There was never a greater catastrophe in America than the War Between the States, often called the War of Northern Aggression, but surely mislabeled the Civil War. America needlessly lost 620,000 lives. It decimated the South as well as the North, and ever since, dishonest Abe has been worshipped for his starting it by misinformed Republicans. I still can’t believe they have yearly “Lincoln Day Dinners.” Lincoln didn’t “save the union,” but destroyed it, and honest people who read and investigate the facts, have long ago ceased adulating Abraham Lincoln. Let’s examine what condition the North was in after the fighting ceased, and Ulysses Grant, the drunk, was installed as President.
Lincoln, in order to finance his army, had his remaining subservient Congress suspend the gold standard, in December 1861. The North then printed as much as they pleased to pay their bills. Government currencies not governed by a gold standard, mostly run amok, and the North did just that, printing $450 million in unbacked paper bills, and selling $2 billion in long term bonds. A new dual-currency system came out of that, and the new “Greenbacks” became ’legal tender’ for payment of all bills. “Specie,” then and still means, gold and silver coin, and even after Lincoln and his Congress took the North off of the gold standard, foreign nations still required their bills to be paid in “specie.” Naturally, they wanted no parts of the North’s Greenbacks.
Without gold backing, the new Greenbacks floated freely against gold, and that began the makings of one of America’s greatest economic tragedies, known as “Black Friday 1869.” It took but seven years to unwind, and like the crash of the NASDAQ, made huge amounts of American wealth simply vanish, leaving no trace of its going. Gold and Greenbacks, sat at opposite ends of a seesaw. As gold went up, Greenbacks went down, and vice versa. They, like the dollar were worthless, but opinion and convenience gave them a bit of credibility temporarily like the dollar. Naturally, this allowed traders and speculators to take risks, influence markets, cheat, lie, use political pressure, and in general manipulate for their own benefit. Sound familiar? The same things happen today, exactly as they did 150 years ago, thanks to un-backed dollars. Gold, now as then, needs no backing, as it is whole, and not dependent on anything.
Before 1862, America had steered clear of making paper dollars. The federal government made silver and gold coins, but left the printing and issuing of paper dollars to individual state banks. When the Northern government began printing paper money, they became known as “Greenbacks,” as opposed to the dollars, backed by gold, issued by state banks. There were no national banks then. Briefly, during the Revolutionary War, and War of 1812, the fed printed paper money, and guess what. It all became worthless. But let’s go to the 1862-1869 period. In 1834, Congress had decreed that the dollar be pegged to gold at $20.67 per ounce. This lasted till 1932 and FDR. State banks had their own gold reserves to back the paper money they issued. Their dollars were as good as the bank that issued them, and if the bank failed, the dollars they had issued failed also, and became worthless. Wouldn’t this be a wonderful place to be today?
As the War Between the States waged on, the costs escalated, and when Lincoln took the North off of the gold standard, naturally the state banks suspended making their dollars convertible into gold. In February 1862, Salmon Chase, Secretary of the Treasury, confessed to Congress that, “The treasury is nearly empty.” With the presses rolling, and all the Greenbacks coming into play, inflation was obviously the result. The comparisons to today are unavoidable. Prices went up in everything, and gold too as today. If Greenbacks went up, gold went down, and if gold went up, Greenbacks went down. In those days, it wasn’t so much “ounces” that were trading, but “dollars,” meaning that $20.67 gold was called “$100 gold,” in Greenbacks. Gold had risen to $130 in Greenbacks, meaning that inflation had taken its toll. What about those who had bought those two billions in bonds to finance the war? Where would they get their investment satisfied or repaid? The only way, would be for the North to return to the gold standard. If that happened, the traders and speculators would be out of a job.
The Kentucky State Court of Appeals declared Lincoln’s Legal Tender Act unconstitutional. Salmon Chase, Lincoln’s Treasury Secretary, who came up with the idea of Greenbacks, had become the Chief Justice of the Supreme Court, and he denounced the unredeemable Greenbacks. President Ulysses Grant, whose two terms were rife with one scandal after another, declared his support of “hard money,” meaning a return to the gold standard. A return to the gold standard, or “hard money,” would save the hides of those who had invested in government bonds, and would quickly stop inflation. The treasury had millions of ounces of gold in its vaults. Remember, the dollars were backed by the gold in various state bank’s vaults who issued dollars. The treasury’s gold was not linked to dollars. How could the nation return to hard money? There was only one way, and that was for the treasury to sell some of its gold, which would bring the Greenback back to par with gold at $100, eliminate the Greenback, pay back the bonds, and return to the state bank issued gold backed dollars.
