The Origins of Stock Marketing

  • Added:
    Oct 10, 2012
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When we look at the development of agriculture, it becomes apparent that like everything else it had a starting point, that its development was a gradual process over time and that it had a significant effect on the lives of ordinary people.  Historically, agriculture had its beginnings in 10,000 BP with the emergence of what is known as the Neolithic Revolution, reaching a new zenith in its development with the advent of the Green Revolution of 1943 to the late 1970s. 

In between these two time frames there were other stages of development in agriculture, but we will not delve into these for want of time and writing space.   It is sufficient to point out that the development process saw agriculture emerged from humble beginnings to a level of sophistication which the world had never seen or experienced and it is still developing.

Stock trading also had humble beginnings.  Did you know that it started off as a dirt road which crossed in front of Trinity Church in East Manhattan about 200 years ago?  Yes, a dirt road!  It didn’t even have a roof over it.  No group of people were seen congregating under one roof trading money for share certificates.   It started out just like agriculture did; out there somewhere as a dirt track taking people to and from the dockside.  But this taking of people from town or dwelling to the dockside had a significant meaning because it was at the dockside that these people were carrying out a trade of silver for papers.  It was here that people or buyers could lay claim to consignments of cargo sent by someone from somewhere else.  They laid claim to the cargo by paying silver and in return they were given papers which had the buyer’s name on it and also the cost of the cargo which the claimant had to pay in silver.  We clearly see the beginnings of the investment (silver) changing hands with paper (stocks or shares).  This type of trade didn’t fizzle out but instead grew strongly as time went by.

The dirt track mentioned above joined the banks of the East River and the Hudson River located to the west and it offered an ideal communications link between traffic moving up and down both rivers.  With time, more development took place on and along the path.  For protection against marauding Indians, pirates and other dangers, a wall was built to protect the steadily growing town which was, by now, dotted with merchants’ warehouses, shops, a city hall and a church. 

From 1785 to 1790, New York was regarded as the national capital of the United States and it was for this reason, that Federal Hall was built on Wall Street.  It was for this reason also that George Washington found himself inaugurated on the steps of the building.  Further developments were to follow.  In March 1792, a group of twenty four merchants met secretly under a buttonwood tree to consolidate their hold on the trading of securities, but it was until two months later on May 17, 1792 that they signed an agreement naming it after their secret meeting place – the Buttonwood Agreement.  By affixing their signatures on the agreement, the twenty four merchants had founded what was to be the forerunner of the New York Stock Exchange, later to be relocated to 11 Wall Street.

Just as the Agricultural Revolution of the 18th and 19th century gave rise to the Industrial Revolution of the same period, the American Revolution also facilitated the further development of stock trading.  In order to fund its wartime operations, the government desperately needed money and to obtain it started to sell bonds.  The government was bound by the terms of the bonds to return the amount of money provided together with interest, so the receiver of the bonds was sure to get paid the original amount as well as the interest on it. 

In addition to the selling of bonds, some of America’s first established banks also wanted to raise money and in order to do this, they began to sell shares in the company to ordinary citizens.  They did this by selling parts of the company to whoever wanted to buy them and it was this selling of shares in a company, that heralded the very first beginnings of the modern stock market, as we know it today.

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