Thank you.
I'm glad to be here.
How many of you were at
the talk last night?
Oh well, OK, then-- I sometimes
find myself
addressing groups that I've
addressed before.
But sometimes there are new
people in, and I don't know
who exactly was there before.
And so I try not to
repeat myself.
I was once addressing, well, a
group considerably older than
yourselves.
It was at a retirement home.
And I said I had been there
a year or two before.
And I hadn't remembered
what I talked about.
And I got up and I said well,
now you'll have to excuse me
if I repeat myself,
because I'm not
exactly sure what I said.
And somebody hollered out, don't
worry, they couldn't
remember it anyway.
But this wouldn't apply
to this group.
Well, since most of you were
here last night, maybe I can
continue what I was
talking about.
Because it actually segues very
directly into what I was
going to talk about anyway.
The book,.
American Colossus, is
on the Guilded Age.
The Guilded Age is roughly
defined as being the slight
1860s to the 1890s.
I expanded a little bit
to get from-- Well, I
call it 1865 to 1900.
And it was a time when America
changed more dramatically than
probably during any 35
or 40, 50 year other
period in its history.
If you look at photographs--
Some of you mentioned that
when you went home last
night, you hadn't had
your fill of history.
So you turned on the local PBS
affiliate, and you caught the
last episode of Ken
Burns' Civil War.
Raise your hand-- OK.
Well, if you look at photographs
from that period,
from the Civil War, you see an
America, at least to my eye,
decidedly different than the
one we live in today.
It seems like it's kind
of a distant time.
And it was a different place.
I think that's one of the
appeals of that wonderful
series, because there's a
certain aspect of the
historical imagination of
people whose interest in
history that wants
to see something
that's quite different.
The exotic aspect of history.
But if you then look at
photographs of America in the
early 29th century, just
jump up to 1900.
Go from 1865 to 1900.
By 1900 America, even in the
photographs, it's looking
quite modern.
And you see the institutions.
You even see automobiles.
You see street cars, subways.
Stuff that you would
see today.
So something happened between,
we'll just say, the end of the
Civil War and the beginning
of the 29th century.
And that's what I talk
about in the book.
But before I get into the
big themes, I'm going
to tell you a story.
And it begins in, well, where
should I-- It begins in the
late 1860s.
And it's based on a fundamental
change in American
financial life during
the 1860s.
And it has to do with the
American money supply.
Until the 1860s, the American
currency was
based on the dollar.
And the constitution, it
establishes a link between the
US dollar and gold.
And gold was the basis of the
American money supply.
Silver was added.
And so you get gold and silver,
hard money, that form
the basis of the American
currency.
Now, there's never enough gold
and silver sitting around that
people can confine their
economic activities to just
using those.
And so banks would
issue bank notes.
And so the local Bank of Grand
Rapids or its equivalents
would issue bank notes, and they
would trade as currency.
You go to local store
and you use them.
But implicitly, behind all this
was supposed to be gold
and silver.
The idea was you could take
these notes to the bank and
exchange them for
gold and silver.
Most people didn't want to carry
gold and silver around,
because it's relatively
clumsy.
Paper is much more convenient.
But the idea was that if you
needed to have the gold, if
you needed to have the silver,
you could go to the
bank and get it.
During the Civil War, because
of the enormous expansion of
demand for government services,
for government
procurement, the Union
government and the Confederate
government both were forced
off of hard money.
Off of specie.
And they began to print
paper dollars.
The idea was, especially in the
case of the Union, these
dollars were based on the full
faith and credit of the
government, but nothing else.
There was no guarantee that you
can exchange these dollars
for gold and silver.
They were printed in green ink,
and therefore they were
called green backs.
This is the first time dollars
were called green backs.
And the green backs
were different
than the gold dollars.
There were two currencies
that were circulated.
They were the gold dollars, and
if you took these to the
treasury, these could be
exchanged for gold.
If you took the green backs to
the Treasury, they would say,
nice looking piece of
paper you got there.
And that was it.
And the only thing that, well,
I suppose I could ask you.
What was the only thing
that would keep value
in the green backs?
What was it that would allow
the green backs, just this
piece of paper, to have value?
What is it that gives
value to money?
Pardon?
Trust, exactly.
If you pull out a dollar bill,
and I actually don't know if I
have any currency in my pocket,
but if you do, there
are two magic words on a $1
bill, on a $5 or $10 or
whatever bill you have. Do you
know what the magic words are
that converted from just a
piece of paper to money?
