THE NEW YORK STOCK EXCHANGE IN THE CRISIS OF 1914 [Reprint] E-Book

H. G. S. Noble

• Herausgeber: BookRix
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2014

Beschreibung

History repeats itself. Stock Exchange Crash. The year 1914 has no precedent in Stock Exchange history. At the present time (1915), when the great events that have come to pass are still close to us, even their details are vivid in our minds and we need no one to rehearse them. Time, however, is quick to dim even acute memories, and Wall Street, of all places, is the land of forgetfulness. The new happenings of all the World crowd upon each other so fast in the financial district that even the greatest and most far-reaching of them are soon driven out of sight. This being the case, it has seemed to the writer of these pages that some record should be kept among the brokerage fraternity of what was so great an epoch in their history, and that this record could best be written down by one who happened to be very favorably placed to know the story in its entirety. Of course the archives of the Exchange will always contain the minutes of Committees and other documentary material embodying the story of the past, but this dry chronicle is never likely to see the light except when unearthed by law courts or legislative committees. It seems worth while, therefore, to disentangle the essential thread of the tale of 1914 from the mass of unreadable detail in the minute books, and put it in a shape where those who are interested may look it over. [Note: This is a reprint of „GARDEN CITY, NEW YORK, THE COUNTRY LIFE PRESS, 1915. Copyright, 1915, The Country Life Press“ and was found in the Public Domain. Bold text from editor.]

Leseprobe

H. G. S. NOBLE

THE NEW YORK STOCK EXCHANGE IN THE CRISIS OF 1914 [Reprint]

Stock Exchange Crash, Börsen Crash

BookRix GmbH & Co. KG81371 Munich

THE NEW YORK STOCK EXCHANGE IN THE CRISIS OF 1914

BY H. G. S. NOBLE, PRESIDENT

[Note: This is a reprint of „GARDEN CITY, NEW YORK, THE COUNTRY LIFE PRESS, 1915. Copyright, 1915, The Country Life Press“ and was found in the Public Domain. Bold text from editor.]

INTRODUCTION

The year 1914 has no precedent in Stock Exchange history. At the present time (1915), when the great events that have come to pass are still close to us, even their details are vivid in our minds and we need no one to rehearse them. Time, however, is quick to dim even acute memories, and Wall Street, of all places, is the land of forgetfulness. The new happenings of all the World crowd upon each other so fast in the financial district that even the greatest and most far-reaching of them are soon driven out of sight. This being the case, it has seemed to the writer of these pages that some record should be kept among the brokerage fraternity of what was so great an epoch in their history, and that this record could best be written down by one who happened to be very favorably placed to know the story in its entirety. Of course the archives of the Exchange will always contain the minutes of Committees and other documentary material embodying the story of the past, but this dry chronicle is never likely to see the light except when unearthed by law courts or legislative committees. It seems worth while, therefore, to disentangle the essential thread of the tale of 1914 from the mass of unreadable detail in the minute books, and put it in a shape where those who are interested may look it over.

This is not an easy task. To differentiate the interesting and the essential from the mass of routine material is, perhaps, not very difficult, but to present this segregated matter in a form that will not be monotonous is much more of a problem. The proceedings of a Committee that has been in continuous session must, when written down, partake of the nature of a diary, and to that extent be tiresome reading. We shall, therefore, have to ask the indulgence of any one who happens to look into these pages, and beg him to pass over the form for the sake of the substance. That the substance itself is of deep interest goes without saying. It was given to the Stock Exchange to play a great part in a momentous world crisis, and it must be of profound interest to know how that part was played.

Stock Exchanges are a relatively recent product of modern civilization, and like new comers in every field they are suspected and misunderstood. The most complex of all problems are economic problems, and the functions of Stock Exchanges form a most intricate part of political economy. It has, consequently, been a noticeable phenomenon in all contemporary industrial society that the activities of the stock markets have been a constant subject of agitation and legislative meddling. Most of this meddling has been based upon ignorance and misunderstanding, but in a broad view this ignorance and misunderstanding are excusable owing to the novelty and above all the great complexity of the factors at work. One of the needs of the time, therefore, is that the public, and their representatives in the Legislatures, should be enlightened as fast as possible with regard to the immensely important uses of these institutions, and to the operation of their very delicate machinery.

