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"Black Friday" - The Great Gold Crash...Of 1869
When one thinks of gold crashes, one typically visualizes a trading floor from the 1980s onward, predicated by Nixon's nixing of Bretton Woods 40 years ago, which removed gold from the list of accepted currencies and converted it into a government-manipulated pariah, whose core function was to be suppressed in an ongoing (failed) attempt to make the dollar the undisputed reserve currency (something even China comprehends). Well, readers may be surprised to discover that one of the first, and probably biggest on a relative basis, documented gold crashes was not 3 weeks ago, nor back in October 2008, nor any time since the advent of Nixon, or even the Federal Reserve, but over 140 years ago, on September 24, 1869 when a massive gold price manipulation scandal created a financial panic. That day, also known as "Black Friday", was the culmination of an attempt to corner the gold market following the latest, however brief, termination of the gold standard, when during the reconstruction period following the US Civil War, the US dollar was backed not by gold, but simply by credit (sound familiar). The result was a surge, and then collapse in gold.
What is the take home, if any? Perhaps that any time the government attempts to interfere with gold's status as a natural safety currency, it is not only gold price discovery that suffers, but virtually every other asset class, as central planning once again tries to order capital flows, however inefficiently, always, and without fail, leading to financial catastrophe.
The chart below demonstrates the intraday swing from that long ago Friday 142 years ago:
For those curious to learn about one of the first record gold price manipulations... and crashes, can do so below, courtesy of Wikipedia.
Black Friday, September 24, 1869 also known as the Fisk/Gould scandal, was a financial panic in the United States caused by two speculators’ efforts to corner the gold market on the New York Gold Exchange. It was one of several scandals that rocked the presidency of Ulysses S. Grant. During the reconstruction era after the American Civil War, the United States government issued a large amount of money that was backed by nothing but credit. After the war ended, people commonly believed that the U.S. Government would buy back the “greenbacks” with gold. In 1869, a group of speculators, headed by James Fisk and Jay Gould, sought to profit off this by cornering the gold market. Gould and Fisk first recruited Grant’s brother-in-law, a financier named Abel Corbin. They used Corbin to get close to Grant in social situations, where they would argue against government sale of gold, and Corbin would support their arguments. Corbin convinced Grant to appoint General Daniel Butterfield as assistant Treasurer of the United States. Butterfield agreed to tip the men off when the government intended to sell gold.
In the late summer of 1869, Gould began buying large amounts of gold. This caused prices to rise and stocks to plummet. After Grant realized what had happened, the federal government sold $4 million in gold. On September 20, 1869, Gould and Fisk started hoarding gold, driving the price higher. On September 24 the premium on a gold Double Eagle (representing 0.9675 troy ounces (30.09 g) of gold bullion at $20) was 30 percent higher than when Grant took office. But when the government gold hit the market, the premium plummeted within minutes. Investors scrambled to sell their holdings, and many of them, including Corbin, were ruined. Fisk and Gould escaped significant financial harm.
Subsequent Congressional investigation was chaired by James A. Garfield. The investigation was alleged on the one hand to have been limited because Virginia Corbin and First Lady Julia Grant were not permitted to testify. Garfield's biographer, Alan Peskin, however, maintains the investigation was quite thorough. Butterfield resigned from the U.S. Treasury. Henry Adams, who believed that President Ulysses S. Grant had tolerated, encouraged, and perhaps even participated in corruption and swindles, attacked Grant in an 1870 article entitled The New York Gold Conspiracy.
Although Grant was not directly involved in the scandal, his personal association with Gould and Fisk gave clout to their attempt to manipulate the gold market. Also, Grant's order to release gold in response to gold's rising price was itself a manipulation of the market. Grant had personally declined to listen to Gould's ambitious plan to corner the gold market, since the scheme was not announced publicly, but he could not be trusted. Gould had promoted the plan to Grant as a means to help farmers sell a bountiful 1869 wheat crop to Europe.