No, not in God we
trust. Sorry.
In God we trust, everybody
else has to pay cash?
No.
Unfortunately, God doesn't
enter into this one.
No.
And this is before the age
of the Federal Reserve.
The Federal Reserve doesn't
come along until the early
20th century.
There are two magic words that
convert it into money.
Otherwise it's just
a piece of paper.
OK, you've got your money out.
Legal tender.
This note is legal tender for
all debts public and private.
And what it means is, if I owe
you $10, if I have a debt of
$10, I bought a horse from you,
and I use $10 to pay off
on the horse.
And I hand you one of these
bills, you have to accept it.
Because that's the law.
That's what legal
tender means.
And so that's what
makes it money.
That's what makes it the
sort of thing that
people have to accept.
Do you know what the temptation
is though for
governments?
If you can create legal
tender by legal fiat?
What's the temptation if you're
a government and you
have debts to pay?
What would be the temptation?
What is the temptation for
our elected officials in
Washington today when they're
trying to hammer out a deal?
Print money.
Now in fact, these days when
money is-- When we say "print
money," that's a euphemism.
Because most of our money
is in bank accounts.
It's just electronic digits.
But the essence is
the same thing.
In the Civil War, in fact they
actually did just run the
printing presses over time.
So the result of this
was a dual currency
in the United States.
There were the gold dollars, but
those were limited by the
supply of gold in
the Treasury.
And the Treasury had a big
vault, and in the vault was a
bunch of gold.
And the main vault was in
Washington, but there was a
secondary vault.
The one that was actually more
important was in New York
City, which is where Wall
Street was located.
And that's the one
where people can
actually get the gold.
And then there were the green
backs floating around.
The result of this was
that there was huge
speculation in currency.
Now, we know about how
people speculate in
currencies these days.
They'll buy Euros, or Yens, or
Yuan, or whatever it might be,
guessing that one's going to
go up against the other.
And if you guess right, you
make lots of money.
In the United States, starting
in 1862, there was a
speculation in the two
currencies of the United
States, one against the other.
And if you thought that Congress
and the US Treasury
and Mint were going to be
judicious and restrained in
printing money, then you
would bid up the price
of the green backs.
Now, the green backs were always
worth less than the
gold dollars, but the
premium varied.
So typically, it would take
anywhere from 150 green back
dollars to buy 150
gold dollars.
But at times it got much
worse than that.
So when the fortunes of the
Union were declining after
various defeats on the
battlefield, the value of the
green back would go down.
So it would take as many as 250
green backs to purchase
100 gold dollars.
And last night I was talking
about why they tried to get
the news of the battles to New
York as swiftly as possible.
Well, the currency speculators
were betting on the outcome of
the battles.
And depending on whether they
bet right or bet wrong, they
would win big.
Anyway, the war ends, but the
currency problem remains.
It's no longer connected to
battlefield victories or
defeats, but it's connected to
a variety of other things.
The ordinary ups and downs
of the economy.
Now, there were two individuals
who had decided
that they were going to try to
bid up the price of gold
against the green back.
And one of these individuals'
name was Jay Gould.
Now, Jay Gould was
a young man.
And I suppose, is it fair to
say that speculation is a
young man's game?
Maybe you have to have either
the nerves of a young man or
the short memory
of a young man.
Maybe that's what does it.
And when I look at what happened
in 2008, I'm sure
there were plenty of people in
the room who were saying, this
bubble we're in, these always
come to a bad end.
But it's the people who don't
remember the last time the
bubble burst that are pushing
up the prices.
Anyway, so Jay Gould was the
director of the Erie Railroad.
And this is important to the
story, because as the director
of the Erie Railroad, he had an
interest in bidding up the
price of gold.
Because to bid up the price of
gold is to drive down the
price of the dollar.
And as I said, the green back.
And so I'm going to say gold on
one hand and dollar on the
other, to gold dollars
and then green backs
dollars over here.
To bid up the price of gold
would be to drive down the
price of the dollar.
And if the dollar weakens, then
American exports become
more attractive in
foreign markets.
The principle is still
the same today.
And what Gould wanted to do was
drive down the price of
American grain.
American grain?
What did he have to do
with American grain?
Well, the Erie Railroad shipped
a lot of grain from
the Midwest to New
York, and then it
would be shipped overseas.
So if American grain is cheap,
then it's purchased by
overseas buyers.
And they demand the grain from
the Midwest, which goes out
over the Erie Railroad and
generates business for the
Erie Railroad.
