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Black Friday, Part 3

March 2, 2017

During the first six months of the Grant Administration the national debt had been reduced significantly.  This was accomplished by redeeming greenbacks with gold and buying back government bonds with the greenbacks.  Meanwhile, private citizens James Fisk and Jay Gould, in an attempt to corner the gold market, were destabilizing the currency.  They had to be stopped.

Their scheme was very simple.  If the gold market remained thin, Fisk and Gould could easily manipulate the price.  When the price was sufficiently high, they would then sell their gold at a huge profit.  Of course, that would probably leave late investors with a loss they could not recoup, but that was of no concern to Fisk and Gould.

Apparently, it was also of no concern to President Grant’s brother-in-law.  Abel Rathbone Corbin had invested much of his own money in the scheme, and Grant belatedly suspected that his own sister’s welfare might be at odds with the good of the country.  Grant instructed his wife to tell his sister to tell her husband not to associate with Fisk and Gould.  Then he took action.

Throughout the 19th century the average price of gold was less than $20 per ounce, but on Friday September 24, 1869 it exceeded $160.  If the price continued to rise, the Federal government would not be able maintain its debt reduction policy.

Grant had the Treasury sell a huge amount of gold.  Within minutes the price of gold dropped below $140.  By the end of the year it was below $30.  Grant had stabilized the currency, but at great cost.  The stock market declined 20% in less than one week.  Grant’s sister and brother-in-law suffered financially.  Eventually there would be a Congressional investigation, but Fisk and Gould were never prosecuted.

 

 

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