A highly fictionalized account of Fisk's life, culminating in a dramatic presentation of the gold corner, was shown in the 1937 film The Toast of New York.
h/t Nolsgrad
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so true, and thank you for your service.
Sounds prescient.
Who are the two guys cornering the gold market today?
"HSBC" and "GLD"--granted they aren't "the guys" per se but massive multi-billion dollar organizations. And indeed so far as i know of nothing that says they have done anything illegal in the way they have acquired their massive gold positions. at least "yet."
World governments and central banks. They keep supplies off the market thus artificially inflating the price. Goldbugs are teched in the head.
Right, at the same time they lease gold to bullion banks who pile on massive paper shorts. I think you're on to something. Or not.
LOL ! critical thinking; it's very important. Not only is the devil in the details; as the saying goes; everything is in the details.
Good story, Tyler. But this time i dont think TPTB have any gold to crash the market with, at least any theyre willing to trade for dollars.....
I shouldn't have been as surprised in how much they really needed daffys gold. I'm wondering how much gold they got outta Arab Spring. Let's not forget about Afghanistan
http://seattletimes.nwsource.com/html/nationworld/2013672434_afghan14.html
well they're just an under developed natural resource bonanza. I saw somewhere that an Ex-MI5 boss thoght it was time to negotiate with Al Qaeda.
http://www.guardian.co.uk/uk/2011/sep/02/mi5-war-on-terror-criticism
It is illogical to believe that central banks, all at once, all over the world, conspired to slowly buy up cheap gold, thereby running up the price of gold, only to dump their gold on the markets and crash the price of gold back to their starting point. Sure, they could dump some gold to manipulate the prices lower, but why bother doing so with their precious horde of physical when they have demonstrated success in doing so with paper?
I strongly suspect the gold conspirators don't have as much trust in each other as they did back when the acquisitions began. There has to have been some back stabbing along the way. I doubt anyone would dump their physical on the market and trust that China, or some other rogue state wouldn't snap it up.
Who is trying to corner gold now? It is too decentralized. China can buy all they want, but NO ONE is going to corner gold.
No bubble.
excellent point, 1 positive for dochen.
BIS can.
BIS can't get mine. Can they get yours? Doubt it. The Golden Horses have left the barn...
At current prices gold is cornered.
That's an interesting question. Central banks and soverign nations are buying up all they can, so I guess when they complete their campaign and have every incentive, for the first time in 100 years, to ramp the price of gold, all they have to do is to let go of the suppressed price and they will have effectively worked a corner.
My personal belief is they will then use the highly effective apparatus they built in suppressing gold to push prices up, thereby repairing their balance sheets at the expense of anyone who doesn't hold gold.
So the Cliff Notes answer to your question is the Fed and the ECB are leading the corner on gold. Hugo Chavez and China don't seem to want to go along with the game, but they have to play anyway, so Chavez wants his physical, and China is pushing its citizens to buy physical.
a wise old broker told me that all the big operators of the 60s and 70s had one ambition, and that was to work a corner...in many cases this was the offspring of vanity; in others, of the desire for revenge...it was more than the prospective money profit that prompted the engineers of corners to do their damnedest...it was the vanity complex asserting itself among cold-bloodest operators...
- jesse livermore
Warren Buffet's daughter said in a biography that it was his dearest ambition.
i don't doubt it...it's a game after all...
One just needs to remember that both manipulation and control mechanisms are way ahead of Gould/Fisk days. So is the information/dis-information mill that much more powerful. In addition, a lot of current gold holding is not physical, which I believe it must have been in those days.
One could go on in an apples to oranges fashion.
Too much has changed (besides the greed factor) for us to draw any parallels with deep history. The biggest change and one of the most powerful factors in this equation, even though the direct connect might be hard to see at first, is globabl population. In a world of supply and demand, the demand side has gone waaaaaaaaay off scale, in every "story" if you will, including the gold story.
When the bubble hits, it will be massive, vicious, short lived, heady and will end in tears.
Cycles never fail to go through zero, reach minima before starting up again.