On the scene came two men who became famous for their rascality and cunning. They were Jim Fisk, pudgy and vain, and Jay Gould, a tall, bearded, thin, severe, calculating man They had been manipulating Erie Railroad stock for some time, breaking the company and enriching themselves which believe me, is another interesting story. These two decided that if they cornered the gold market, a-la the Bunker Hunt attempt with silver, they could manipulate to their heart’s content, and become filthy rich. The war had been paid for with bonds, payable with interest in gold. While Gould and Fisk were making plans, George Boutwell had been made Secretary of the Treasury. Boutwell was a decent, honest man, and wanted to straighten out the mess the War had created, return the dollar to its rightful place, and pay the debts. To do this, he had to sell treasury gold. Gould and Fisk wanted the treasury to keep its gold so they could speculate on the gold not in US or bank vaults. This they did, with alarming alacrity.
Gould met Abel Corbin at a summer resort in Saratoga New York, and their friendship blossomed. Gould wanted a piece of Corbin’s land to run his Erie railroad tracks through, and besides, Corbin was married to Jennie Grant, sister of the President. A wonderful connection, to possibly influence the treasury’s selling of gold.
Boutwell began selling treasury gold, and redeeming bonds. Foolishly, he announced his intent to the papers in advance, giving Fisk and Gould a wonderful opportunity to speculate. As the treasury sold, gold went down, and since it had been announced in advance, Gould and Fiske shorted it, thereby making a huge profit. In his first six months in office, Boutwell had reduced the national debt by $50 million. All was going well towards reducing the debt, and returning the dollar back to the gold standard, when President Grant put a stop to it. Was this because his sister’s husband was pressuring him? Was it because of promises of wealth, if he went along and participated in the speculation? No one ever found out, but it is suspicious to this day.
As ALWAYS happens in situations like this, the gold not in the US treasury or state bank vaults, became fair game for speculation. As is happening now with silver, and perhaps gold also, hundreds of millions of dollars of gold (ounces) became the speculation of the day, just like tulip bulbs previously, and NASDAQ stocks recently. Gould, Fisk, and Corbin, pulled every string they could think of, and brought in thousands of the unwary, making veiled promises of huge wealth. Political hacks were paid by them, including judges, Congressmen, and “Boss Tweed.” Gold went to $160, and millions of dollars of non-existent gold were traded daily naturally on margin. Gould and Fisk bought their own bank, which certified millions of dollars in checks, with not nearly enough Greenbacks or dollars to cover them. Gould, Fisk, and to a far lesser degree, Corbin, actually controlled much, if not all the gold in existence, except that in the treasury or in state bank vaults. They ran it up and down like a garage door, always to their profit. More and more of the public bought and took huge risks. After all, it was the “in” thing to do, and the profits were certain, according to Gould and Fisk. They planted newspaper stories after bribing reporters. All was going incredibly well. What could possibly blow it apart?
One thing, and it did. Grant told Boutwell to sell $4 million in gold from the treasury to break up the cabal and its wild speculation. He did, and all hell broke loose. Everything crashed. The stock market crashed. The prices of everything crashed. Foreign trade crashed. Pandemonium, bankruptcies, and suicides were common, and everyone wanted the heads of Gould and Fisk. It took years to straighten out the mess, and a good deal of the national individual wealth simply vanished. Hundreds of previously sound companies and brokerages failed, and never returned. Unemployment rose to alarming levels. Gould and Fisk escaped without losing a penny, thanks to bribery of judges. It was a Black Friday, indeed. The Government brought it all down in virtually one day, even though Ulysses Grant only wanted to soften the blow, return to the gold standard, and gradually put a stop to the speculation. The US returned to the gold standard after a few years, and inflation ceased, but people who had invested, got 25 cents on the dollar. The rest was lost.
Today, there is no limit on the amount of bills that can be printed, and the gold standard has been forgotten. Since gold is not used as a backing for the dollar, smart people use it to back up their net worth, realizing that a net worth in dollars, is really no net worth at all. If one had kept ones net worth in Greenbacks, Reichsmarks, Rag babies, or any other unbacked paper currency in history; their net worth would have eventually reached zero. Gold and silver are the uncontested real money in history, and are not dependent on anyone or anything. Politicians come and go, as do paper monies, but gold and silver abide forever. Protect yourself.