Period 5: 1750-1900 - Financial Reactions to Industrialization

Aim: How did financiers develop and expand various financial institutions to

facilitate investments at all levels of industrial production?

Financial Instruments- WHY did these expand?• Stock market is the market

that people use to trade (= buy and sell) shares, which are like small pieces of the company that a person can own. The value of the share depends on how many people want to buy it and how many people are selling it.

• If many people want to buy a stock, the price will go up. If there are more sellers than buyers, the price will go down.

• Insurance is something people buy to protect themselves from losing money. People who buy insurance pay what is called a premium (monthly) and promise to be careful (called a "duty of care").

• In exchange for this, if something bad happens to the person or thing that is insured, the company that sold the insurance will pay money back.

Financial Instruments• A gold standard is a monetary

system in which a unit of money (such as the dollar) is equal to a particular amount of gold

• The gold specie standard arose from the widespread acceptance of gold as currency. Various commodities have been used as money; typically, the one that loses the least value over time becomes the accepted form. The use of gold as money began thousands of years ago in Asia Minor. Silver was used until the British made gold its standard in 1700s.

• A limited liability company (LLC) is a form of corporate structures.

• Advantage of an LLC is that its owners, have "limited liability", meaning that, under most circumstances, they are not personally liable for the debts and liabilities of the LLC. For example, if an LLC is forced into bankruptcy, then the members will not be required to pay the LLC's debts with their own money

Proliferation of Large-Scale Transnational Businesses

• Example: The United Fruit Company was an American corporation that traded in tropical fruit (primarily bananas) grown on Central and South American plantations and sold in the United States and Europe. The company was formed in 1899 from the merger of a banana-trading concerns with Boston Fruit Company. From early to mid-20th century it came to control vast territories and transportation networks in Central America, the Caribbean coast of Colombia, Ecuador, and the West Indies

Large-Scale Transnational Businesses – Example: HSBC

• HSBC - The Hongkong and Shanghai Banking Corporation Limited is a bank established and based in Hong Kong since 1865, when Hong Kong was a colony of the British Empire. The company's business included all aspects of global banking. It is still the largest bank in Hong Kong, and operates branches and offices throughout the Asia Pacific region, and in other countries around the world.

Developments in Transportation and Communication• Railroads • Steamships

Developments in Transportation and Communication- Telegraphs and Canals

• Telegraphs- Where? Effect?

• Canals• Effect?

Assessment• Pick one of the new financial instruments, transnational

corporations or new transportation and communication developments and write a multiple choice question. When done have your neighbor answer your question.

• Stock Market• Gold Standard• Limited Liability Company• Insurance• Example of transnational corporation (United Fruit Co.

and HSBC)• Railroads• Canals• Telegraphs• Steamships