V
http://aadivaahan.wordpress.com/2011/09/02/first-print-and-some-amazing-reading/
Summary: An unsustainable financial system, transportation system, energy, food, politics, EVERYTHING, coupled with an increasingly fragile and efficient society, sprinkle in 7 billion people lives dependant upon nothing changing = an unsustainable system.
Yup, yup, yup. It can only end in tears. But hey, I've never shed a tear for all the plague victims from the Middle Ages. I doubt future people will shed any for us. It is amazing that nobody seems to care. The mind set is:
It can't happen,
OK, but it can't happen in my time,
OK, but it can't happen to me, and if it does, this time will be different
All studies trying to identify the end of the gold bull market seem superficial to me.
At the risk of sounding like "this time is different" let's just consider that the fiat supermacy of the last 40 years was a result of the relative stability brought on by the "Pax Americana".
Simply put, in an increasingly multipolar world, likely there won't be a government-trust-based asset that can be used as a safe haven any more.
So again, I don't want to fall into cliches but there might be some truth to those that say gold will reach a permanent plateau *above* the inflation adjusted (many methods here from CPI to ShadowStats) recent (as in 1980) highs.
Looks like all those HFT machines yanked their bids....
Damn you Babbage!
I keep reading all these Gold-busters who lead with, "Gold doesn't pay dividends, and you can't eat it if the SHTF." But these are the same people who invest in GOOG, which--last time I checked--didn't have much nutritional value.
but if the shtf, isnt a 1oz gold coin going to have too much value, what will you buy with it? other than a real big target on your butt when you try to spend it. wouldnt pre 64 dimes be a better investment, or skills and the tools to ply your trade. just asking....
Are you serious? The Tylers allowed you entrance (off the porch) and you should have read more of ZH (fight club) before introducing yourself!
Do some reading (metal threads) and educate yourself too these very basic questions. I for one read ZH for a year before I stood on the porch. Over the next year and change I've continued to read and absorb and my tradition continues to grow along with my purchasing power. Most people here expect you to do your own homework off the articles/comments that are provided by very intelligent souls.
Good Luck!
There was a post Soviet survivor here that said just that. He said if you produced a gold coin, you would be followed home by gang members who would kidnap your kids to get your gold.
Boy, I'd sure miss my kids if that happened to me, but a man's got to do what a man's got to do.
and during the occupation of kuwait in 90-91, the iraqis took the parents and thier kids to improvised torture chambers to extract the personal wealth in a more direct manner...yeah, they got their wealth...food for thought.
Some people buy gold to protect savings and look to exchange for productive assets down the road. Most people think silver will be a preferred item for commerce in a currency crisis. So the answer to your question is yes, but that is no reason not to buy gold. You won't be "spending" gold in the sense you are proposing, unless it is selling links from a chain or some such.
Thank you for the answer,Ben. Green to you.
You sounds like saying, " F-U".
uh, and what about nutritional value of AAPL ?
I have been living large off of GOOG dividends for several years. Pays for all my vacations.
So nice to read an article where a million rather than a trillion means something.
That was an amazing run back in 1869. However, it was a very short run completely contrived by a very small group of people through the help of their associates to get in on the action. I loved reading the biography on Jay Gould. It reminded me that the massive level of manipulation in the markets has always been there. Just different details to suit each new age.
Number of people I have been able to convince to buy even 1/20th of an ounce of physical: 0
I have been leaning towards the great PTB to attempt an SDR stick-save before all is said and done. The silence is deafening.
Balls in your court, Germany.
didnt Gould say, " i can hire half the population to kill the other half" what a real winner that guy was....
"France is about to demand payment from Libya for the "liberating costs". They are going to rape the Libyan people"
We told ya Sarko is the French W43! He's a bastard alright but the problem seems to be that France copied what W43 did to Iraq...? That is attack an unarmed country, "liberate" it, then rape it?
It's OK when the U.S. do this but it's not when another country does the same? (confused)
payment in gold???
