It’s a long story, and I’ll try to abbreviate it, because my daughter Melissa, sort of witnessed the results 130 years later! The story began when the North printed Greenbacks, as I have mentioned in a past column. The misnamed ‘Civil War,’ cost the North billions of dollars, and the South too, which they didn’t have, so the North conveniently removed the dollar’s gold backing, and turned on the printing presses. (Today, the dollar has no gold or silver backing.) The national debt went from $64 million to $2.8 billion between June 30 1860, and September 1 1865. (Today, the national debt is over $21 trillion.) The fleecing of the dollar began in December 1861, when the North began its ruin of the dollar by printing an initial $450 million in paper money, and selling over $2 billion in long term bonds. The North’s General Ulysses Grant became U.S. President, and “Boss Tweed” and “Tammany Hall” won the city of New York. Total corruption reigned in the state and city. Tweed’s vote counters in New York City, created as many fake ballots as was needed to win elections, and it was such a fraud, that the ballots weren’t even counted in many precincts. Susan B. Anthony launched a tabloid called, “The Revolution,” in which she lambasted un-backed paper money printing, as “The high art of swindling,” and noted that Greenbacks, “Cost only the paper and printing.” Supreme Court Chief Justice Salmon Chase, who had designed the Greenback system when he was Abe Lincoln’s Treasury Secretary, in 1865 described the currency he had designed 5 years earlier, as “worthless.”
The Erie Railroad was competing with Commodore Vanderbilt’s New York Central for a line between New York and Chicago. The Erie’s majority stock was held by two rapscallions with the names of Jim Fisk and Jay Gould. There were no laws of any kind controlling the issuance of stocks, or ‘watering’ them. It was a sort of free for all, if you had money and guts enough to play the game, which Fisk and Gould did. Since the money had become worthless, after the war people turned to gold, which then as now, is real money. Fisk and Gould had all sorts of buddies who helped with their stock manipulations, which they transferred to gold manipulations. One of his buddies in crime was a fellow named Corbin, who luckily was married to President Grant’s daughter. “Boss Tweed,” provided protection in New York, for Fisk and Gould, who created what came to be called “The Gold Room,” a trading room like a stock market, where people could buy and sell gold contracts. Fisk and Gould did the usual with their majority stock holdings in the Erie Railroad; selling thousands of shares, running up the price, and then selling them at the high, driving them down, and buying thousands more at the lows. (The same thing currently goes on every day with stocks and bonds.) Gold was the desired currency, since the Greenback had become worthless.
Gold contracts had been hovering around $130 (the contract price, not the price per ounce of gold), when Fisk and Gould figured they could do with gold contracts, what they had done with Erie stock. Over a period of a few weeks, gold trading became very popular, with Fisk and Gould buying and selling huge amounts, paying for them with their stock profits, but also with certified bank checks from the Tenth National Bank, which they had bought, and which certifications eventually became as worthless as the Greenback. Fisk and Gould remained as invisible as possible, so the public didn’t know they were manipulating the gold contract prices. They used friends’ and ‘straw’ names on the contracts. Eventually, in a matter of weeks, gold contract trading became very popular, with institutions, churches, and the general public participating, just like today, when hundreds of millions of stock shares are traded daily.
Fisk and Gould bought and sold gold contracts carefully, selling high and buying low, while keeping their names officially off the contracts, although it was fairly well known by the big traders, who was behind the price manipulations. As they ran the contract price up, the number of contracts increased, till there were far more contracts for gold, than there was gold in existence. (Today, gold futures contracts have but a small fraction of the physical gold backing, which the contracts represent. If current gold futures contract holders tried to cash them in for physical gold, few would get it.) On September 18th 1869, Fisk ordered his brokers to ‘buy, buy, buy,’ and on September 20 and 21, everyone else seemed to follow. On Thursday, September 23rd, Treasury Secretary George Boutwell came to New York to investigate the Tenth National Bank, owned by Fisk and Gould, which had been certifying millions of dollars worth of checks, which were basically worthless. Fisk and Gould had run up the gold contract price to $160, ‘owned’ $50-$60 million worth of gold which didn’t exist, and which was paid for with Tenth National Bank ‘certified’ checks. Also on this very day, President Ulysses Grant announced the Treasury was selling Treasury gold into the market. (Today, our government has no gold, and has to buy it from U.S. mines to make its Gold and Silver Eagles.) The Treasury sale caused gold contract prices to plummet. Fisk and Gould owned lots of contracts at $160, and they had been paid for with bogus checks from their Tenth National Bank. On Friday September 24th 1869, everything fell apart. It became known as “Black Friday.” Stock prices crashed, cotton, wheat, and other commodities went into the basement. Gold contracts quickly went back to their former $130. Fisk and Gould were ruined, as were millions of individual contract holders who had followed the trend, and figured the profits would never end. Thanks to “Boss Tweed,” Fisk and Gould weren’t jailed, but millions of investors lost everything.
In all markets, suspicion and distrust, can happen, causing there to be more sellers than buyers, resulting in prices careening down, which happened on “Black Friday” 1869. (Currently, Oil briefly reached $70 last week, for the first time in years, because the oversupply had been used up.) With the Treasury selling gold, and spot and contract price going down, people tried save themselves, but couldn’t, because everyone was selling, and no one was buying, not knowing where the bottom was. Fisk and Gould still owned their shares in Erie, and through influential friends in high places, were not charged with fraud. Their plans for Erie to have a connecting line to Chicago, to beat the New York Central, went out the window, and The New York Central, under Commodore Vanderbilt, achieved it. (The New York Central’s luxury train was named “The 20th Century Limited,” and went from New York to Chicago with an average speed of over 60 MPH including station stops along the way!) ‘Commodore’ Vanderbilt didn’t participate in the gold contract market, so his capital was intact. (The Commodore’s grand nephew owns America’s largest mansion in Ashville, North Carolina, and is a great place to visit!) “Boss Tweed” was convicted of 204 counts of fraud in November 1873, went to jail, was released and died at age 55 in 1878. Jim Fisk was shot dead by an outraged loser in the gold room on January 6, 1872. Jay Gould was ejected as president of the Erie in March of 1872, but gained control of two of the nations’ two most vital utilities, which were railroads and telegraphs. The Erie never got to Chicago, but Gould’s rail system eventually controlled the Union Pacific, Kansas Pacific, Missouri Pacific, and Wabash, plus New York’s elevated railroads, the precursor to today’s subway system. He bought the New York World newspaper, which he eventually sold to Joseph Pulitzer. He also built a sumptuous mansion, which he named ‘Lyndhurst,’ on the Hudson River, north of New York. He died in December 1892, and left a fortune estimated at that time, of $70 million, but by today’s standards, more than a billion dollars.
My daughter Melissa, who of course does a great job of brokering gold and silver for Colorado Gold, has a master’s degree in Historic Restoration. She was busy restoring Jay Gould’s Lyndhurst, when David and I needed additional help with the gold and silver business. She took to it easily, and all her customers think she is wonderful. So do I! – Don Stott – 1-888-786-8822