So Jay Gould decides that he
wants to take action to bid up
the price of gold.
Gould decides that he wants to
have the assistance of the US
government on this.
The new president is none other
than Ulysses Grant.
Grant has been elected in
an overwhelming victory.
After Abraham Lincoln was
assassinated, Andrew Johnson
became president.
And then, I'll just remind you,
Andrew Johnson had been
added to the, well, you
could call it the
Republican ticket in 1864.
But the Republicans didn't call
it the Republican ticket,
because Abraham Lincoln wanted
to point out that the war
effort was not simply a
Republican monopoly.
Andrew Johnson was a Democrat.
He was a member of the
opposing party.
He was a Southerner.
He was from Tennessee.
He was a Unionist, which is one
of the reasons he wasn't
very popular in Tennessee.
But he added to the ticket.
Now, Abraham Lincoln's first
vice president was a man named
Hannibal Hamlin, who was quiet
personally unpopular.
In fact, Lincoln used to joke.
And the joke came out later, and
it turned out to be rather
dark joke later.
He said that Hannibal
Hamlin was his
assassination insurance.
No one would assassinate Lincoln
knowing that Hannibal
Hamlin would be the
next President
of the United States.
Now, it was Lincoln who decided
to remove Hamlin from
the ticket in 1864 and replace
him with Andrew Johnson.
Lincoln appears not to have
commented on what this
cancellation of his insurance
policy might have portended,
but of course, Lincoln was
assassinated shortly after his
second inauguration.
And this Southerner now, this
Democrat, becomes President of
the United States.
Now, how fully John Wilkes
Booth thought
through this is unclear.
It was mostly a matter of
vengeance against Lincoln,
whether he thought that Johnson
would do any better
for the South is hard to say.
Johnson suffered from being
an impossible situation.
He was the heir to the
successor to the
now martyred Lincoln.
No one in the North liked him,
because he was a Southerner.
No one in the South liked him,
because he was an apostate.
He had joined the
Republican side.
The Republicans didn't
like him,
because he was a Democrat.
The Democrats didn't like him,
because he had joined with the
Republicans.
There was no way he could even--
Well, maybe he could
survive his presidency.
He did survive his presidency,
but not by much.
Oh, there was something
else that happened.
You know the story, roughly
speaking, about how Johnson
was impeached, but barely
not convicted.
His impeachment was not
necessarily for ordained, but
there was going to be a huge
challenger, a confrontation,
between whoever was president
and Congress.
Even if it had been Lincoln.
If Lincoln had lived, Lincoln
would have had to deal with
many of the same issues
as Johnson.
And at the heart of the issue
was the question of the role
of the president.
During the 19th century, it
was understood that the
initiative in American politics
lay with Congress.
The big decisions originated
in Congress.
The president was mostly,
well, we call
him the Chief Executive.
But he was like the CEO of
the board of directors.
Congress ordained, and the
president then enforced.
Things changed during the war.
Things always change during the
war, because during the
war, Congress loses ground
to the president.
The president is the
commander-in-chief, and as
commander-in-chief, the
president can do stuff that
doesn't depend on Congress.
And the major initiatives of the
Civil War were undertaken
by Lincoln as president.
And Congress had to tag along.
But there was an institutional
resistance and jealousy that
was building up, that was going
to snap back against the
president, as soon as the war
ended, regardless of who the
president was.
Anyway, it wasn't Lincoln, and
it was Andrew Johnson, who
didn't have the personal stature
of having led the
country to war.
So Johnson was lame duck, almost
a dead duck, from the
moment he took office.
He barely survived.
Everyone knew he would be
succeeded by another
Republican.
Not a Democrat, like Johnson,
a Republican.
Who would the Republican be?
America, at this point, did what
it had done after each of
its previous wars.
After each war, America elected
the victorious general.
After the Revolutionary War,
who became president?
George Washington.
After the War of 1812,
who became president?
Jackson.
And then William
Henry Harrison.
After the War of Mexico,
who became president?
Zachary Taylor.
And after the Civil War, it was
going to be, of course,
Ulysses Grant.
Grant was approached to have his
name put in play in 1864.
As early as 1864.
There were Republicans who were
dissatisfied with Lincoln
and who thought Grant would
make a better candidate.
But Grant said no, he didn't
want anything to do with it
and he had a war to win.
After the war ended though,
Grant realized that he could
very well be the next President
of the United States.
And he looked upon this
with some ambivalence.
He was not an ambitious
fellow.
And I read his letters.
