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Gold was scarce, and the scarcity resulted in high
interest rates. By 1869 the federal treasury held in
reserve $95,000,000 in gold, but only $15,000,000 worth
of the precious metal circulated throughout the country.
Even at that time the fact that it did not deal in gold
as a commodity threw a great part of the community's
highly speculative business over to the Gold Exchange,
which was formed for that purpose exclusively.
The Gold Exchange was established in 1864 on the
corner of Broad Street and Exchange Place. The dramatic
incident of this period was the gold panic on Black
Friday in September, 1869, when a combination of several
unscrupulous speculators, among them James Fisk, Jr.,
and Jay Gould, attempted to corner and put to
extravagant figures the gold supply of the market.
Operations on the Stock Exchange proper at that time
were largely made up of the personal struggles of rival
capitalists, notably in connection with the Erie and New
York Central railroads.
The completion of the Pacific Railway (1869) caused
extensive speculation in shares of the two
transcontinental railways, and as capital increased and
the railway mileage of the country extended the
transactions of the Exchange became of a national rather
than provincial character. The leading operators of that
time were Gould, Fisk, Daniel Drew, Cornelius Vanderbilt
and their associates. None of the capitalists named was
accustomed to trade personally on the Stock Exchange;
indeed, such a practice has always been the rare
exception among active financiers.
BLACK FRIDAY: The term is often used to designate a
dark financial day. September 24, 1869, is sometimes
referred to as Black Friday in the United States. On
this day a syndicate of New York bankers advanced the
price of gold to 162 1/2, causing a panic. It sold at
143 1/8 the previous evening. The Grant Administration
dumped $4,000,000 in gold on the market, the price falls
in fifteen minutes from 162 to 133, and many investors
were ruined. Fortunes were lost. Wall Street brokerage
houses failed. Railway stocks shrank. The nation's
business was paralyzed. Another such day was Friday,
Sept. 19, 1873, when Jay Cooke & Co., leading American
bankers, failed. A great crash ensued in Wall Street,
the center of financial operations in America, and the
historic panic of 1873 began. Credit generally was
impaired and many financial institutions were forced
into bankruptcy.
FIRST INAUGURAL ADDRESS:
During the term of Ulysses S. Grant while in office
as President March 4, 1869 to March 4, 1877.
Volume: VII Page: 7 (extract)" A great debt has
been contracted in securing to us and our posterity the
Union. The payment of this principal and interest, as
well as the return to a specie basis as soon as it can
be accomplished without material detriment to the debtor
class or to the country at large, must be provided for.
To protect the national honor, every dollar of
Government indebtedness should be paid in gold, unless
otherwise expressly stipulated in the contract.
FIRST ANNUAL MESSAGE
Executive Mansion, Washington, D. C., December 6,
1869
To the Senate and House of Representatives:
Volume: VII Page: 29 (Extract) "Among the evils
growing out of the rebellion, and not yet referred to,
is that of an irredeemable currency. It is a duty, and
one of the highest duties, of Government to secure to
the citizen a medium of exchange of fixed, unvarying
value. This implies a return to a specie basis, and no
substitute for it can be devised. It should be commenced
now and reached at the earliest practicable moment
consistent with a fair regard to the interests of the
debtor class.
Immediate resumption if practicable, would not be
desirable. It would compel the debtor class to pay,
beyond their contracts, the premium on gold at the date
of their purchase, and would bring bankruptcy and ruin
to thousands. Fluctuation, however, in the paper value
of the measure of all values (gold) is detrimental to
the interests of trade. It makes the man of business an
involuntary gambler, for in all sales where future
payment is to be made both parties speculate as to what
will be the value of the currency to be paid and
received. I earnestly recommend to you, then, such
legislation as will insure a gradual return to specie
payments and put an immediate stop to fluctuations in
the value of currency.
The methods to secure the former of these results
are as numerous as are the speculators on political
economy. To secure the latter I see but one way, and
that is to authorize the Treasury to redeem its own
paper, at a fixed price, whenever presented, and to
withhold from circulation all currency so redeemed until
sold again for gold.
THIRD ANNUAL MESSAGE
Executive Mansion, December 4, 1871
Volume: VII Page: 148 (extract) " Continued
fluctuations in the value of gold, as compared with the
national currency, has a most damaging effect upon the
increase and development of the country, in keeping up
prices of all articles necessary in everyday life. It
fosters a spirit of gambling, prejudicial alike to
national morals and the national finances. If the
question can be met as to how to get a fixed value to
our currency, that value constantly and uniformly
approaching par with specie, a very desirable object
will be gained."[END OF ARTICLE]
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