As the twentieth century dawned, the American economy had become, by far, the largest national economy in the world. And while the country produced and exported vast and growing quantities of agricultural products and raw materials, it was also a thoroughly modern economy in terms of its manufacturing potential and technological abilities. Wall Street was now equal in size to London as a capital market and, once a major capital importer, was now a capital exporter.

The United States in a little more than a century had been transformed from a nearly empty wilderness to the equal of Europe, and the world’s economic center of gravity, long in Europe, was now in the mid-Atlantic.

Then, in 1914, Europe blew up. The politics surrounding a relatively trivial event, the assassination of the little-respected Archduke Franz Ferdinand, heir to the throne of Austria-Hungary, spun out of control, and by August 1st of that year all the Great Powers of Europe were at war.

Politically, the United States, following a century old policy of remaining aloof from European affairs, was determined to stay neutral. But economically, the country, now deeply enmeshed in a global economy, panicked. The New York Stock Exchange, like all the other major exchanges, did not open for business on the morning of August 1st. It would not be fully operational again until the following spring. A broker, sent out to investigate the rumor of an illicit market operating on New Street, just behind the Exchange, reported back that all he could find on New Street were “four men and a dog.”

It was widely believed by both economists and politicians that a general European war would be disastrous for the American economy: Gold owned by foreigners would be withdrawn from American banks and repatriated, causing the American money supply to contract and forcing the banks to call in loans while interest rates soared. Further, investors in Britain, France, and Germany held about $5 billion in American securities, and it was feared that these would be dumped on the market to facilitate weapons purchases, causing the market to crash. American agricultural exports would decline sharply as Britain shut off the sea lanes to Germany and Austria.

Rarely, even by the standards of the famously cloudy crystal balls of economists, have predictions proved so wrong. Instead of gold leaving the country, it flooded in as European nations sent their supplies of the precious metal to the United States for safekeeping. Much of it remains here to this day, now tucked away in the vaults 80 feet below street level at the Federal Reserve Bank of New York, in lower Manhattan. Allied investments in American securities were indeed liquidated, but this was handled slowly and skillfully, mostly by J. P. Morgan and Company, and the markets were not disrupted. As a result, the United States, a net debtor for its entire history, became the greatest creditor nation in the world.

Agricultural exports,