The World crisis of 1914 forced upon us an object lesson on the question of speculative exchanges in general which ought to be of lasting profit. For years agitators had been hard at work all over the country urging the suppression of the Cotton Exchanges, and claiming that they contained gamblers who depressed the price of the cotton growers' product. In the summer of 1914 the dreams of these agitators were realized. The Cotton Exchanges were all closed and the cotton grower was given an opportunity of testing the benefits of a situation where there was no reliable agency to appraise the value of cotton. The result may be summed up in the statement that the reopening of the Cotton Exchanges met with no opposition. A similar object lesson was furnished in the case of the Stock Exchanges. They were all closed, and for a few weeks some profound thinkers in the radical press stated that the country was showing its ability to dispense with them. When the time for their reopening came, however, there was no agitation to prevent it. On the contrary it was hailed as a sign of the resumption of normal financial conditions in the United States.

This evidence that the experience of 1914 has cast a much needed light on the public value of speculative exchanges, gives a further excuse for describing in some detail how the experience was passed through by that greatest of all these institutions, the New York Stock Exchange.

CHAPTER I: THE CLOSING OF THE EXCHANGE

The Stock Exchange is in the second century of its existence and in that long period of time (long relatively to the number of years during which Stock Exchanges have been known to the world) it has been forced to close its doors only twice. The first occasion was the great panic of 1873, the after effect of civil war when trading was suspended for ten days; the second came with the outbreak of the world War in the close of July, 1914. These two remarkable events differ profoundly in the gravity of the circumstances which brought them about. In 1873, although the financial disturbance was one of the greatest the United States has ever experienced, the trouble was mainly local and did not seriously involve the entire world. The Exchange was not closed in anticipation of a catastrophe but was obliged to shut down after the crash had taken place, in order to enable Wall Street to gather up its shattered fragments. The measure of this crisis was the ten days during which trading was suspended.

Far different from these were the circumstances surrounding July 31st, 1914. On that eventful date a financial earthquake of a violence absolutely without precedent shook every great center of the civilized world, closing their markets one by one until New York, the last of all, finally suspended in order to forestall what would have surely been a ruinous collapse. The four and a half months during which this suspension continued stand to the ten days closing of 1873 in a proportion which fitly illustrates the relative gravity of the two historic upheavals.

In the light of these facts we are justified in asserting that the events of 1914 are the most momentous that have so far constituted the life and history of the New York Stock Exchange, and consequently that some record of, and commentary upon, these facts may be of value to the present members of that body and of interest and profit to its future members.

It is in the nature of panics to be unforeseen, but the statement may be truly made that some of them can be more unforeseen than others. The panic of 1907 was preceded by anxious forebodings in the minds of many well informed people, whereas the Venezuela panic in 1895, being due to the sudden act of an individual, came out of a clear sky. To the latter class distinctively belongs the great convulsion of 1914. While the standing armies of Europe were a constant reminder of possible war, and the frequent diplomatic tension between the Great Powers cast repeated war shadows over the financial markets, the American public, at least, was entirely unprepared for a world conflagration. Up to the final moment of the launching of ultimata between the European governments no one thought it possible that all our boasted bonds of civilization were to burst over night and plunge us back into mediæval barbarism. Wall Street was therefore taken unaware, and so terrific was the rapidity with which the world passed, in the period of about a week, from the confidence of long enduring peace to the frightful realization of strife, that no time was given for men to collect their thoughts and decide how to meet the on-rushing disaster.

Added to the paralyzing effect of this unheard of speed of action, there came the disconcerting thought that the conditions produced were absolutely without precedent. Experience, the chart on which we rely to guide ourselves through troubled waters, did not exist. No world war had ever been fought under the complex conditions of modern industry and finance, and no one could, for the moment, form any reliable idea of what would happen or of what immediate action should be taken. These circumstances should be kept clearly in mind by all who wish to form a clear conception of this great emergency, and to estimate fairly the conduct of the financial community in its efforts to save the day.

The conditions on the Stock Exchange, when the storm burst, were in some respects very helpful. Speculation for several years had been at a low ebb, so that values were not inflated nor commitments extended. Had such a war broken out in 1906, with the level of prices then existing, one recoils at the thought of what might have happened. Furthermore, the unsettled business outlook due to new and untried legislation had fostered a heavy short interest in the market, thereby furnishing the best safeguard against a sudden and disastrous drop. This short interest was a leading factor in producing the extraordinary resistance of prices in New York which caused so much favorable comment during the few days before the closing. It were well if ill-informed people who deprecate short selling would note this fact.

During the week preceding July 31st, therefore, in the face of a practical suspension of dealings in the other world markets, the New York market stood its ground wonderfully. The decline in prices, though it became violent on July 30th, showed no evidence of collapse. There was a continuous market everywhere up to the last moment, and call money was obtainable at reasonable prices. Here was a perplexing problem when the closing of foreign Bourses raised the question of how long we should strive to keep our own Exchange open.