144 in the past, on September 24, 1869, an original "Black Friday" hit the stock markets, triggered by an attempt by "robber barons" Jay Gould and James Fisk to corner the U.S. gold market.
Since Lincoln had introduced the fiat "greenback" paper dollar and stopped the redemption of paper money for equal degrees of gold take advantage 1862, the greenback had traded at a discount to U.S. tender gold coins. As opposed to being traded in "dollars per ounce", because the U.S. was for the defacto standard, gold was traded about the Big apple Gold Exchange as "how much paper dollars to purchase $100 in gold dollars".
Throughout the height in the war in 1863, using a Union victory uncertain, it took $250 in greenbacks to obtain $100 in coins. In 1869, when Fisk and Gould started their scheme, it took around $130 in greenbacks to get five double eagle $20 coins. This determines to about $26.87/oz.
Even though the total amount of the gold market was just around $15 million, no person could corner the market and drive the purchase price up due to U.S. government. The Treasury had approximately $95 million in gold reserves, and traded gold on the open target keep prices nearby the official gold standard. The federal government would sell gold to acquire greenbacks, then utilize the paper money to acquire Treasury bonds over open market. This helped reduce the government debt. Should the money supply became too restricted, the costa rica government would buy gold using greenbacks.
Jay Gould realized that he needed some way to convince government entities to keep from selling gold, or lacking that, advance realize that the government concerned to promote. He began by recruiting Abel Corwin, the husband of President Ulysses S Grant's sister, into the scheme. Corwin invited Gould and Fisk to Ny social functions that your President attended, plus they expounded on what government entities should permit the (unregulated) open market set the cost of gold. Additionally, they touted high gold prices as helping U.S. farmers export the over-abundant harvest that year.
Corwin also helped Gould and Fisk obtain a former Union general, Daniel Butterfield, appointed as Assistant Secretary of the Treasury in control of selling and buying gold for your government. In return for a $10,000 bribe, Butterfield decided to lobby against government gold sales, and also to tip off Gould if any were planned. The band even attemptedto bribe President Grant's personal secretary and the wife(!) but were rebuffed.
Since the pieces were in place, Gould and Fisk go about making millions. After convincing Grant to prevent gold sales, they began during the early September buying up all of the gold they are able to. By September 16, that they nearly $10 million (2/3 with the total market) either in physical bullion on in calls. By September 23rd, it took $144 in greenbacks to purchase $100 in gold ($29.77/oz) plus the number of gold the conspirators held equaled total U.S. gold reserves. International commerce, which trusted gold bullion, had been strangled, with businesses forced to pay for what you had to to acquire gold. Numerous speculators jumped in, borrowing heavily. By 11:30 the morning of September 24, the value was $162 per $100 in gold ($33.59/oz), and the economy was about the brink of collapse.
Alerted by Secretary of the Treasury Boutwell, Grant found out about the attempted bribery of his wife and secretary. Butterfield caught wind of what was happening, and sent an urgent message to Gould, who started selling in the rally. Grant telegraphed Boutwell, and told him to dump $4 million of U.S. gold reserves into your market immediately and purchase $4 million in bonds. Word got out around noon that day, as well as the rout with the exit began Gold dropped from $162 to $133 within just 1 hour.
Fisk ended up kept in the dark about Butterfield's warning, and was merrily buying as much gold when he could, crowing he would send the price to $200. But Gould was selling faster than Fisk was buying, liquidating all of their position plus any that Fisk bought ahead of the rug was totally got out from beneath market. Gould had needed Fisk and keep buying publicly, to pretend the market industry used to be cornered while he dumped their holdings.
It worked. They dumped their holdings for about $150 per contract, netting around $15 million dollars (almost $255 million today). They spent $two million on choosing a Nyc judge using their company friend "Boss" Tweed at Tammany Hall, and hiring lawyers to fight a huge selection of lawsuits, leaving $tens of millions of together. Even Congressional investigations, led by Congressman (and future President) James A. Garfield, still did not punish them. For, in the end, their market activities were completely legal.
Others weren't so lucky. Most speculators were extremely leveraged, coupled with to promote stock holdings in the resulting panic to meet up with their calls. The stock exchange fell 20%. The prices of agricultural exports were chopped by two. By some reports, 50 Wall St brokerages collapsed, and another 150 were insolvent. The whole U.S. economy was affected, plus it took months for items to go back to normal in case you had survived.
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