But that did not happen in Britain. Hence there was no downfall of a major financial institution or prominent individual depriving the crisis of an iconic victim. The reason was massive and unprecedented state intervention. But that looked like wartime controls rather than financial crisis resolution....MORE