And I try to figure out, so is
there a president inside this
guy secretly screaming
to get out?
And I just can't find it.
But Grant took the same
position that
Andrew Jackson took.
And I'm aware of this, maybe
just because I read about
Andrew Jackson, but both of them
adopted the attitude of
the soldier.
By the way, this is the attitude
adopted by Dwight
Eisenhower, who didn't seek
the presidency, but was
willing to answer the
call of the people.
When you become the top soldier
of your generation in
your country, when the people
call, when they give you an
order, it's almost like the
president giving you an order.
And you can't really say no.
And so Grant goes, all right,
if the people want me to be
president, I will answer
the call of the people.
And it was not exactly
automatic
that he became president.
It certainly was automatic that
he got the nomination.
The Republicans knew that a
victorious general would be
unbeatable.
Especially since in 1868,
most of the South
could not yet vote.
It was not back in the Union.
And so the only people who
objected to Grant were those
on the side that he had
defeated, it and
they weren't voting.
So Grant was an shoo-in.
Ha, and now things get more
interesting, because there
were people who nominated Grant
on the assumption that
Grant would be kind
of an empty suit.
Someone who would be willing to
go along with whatever the
Republican leaders in Congress
wanted him to do.
And Grant was, I guess I
can say, shrewd enough.
Or maybe he was just-- It's hard
to tell-- I'll say shrewd
enough to let them think
precisely that.
This happens repeatedly.
If somebody becomes the nominee
of the favorite of
some powerful group, and they go
ahead and let that powerful
group put their name forward,
and the powerful group often
thinks, OK, we elect
this person.
And then we'll be able to
tell them what to do.
Then lo and behold, the person
gets elected, takes the
inaugural oath, and then
decides, know what?
I'm president, you're not.
And Theodore Roosevelt, for
example, did this when he was
elected governor of New York.
And he allowed the New York
bosses, the New York political
machine, to put his name
in nomination.
And he thought, OK, we're
going to get this guy in
there, and he'll do what
we tell him to do.
And Roosevelt played along,
and then once he was
inaugurated .
OK, I'm governor, and
I'll do what I want.
William Howard Taft did this
in the history of the
presidency.
Taft was Theodore Roosevelt's
anointed successor.
Theodore Roosevelt had thought
about running for a third
term, but no, he better not.
He better not hold himself up
higher than George Washington.
And furthermore, on election
night in 1904, when he was
elected the first time in his
own right, through some fit of
odd humility, he's-- Very
odd for Roosevelt.
He said he would not run
for election in 1908.
And he later said that he would
give his right arm to be
able to take that back.
But he couldn't, so he
said, OK, I know,
I'll make Taft president.
And he prepared Taft.
And he thought that Taft would
do exactly what Roosevelt
would have done.
Well, Taft goes along with this,
even to the point of
Roosevelt was advising him on
how to run his campaign.
He said, don't play golf.
Taft liked to play golf.
Don't play golf.
Golf is not the sport
of the people.
Do something like Theodore
Roosevelt would have done.
A real man of the people.
Single sticks.
Yeah, Teddy, people do
that all the time.
But anyway, so Taft gets
elected, and decides, hey, I'm
president, I'm going to do
it the way I want anyhow.
So the Republicans elect Ulysses
Grant, and they got
this president, what are they
going to do with him?
Grant had a very
modest agenda.
He wanted to, first of all,
first and foremost, balance
the budget.
Because the government
was deeply in debt
after the Civil War.
And the thing to do was
to pay off the debt.
And he also wanted to restore
the currency to its gold and
silver basis.
He, like most everybody else,
felt the green backs were an
emergency wartime measure.
And so he wanted to gradually
retire the green backs.
Have the government buy them up,
and then replace them with
gold and silver backed notes.
That was the long term agenda.
But the question is, how could
you do that without disrupting
the currency markets?
So this is Grant's position.
Now, Grant is no financial
expert.
He has a basic understanding of
the way the money markets
work, and the way the
economy works.
But he's no expert.
And Jay Gould knows this.
Jay Gould is an expert.
He has made a career, a short
career until now, but
nonetheless a successful career
out of speculation.
And so he manages to arrange
an interview
with Ulysses Grant.
Now this is a little
bit strange.
Here is this 35 year old Wall
Street trader, who gets an
interview with the President
of the United States.
How could such a thing happen?
Well, he was indeed the director
of a major railroad.
The Erie Railroad
was a big deal.
And so it would be like some
head honcho of a big Fortune
500 company getting an interview
with the president.
