This Remembrance Day, we honour those who gave up their lives for our freedom. To the men and women who sacrificed their lives to protect our freedom – we’re forever in your debt. And we thank you and proudly remember you.
As part of our thoughts in the office, we look back at what happened during this time. It’s also a chance to reflect on how these past events have had a tremendous effect on the finance and banking world.
In our blog, we’ll take a closer look at how Remembrance Day and similar events have impacted financial markets throughout history – you’ll no doubt learn real-world lessons that apply to today’s finance landscape.
The Financial Turmoil of 1914
Let’s leap back in time to the start of World War I in 1914. The world was embroiled in war.
What’s more, it also faced an economic crisis dubbed the “Great Financial Crisis of 1914.”
The financial meltdown disturbed the global economy.
The London Stock Exchange was forced to shut down, and the gold standard was adjourned.
When the London Stock Exchange was closed, the world was left in utter shock.
Mass hysteria ensued, resulting in a considerable sell-off of assets.
And when the gold standard was suspended, this exacerbated the crisis even more. There was economic unease and volatile exchange rates.
This incident really showed us how helpless our financial systems can be when faced with the trials of war.
Global Financial Crisis
The impact of 1914 didn’t just affect London – it rippled across the stock markets worldwide, affecting roughly 50 countries.
During this time, banks encountered a rush of withdrawals, while stock markets faced a drop in values. It was nothing short of chaotic! The effects of the crisis reached far and wide, and the whole world wrestled with the horror of this devastation.
The crisis was triggered by a range of factors, namely the assassination of Archduke Franz Ferdinand and Austria’s ultimatum to Serbia. These events set off a domino effect that finally sparked widespread financial disarray across the globe.
Government Response and the Bank of England
In light of the crisis, central banks and government interventions played a critical role in handling the situation. You can see here the Bank of England’s response to what was happening globally.
During those challenging times, the governments and central banks made moves that were critical in keeping our financial solidity undamaged.
Global Stock Markets Amid World War I
There’s no doubt that World War I sent shockwaves through the stock markets across the globe. The insecurity and mayhem imposed by conflict caused stock prices to go up and down suddenly.
As the war waged on, the stock markets took investors on a wild journey. The way people felt about investing in stocks changed along with the progression of war.
This history lesson underscores how vital it is to keep up to date with global politics. The things happening in the world can have a detrimental effect on how markets behave, and as a result, our wallets can take a hit.
What’s more, it highlights the importance of a well-rounded investment strategy to ride out the storm amid uncertainty.
How the Federal Reserve Took Action During World War I
Central banks played a critical role in preserving financial solidity during the war. Founded in 1913, the Federal Reserve helped put money into the war effort. They worked to make sure banks operated seamlessly and helped stabilise the currency.
The Federal Reserve proves how imperative central banks are during emergencies. They instil liquidity into the financial system and sustain confidence in the currency.
Insights for Modern Financial Experts
When you reflect on Remembrance Day, don’t just pay tribute to those who served. Also, remember the lessons history has to offer.
If you’re a finance professional, here’s what you can glean from these historical events:
- Global political changes count – Keep an eye on international politics. It can have an overpowering effect on economic markets. You need to understand the potential outcomes of conflicts and catastrophes. They’re integral if you want to make smart investment choices.
- Diversify to protect your investments – Broaden your investment portfolio to diminish risk. If you have a well-structured portfolio, this can dampen the effects of market turmoil during uncertain times.
- The critical role of central banks – Understand the pivotal role central banks play in upholding financial stability. Their actions can considerably shape market conditions.
On Remembrance Day, think about the sacrifices made during those times of conflict. It’s a chance to reflect on the wisdom history has bestowed.
Sure, the financial world has witnessed its fair share of tumult during such times. But these events from yesteryear serve as valuable insight for modern finance professionals.
So, when you mark Remembrance Day, be sure to pay homage to those who served. And give a nod of appreciation to the role of banking and finance in moulding our world.
You gain a more in-depth understanding of the complex connection between finance and history when you study historical events such as the Great Financial Crisis of 1914.
This, in turn, helps you make more educated choices in the ever-evolving world of finance.