Gould once printed up stock certificates during the night after Vanderbilt bought a big chunk of the company. He was a bastard to his enemies, but good to his friends. During that gold corner, he actually started selling his massive holdings earlier. His co-conspirators took losses on the day of the panic because they continued buying, but that's maybe what made the scheme so successful. After the crash, Gould made covered his partners losses and they all made out like bandits.
He also sidled up to Boss Tweed to get those "naked shorts" legitimized. Funny how some people call him a 'financier'...he was a fucking thief and a scumbag.
This article isn't a good representation of the gold market crash in 1869. It's pretty weak to say the least.
The origin of that crash in the US had all it's roots in the Latin currency in Europe created by Napoleon that broke down.
This is where the 16 to 1 gold silver price comes from. You could trade 20 silver crowns with a weight of +- 88 grams of silver for 20 gold francs 5,9+- grams.
It's sunday so I don't feel like typing much but in the end when this whole gold silver scam broke down was the reason why Germany and France went to war in WOI.
Look it up and you get the picture.
I persoanly feel that it's a kind of yet another bubble sprouting up. Its not a good idea to purely invest in gold. If we compare the situations of back 1869 and now; things are quite different.
I follow the predictions of http://www.forecastfortomorrow.com/, they have given some really amazing predictions recently.
You really need to know the history from the 19th century to understand that crash.
One of THE most important factor where the colonies of Europe.
It began with a very well inventory of gold and silver in that time and the system worked very well from 1798 till 1851 and that set the gold and silver prices to 16/1 and managed to keep that up voor 5 decades.
But than there where 2 countries that had colonies that had enormous recources of Gold and Silver. Spain and Belgium, Congo and South America.
And after the launch of the latin currency, they started mining like crazy which after 5 decades destabelized the PM market back than and lead to wars.
This time it's totally different. We know all the mines and there aren't any big new discoveries to be made.
The demand is 100 times bigger than supply.
And there are no more colonies which we can mine with the use of slaves (very cheap labor). In fact, the current suppliers are saying: Why do we sell so cheap for something everybody wants? And that is the reason for the strikes in Peru for examply.
Supply will go down, demand is picking up speed.
The rally for PM's still needs to start. It's still in embryo phase.
Thx 4 the history, SD.
Why its different this time:
1. The gold market is much bigger, even on a per capita basis than in the 1860's. Moreover, the world population has exploded and gold per capita has not kept up.
2. Gold is already being used as a medium of exchagne in Africa, between India and Iran for oil
3. I highly doubt tha the US Treasury will liquidate the gold at fort knox to dilute its value. even so, I believe that 350-400B in gold would eventually be absorbed by the markets and after time, we would be back at this point of buying gold to protect against inflation and currency debasing. 400B would only pay for the last 100 days of borrowing and not even dent the national debt. If anything, China may swap some of its treasury holdings 1.3 trillion worth for the fort knox gold if it were to hit the market. There definitely would be a 50% correction if not more if this were to happen, but it would be a good put strategy on the way down and calls on the way back up.
4. The US did eventually go back on the gold standard after that brief civil war period. I believe that a commodity standard, not jsut gold standard is the next stop. Currency is a proxy for a commodity, doesnt have to be gold. Its just that gold is the most universal and practical. trading grains, trees, chickens, apples is difficult and hard to define against each other. Gold is an element with universal characteristics. However nations can swap trees for gold and use the gold to get other things they need from people who dont need trees etc. Its how we arrived to gold.
We will not have a commodity backed standard. That is far too trusting. TPTB cannot easily manipulate a currency that is backed by multiple commodities. That would require far too much price manipulation on the part of central banks and would endanger the industries that depend upon stable prices in those commodities.
Anyone proposing a commodity backed standard is tethered to logic too much. This isn't about logic. It is about power, and the people in power are not about to surrender it by handcuffing themselves.
So you see, this isn't a criticism of you, it's a criticism of them. They will never accept your very logical solution. (for the very same reason, we won't see a true gold standard, just a gold related standard that leaves them free to steal)
Smiddy your A game is something to behold. Learned more from these posts today than in the last hundred threads I've read. Much obliged.
