“Black Friday” has its origins in the crash of the United States gold market on Twenty fourth September 1869. Two notorious Wall Street financiers, Jay Gould and Jim Fisk were the ringleaders in a plan to artificially inflate the price of gold.
In early 1869, Gould initiated his audacious scheme. At that time, gold was still the official currency of international trade, but the United States had gone off the gold standard during the Civil War, when Congress authorized $450 million in government-backed ‘greenbacks’ to fund the Union war effort. Competing currencies—gold and ‘greenbacks’—had been in circulation ever since. As there was a limited amount of gold in circulation, Gould calculated that a speculator with sufficient funds could potentially buy up enough of the precious metal to effectively “corner” the market. Such a speculator could then drive up the price and potentially sell for astronomical profits. There was only one hurdle- the President of the United States- Ulysses S. Grant. The government controlled the value of gold: when government sold the price reduced; when it didn’t, the price increased. For the scheme to work, Gould needed President Grant to prevent the treasury from selling gold. Through conspirators close to the President, pressure was brought to bear upon the President to persuade him to introduce a clear policy not to sell gold. Finally, at the beginning of September 1869, the President instructed the treasury not to sell gold during the month.
The Game was on!
Gould recruited Jim Fisk into the scheme because he had considerable funds immediately available to purchase gold. They and the other conspirators continued to purchase as much as they could. As the month passed and the price of gold increased the treasury began to put pressure on the president to authorise sale of gold in order to stabilise the price. On twenty second September Gould discovered the President suspected a conspiracy. Gould did not tell his fellow fraudsters and began secretly to sell his own gold.
By twenty fourth September 1869 mobs of investors who were losing money and reporters were converging on Wall Street. Fisk continued to buy gold furiously delighted as the success of the scheme. The President furious at being deceived instructed the treasury to flood the market. $4 million in gold would be sold the following day, the twenty-fifth September.
The announcement sent Wall Street into free fall. “Possibly no avalanche ever swept with more terrible violence,” the New York Herald later wrote. Within minutes, the inflated gold prices plummeted from $160 to $133. The stock market dropped a full twenty percentage points, thereby bankrupting or severely damaging many of Wall Street’s most respected firms. Thousands of speculators were left financially ruined, and at least one committed suicide. Foreign trade ground to a halt. Farmers saw the value of their wheat and corn harvests halved.
‘Black Friday’ damaged the United States economy for several years afterwards and tainted the remainder of the President’s tenure. Despite multiple allegations of malfeasance and an official investigation by Congress neither Jay Gould or Jim Fisk spent a single night in jail. Fisk avoided massive losses by claiming third party brokers had made the trades without his knowledge. Estimates suggest Gould may have netted around $12 million as a result of his sales before that first ‘Black Friday’.
Author The Cypher Bureau