The world of stocks and finance has always been a rollercoaster of ups and downs, and the year 1913 was no exception. As we dive deep into the annals of financial history, the stock market of 1913 presents some astonishing facts that might surprise modern investors. Here are five shocking revelations about stocks in that pivotal year, keeping in mind the importance of creating helpful, original content for our readers.
1. The Birth of the Federal Reserve
In 1913, the U.S. witnessed the establishment of the Federal Reserve System. This monumental event reshaped the financial landscape, influencing stock market operations and monetary policies. The creation of the Federal Reserve aimed to stabilise the economy, but its inception also brought about significant changes in stock market dynamics.
The Federal Reserve System, since its inception in 1913, has made numerous pivotal decisions that have significantly impacted the U.S. economy. Here are a few notable examples:
- Great Depression Era (1930s): In response to the banking crises of the early 1930s, the Federal Reserve decided to raise interest rates. Many economists argue that this decision exacerbated the Great Depression, making it more prolonged and severe.
- End of the Gold Standard (1971): While the decision to leave the gold standard was made by President Richard Nixon, it was done with the support of the Federal Reserve. This move meant that the U.S. dollar was no longer directly convertible to gold, giving the Federal Reserve more flexibility in monetary policy.
- Interest Rate Hikes (1979-1980): Under the leadership of Chairman Paul Volcker, the Federal Reserve dramatically increased interest rates to combat the high inflation of the late 1970s. This decision led to a recession in the early 1980s but is credited with taming inflation for the subsequent decades.
- Response to the 2008 Financial Crisis: In the face of the most severe financial crisis since the Great Depression, the Federal Reserve, under Chairman Ben Bernanke, took unprecedented actions. This included slashing interest rates to near zero and implementing a series of Quantitative Easing (QE) programs to stabilize and stimulate the economy.
- COVID-19 Pandemic Response (2020): In response to the economic fallout from the COVID-19 pandemic, the Federal Reserve, under Chairman Jerome Powell, again slashed interest rates to near zero and launched numerous emergency lending programs to support businesses, municipalities, and financial markets.
These decisions, among many others, highlight the critical role the Federal Reserve plays in shaping the U.S. economic landscape.
2. Stock Market Wasn’t the Go-to Investment
Unlike today, where the stock market is a primary investment avenue, in 1913, many preferred bonds and direct business investments. Stocks were often viewed with skepticism, and the general public was wary of the volatility associated with stock trading.
In 1913, the New York Stock Exchange (NYSE) was the dominant stock exchange in the United States. However, there were several other stock exchanges operating in the U.S. and around the world. Some of the notable ones include:
- American Stock Exchange (AMEX): Originally started as a curbstone market in New York City, it became the New York Curb Market Agency in 1911 and later evolved into the American Stock Exchange.
- Philadelphia Stock Exchange: Founded in 1790, it’s the oldest stock exchange in the U.S. It was a significant exchange during the early 20th century.
- Chicago Stock Exchange (CHX): Established in 1882, it was another major stock exchange in the U.S. during the early 20th century.
- Boston Stock Exchange: Founded in 1834, it was one of the primary regional stock exchanges in the U.S.
- Pacific Stock Exchange: Originated with the founding of the San Francisco Stock and Bond Exchange in 1882 and the Los Angeles Oil Exchange in 1889. They merged in 1957 to form the Pacific Stock Exchange.
- London Stock Exchange (LSE): In the UK, the LSE was already a well-established and major global exchange by 1913.
- Paris Bourse: The historical stock exchange of Paris, France.
- Berlin Stock Exchange: One of the world’s leading stock exchanges before World War I.
- Tokyo Stock Exchange (TSE): Founded in 1878, it was the premier stock exchange in Japan.
- Bombay Stock Exchange (BSE): Established in 1875, it’s the oldest stock exchange in Asia.
These exchanges, along with several others around the world, played crucial roles in the global financial system of the early 20th century.
3. No Electronic Trading: The Era of Paper and People
Imagine a stock market without electronic screens, online trading, or instant updates. In 1913, trading was a manual process, dominated by paper slips, shouting brokers, and physical trading floors. This manual system, while efficient for its time, was a far cry from the high-speed electronic trading we’re accustomed to today.