TG
"The US did eventually go back on the gold standard after that brief civil war period."
Not picking on you, just using your post to point this out. Nowhere in this thread, anywhere I can find, does anyone point out the obvious: the whole fucking affair could have been avoided had Lincoln not chosen to stand the concept of federalism on its head and invade a sovereign neighbor. The point of the article: the gold standard works well until we go off of it to fund a fucking stupid war of some sort or the other, to assuage some politician's need or desire, and then we try to go back on it and fuck it up even more royally.
Had we not done the war, we'd not have needed to go off the gold standard to fund the war, and the ensuing inflation / depression cycle would not have occurred. Did you all miss that?
The parallels to today are glaringly obvious: we are in a state of constant war, and the Federal Reserve constantly inflates the currency to pay for the endless wars. And they are fucking it up royally.
Interesting to note the California Gold rush and Nevada Comstock mines contribution to the war as well. At the beginning of the conflict the south had 27 million in specie. The mines out west were well into production after the initial discoveries in 1848-49. Moneied interests in NY hauled regular shipments from SF of 1, 2 and 3 million "dollars" per delivery to pay for the war effort. (Carnigie provided Lincoln with a million dollar naval vessel himself) The south's attempts to intercept these shipments was never successful in preventing them from delivering their valuable cargo to the NY harbor.
Many people don't realize the tremendous influence California / Nevada actually had in defeating the south by way of the mine fields. imo.
wah wah. the South was already poised to INVADE CALIFORNIA.. AND CUBA, had they won the war (which was a distinct possibilty had the McClellan and the "Copperheads" won the 1864 election.) "Sovereign state" my butt! GO ASK the Welsh, Scots, and Irish just how "SOVEREIGN" they were against England's imperial armies...
And now Lincoln's Greenback is worthless and the US did go back to a gold standard after that.
Realistically, they pushed the price higher than it needed to be to back the currency. They were cornering the market, not making a sensible math based decision. What they did was like running gold up to 75k today and expecting the government to buy it off them.
same as it ever was....
another classic hutzpa...
Interesting article but what is missing is that Gold is now traded on the global market and if this group in DC decides to sell it to crash the current market, China, India, VietNam, Russia, Brazil and the rest of countries holding our confetti will buy it and we will be left in worse shape. This is not to say we could not be that stupid, Bernanke and his clowns have alraedy proven otherwise.
But, I encourage the drop and oppurtunity to get out of the junk dollar and into Gold at a lower price.
I supose the m ost interesting thing about this article is that manipulation and fraud seem to be the cornerstone of America finacial markets from day one and I have to wonder when this charade will end?
Interest point . I checked out the average price for gold on the London for 1869 - $18.93 US same as the previous and subsequent years. PM markets were more isolated and local in 1869. (HISTORICAL GOLD PRICES- 1833 to Present)
When ONLY THE NEXT BUYER sets the price on a thing, its all fun and games when there is a buyer at higher prices, but what happens when there isn't??? Tulips, Houses, Plenty of 'stawks', and eventually Gold and Silver.
The first step towards the Austrian realization.
"Black Friday, September 24, 1869 two speculators’ efforts to corner the gold market" ?
Today we have can add many zeroes to that number of "speculators" and to the number of "speculators" during the 1970-1980.
"Gold is going up cause the dollar is going down. Gold at $10,000, gold at $25,000..... it won't matter when you don't want dollars."
I'm studying Russian Default of 1998, and wanna tell you, none of the
economical/financial events, which actually occur in Russia at
that time have presents
in any Country, except Greece (at some extend)..
Russian Central Bank
Interest rates before Default were 90%.. It's absurd talking about
default, while USA and most of EZ have interest rates near 0%..
First sing you have to look at it's a Interest Rates, when they
start to rise dramatically, that means your
"when you don't want dollars" comes TRUE.
So far everybody want dollars and that's the reality.
I'd be watching Greece and see, if there any other signs of
Russian Default events.. USA far, far away from it..
