Saving the City: The Great Financial Crisis of 1914

Jamie Martin writes:

Shortly after ten o’clock on the morning of Friday, 31 July 1914, less than an hour before trading was scheduled to begin, the London Stock Exchange closed its doors to business for the first time since its establishment in 1801. Crowds of brokers gathered in the narrow streets outside the building, many already wearing straw hats and holiday clothes instead of the traditional silk hat. The crisis in Europe had worsened dramatically over the previous week – Austria-Hungary had begun its bombardment of Belgrade just two days earlier – but few had expected that fear of war would bring business in the City to a complete halt. As news spread of the markets’ sudden loss of nerve, anxious queues began to form outside the Bank of England. It was the Friday before the busiest bank holiday of the year, so a full-scale run was averted: many people had already left London. Nonetheless, this was a crisis on an unprecedented scale. By 1914 the Stock Exchange was trading a third of all securities issued anywhere in the world. Its closure made clear that the situation in Europe was far worse than many had realised. ‘We all went away for our holidays,’ the financial journalist Hartley Withers recalled, ‘to come back to a new strange world, in which many of the old lights that guided us had been put out and the red glare of war had taken their place.’ By 4 August, Britain would not only be at war with Germany, but at the centre of the first truly global financial crisis.

(LRB 22 May 2014)