World War I And The World Stock Exchanges
July 28, 2010 by Chip Wood
The outbreak of World War I 96 years ago this month had a devastating effect on the world’s stock markets. Early in the morning of Friday, July 31, 1914, the London Stock Exchange announced that it would suspend trading until further notice—the first time the venerable center had done so in its century-long history. Stock exchanges in Vienna, Rome and Berlin were already closed.
There was panic on U.S. markets, where blue chip stocks had fallen some 20 percent the day before on record volume. Before the New York Stock Exchange (NYSE) opened on the morning of July 31, there were so many orders to “sell at any price” that the board’s governors decided not to ring the opening bell.
This marked only the second time in U.S. history that the NYSE failed to open on time. It did not reopen until almost a year later, in April, 1915. U.S. banks decided to remain open and a rush by depositors to exchange currency for gold (something that was allowed back then) wiped out many of them. Between July 27 and Aug. 7, 1914, some $73 million worth of gold was withdrawn from New York City banks alone.
Today, of course, exchanging dollars for gold is a bit more complicated. But it’s still a good idea.