In the early 20th century, the stock market operated in a manner vastly different from today’s electronic age. The year 1913 was deep within the era of paper and people, where human interaction was the backbone of stock trading.
- Open Outcry System: The primary method of trading was the “open outcry” system, predominantly used on the trading floors of stock exchanges. Traders would shout and use hand signals to communicate their buying or selling intentions. This method required quick thinking, a loud voice, and the ability to read subtle cues from other traders.
- Physical Stock Certificates: When stocks were bought or sold, physical paper certificates were exchanged. These certificates were proof of stock ownership. Transferring ownership meant physically handing over these certificates, which then had to be recorded and stored.
- Runners and Messengers: Due to the lack of electronic communication, young men known as “runners” or “messengers” played a crucial role. They would dash around the trading floor or even the city, delivering messages, stock certificates, and other essential documents between brokers and their clients.
- Ticker Tape Machines: The primary source of receiving stock price updates was through ticker tape machines. These devices would print stock prices on a thin piece of paper, known as ticker tape, as they changed throughout the day. People would gather around these machines, especially in brokerage houses, to watch the latest stock prices roll in.
- Brokerage Houses as Gathering Spots: Without online portals or electronic databases, investors often visited brokerage houses in person. These places became social hubs where investors would discuss market trends, get advice, and place their trades.
- Limited Trading Hours: The stock market had limited trading hours, and all trades had to be executed within this window. Any decisions or analysis had to be done outside these hours, making timely information and quick decision-making crucial.
The reliance on human interaction, paper documentation, and face-to-face communication made the stock market a bustling, noisy, and vibrant place. While it might seem inefficient by today’s standards, this system worked effectively for its time, laying the foundation for the modern stock market we know today.
4. The Market’s Limited Scope
The stock market in 1913 was primarily centered around railroads, industrial companies, and utilities. Tech stocks, healthcare, and many sectors that dominate today’s market were non-existent or in their infancy. This limited scope meant that market diversification was challenging to achieve.
Here are ten companies that were trading in 1913 and are still publicly traded today:
| Company | Description |
|---|---|
| General Electric (GE) | Founded in 1892, GE has been a staple of the American industrial landscape, involved in everything from aviation to healthcare. |
| ExxonMobil (XOM) | Its roots can be traced back to John D. Rockefeller’s Standard Oil Company, which was established in 1870. |
| Coca-Cola Company (KO) | The iconic beverage company was incorporated in 1892 and has been refreshing the world ever since. |
| Johnson & Johnson (JNJ) | Founded in 1886, this company has been a leader in healthcare products for over a century. |
| Procter & Gamble (PG) | Established in 1837, P&G has been behind many household brands and products. |
| U.S. Steel (X) | Founded in 1901, it was once the largest steel producer and corporation in the world. |
| Pfizer (PFE) | Established in 1849, Pfizer has been at the forefront of pharmaceutical innovations. |
| Ford Motor Company (F) | Founded by Henry Ford in 1903, it revolutionized the automobile industry with the introduction of assembly line production in 1913. |
| Consolidated Edison (ED) | Known commonly as Con Edison or ConEd, it began operations in 1824 and has been powering New York ever since. |
| Boeing Company (BA) | While it was founded slightly later, in 1916, it’s worth mentioning due to its significant impact on the aviation industry. |
5. A Precursor to the Roaring Twenties
While 1913 had its financial challenges, it set the stage for the explosive growth of the 1920s. The policies, institutions, and market dynamics of 1913 laid the groundwork for the stock market boom that would define the next decade.
If you are interested whether you should invest or not, we suggest you to check our article – 5 Myths about Investing and Investing guidance for begginers.
Conclusion
The stock market of 1913 offers a fascinating glimpse into a world vastly different from ours. Understanding this era not only provides historical context but also offers insights into the evolution of global finance. As we reflect on these shocking facts, it’s evident that while times have changed, the stock market’s inherent unpredictability remains a constant.
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