Greece also doesn't have a stockpile of nuclear warheads. The US isn't in quite the fiscal straits of the Ruskis....yet. Remember that those nose-bleed yields came after they were taking in less in taxes than they needed to pay interest on their debts.
Check this out, Russian default of 1998 case study somewhere from
Page 4, events, facts, charts, so you know, how default really looks like:
http://research.stlouisfed.org/publications/review/02/11/ChiodoOwyang.pdf
"Meanwhile, oil prices had dropped to $11 per
barrel, less than half their level a year earlier. Oil
and gas oligarchs were advocating a devaluation of
the ruble, which would increase the ruble value of
their exports. In light of this, the CBR increased the
lending rate again, this time to 150 percent."
11$/barrel OIL.. 150% !! CBR (Central Bank of Russia) Lending rate!
That's what you should see, when nobody wants your currency (rubles in that example)
Read that research report only 12 pages and only Facts GDP, Exchange rates, Russian Stock Market, Monetary Policy, Financial Markets,
and Interest Rates
Before and After Default..
I believe that, what is happening around the world is the direct effect of dying American empire. Same happened during Soviet revolution. We, in the west were not informed during the change but learnt only the consequences.
Its why there's an am/pm fix in London, so that no particular market can determine the price overall.
But by now the am/pm fix has basically become a price fixing mechanism and was used to depreciate the gold price to $250. But there was no government intervention this time around in the low extreme, except to attempt push the price further down.
No matter what effort had been made to demonetize gold, including using the am/pm price fix to advantage has not achieved its goal, much as it was sucessful to demonetize silver.
I'm not so sure a fixed gold price is the best idea, since you want a floating value to show ppl. that their currency is depreciating. For that, it would need to achieve its 40 year inflation adjusted average.
Gold has to rise enough to coax it out of the vaults and trade in kind on the markets.
.
there seems to be a lot of yids in this story......i sware........
Nigel Farage explains back in June 2011 -
The Brussels Bugglers will strike again this month. Notice #13 is spinning in his chair, perhaps he forgot his ADD med's that day. Henry Kissinger has contacted #11 and demanded that his glasses be returned.
On a side note of comedy, Dr. Frank Luntz explains how to speak and use intelligent capabilities thru the use of your glasses. Notice how Jose Barroso utilizes the Luntz School of communication during Farage video.
I often wonder what the carnival barker trainers will do for a career after the masses expose the fraud.
As far a Gold is concerned, buy more physical. Your going to witness many millionaires/billionaires wiped out. When? Very soon!
Long cedar 4x4 grids, peat moss and vermiculite, non-gmo seeds, etc.
Back yard gardeners unite! We are anonomous here , right? :)
long compost, urine, probiotic bacteria & supethrive....and oh yeah, very important, jersey greensand. wood ash too.
diy rainwater filter
drill some holes in a 5 gal bucket
fill with wood ash 1/2 way (may also want to put some pebbles in bottom, i prefer quartz)
place filled bucket into a larger container
insert a flex tube into a hole 1" above bottom of larger container
raise the whole thing up high enough to be able to place watering can underneath
pour water into inner bucket
let gravity do the work
voila!
p.s. you can even grow plants in the inner bucket. got some crazy vines growing out of mine.
Sarko's step father is Frank Weisner Jn,son of Frank Weisner Sn, a founding father of CIA and OSS.He is reputed to be very close to his stepfather.
I always felt that the Black Friday market manipulation was an argument against the gold standard. A nation’s currency becomes what you define it as, and empowers who you wish to empower. Currency defined as ‘debt’ will makes the lenders rich. Currency defined as ‘wealth’ means the wealthy will rule. It is very necessary to carefully choose the definition endorsed.
That is, if a free market is the goal.
"courtesy of Wikipedia" lolol
Happy I used the very same .jpg & article about two months ago for snark.
old habits die hard
Here is that movie that the wiki article mentioned. "Toast of New York" from 1937.
http://w1.megarapid.net/forums/t/345900.aspx
This was the film that Martin Armstong cites as an inspiration for his work
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