But there was another avenue.
Ulysses Grant had a
younger sister.
And this younger sister had
never been married.
She was, well, in
the terminology
of the day, a spinster.
She was an old maid.
And it looked as though she
would never be married.
And this was considered either
something between a misfortune
and a minor tragedy.
And then, in her, and I guess
she was probably pushing 40,
which was old age for single
women in those days.
She had a beau.
And this fellow's name
was Abel Corbin .
And Abel Corbin was of very
minor Wall Street player.
Now, interestingly enough,
Corbin had known something
about Jenny Grant for a while,
but had no romantic interest
in her, until wouldn't you know
it, until her brother was
elected President of
the United States.
And all of a sudden, her
attractions grew more powerful.
And Corbin proposed, and
they were married.
Well, Jay Gould knew about this
and decided to approach
Abel Corbin, and tell Corbin
that he, Gould, had this plan
where they were going to try to
drive up the price of gold.
And perhaps Corbin would be
interested in getting in on
this speculation.
And so Corbin was cut
in on the deal.
Now, exactly when in this
transaction, it was suggested
that Abel Corbin would arrange
a meeting between Jay Gould
and his brother-in-law
is unclear.
But Corbin did.
And Grant-- Now, it's hard to
know whether Grant was simply
being naive at this point,
or was trying to
be nice to his sister.
Because his sister was still
kind of nervous about-- She
was now married to this guy, but
still she wanted to please
her new husband.
And her new husband thought that
it would be very good for
the business interests of the
country if President Grant
spoke to Jay Gould, because Jay
Gould, as I say, was the
director of the Erie Railroad.
Anyway, a meeting is held.
And Gould talks to Grant.
And Gould is describing the
advantages to the country of
getting the price of gold up.
And he explains how it would
make American exports more
attractive overseas.
And it will improve
American business.
And farmers will do better.
And the people are engaged
in the [UNINTELLIGIBLE]
theory.
Where if American goods are more
competitive, the American
economy does well.
And Grant is listening.
It seems OK.
And at this point, Jay Gould
is not trying to get any
action out of the government.
What he's really trying to
do is figure out what the
response of the government
will be if the
price of gold increases.
This is the critical thing
about all this.
Gould doesn't want Grant
to do anything.
In fact, what he wants Grant
to do is nothing at all.
Because at some point in this,
and now we're talking about
the summer of 1869, and this
is when the produce of the
Midwest is going to be shipping
to the east anyway.
So sometime during the summer
of 1869, Gould decides to go
over bigger gain than just
a modest increase in
the price of gold.
So it will boost the Erie
Railroad traffic.
That's part of it.
But he realizes that, in fact,
he could perhaps accomplish a
grant coup in American
speculation.
Probably the biggest coup in
American speculative history.
He has in mind a plan to corner
the market in gold.
Now, corners were fairly common
in the 19th century.
And you occasionally hear
about them these days.
But they're much rarer now.
The last time that I remember
hearing about it was when the
Hunt brothers in the
1970s wanted to
corner the silver market.
And what it means, essentially,
is and for those
of you who know finance,
you'll know more
about this than I do.
But basically, a corner occurs
when people have made
commitments, signed contracts,
to deliver more of a product
that exists on the market
to deliver.
And so people take speculate
positions.
They'll promise to deliver pork
bellies at some time in
the future.
And they'll hope that before
they deliver the pork bellies,
they'll hope they can
actually acquire the
pork bellies to deliver.
Well, if enough people are
making promises to deliver in
the future, there will be more
promises out there than pork
bellies actually to deliver.
At which point, if one person
can control all those
promises, if one person is owed
all the pork bellies,
then that person has a
corner on the market.
Because more is owed to him that
exists, and in order to
get out of their commitments,
typically those people who
have pledged to commit, or
contracted to commit, have to
pay a premium.
As I say, there had been corners
in pork bellies.
There had been corners
in wheat.
There had been corners in
things like copper.
But nobody had ever
cornered gold.
And gold was special, because
gold was money.
And if you could control the
gold supply of the country,
everybody needs gold
on a daily basis.
At least everybody who's engaged
in international trade
needed gold.
Everybody who had to pay their
taxes had to pay in gold.
Now, you can do without pork
bellies for a while.
You can do without wheat
for a while.
You can eat rice or corn.
But the country could
not do without gold.
And Gould knew that if he could
corner gold, he would
have command of the American
financial system.
And people would have to pay him
essentially extortionate
rates to be released from
their contracts.
So this became the plan.
And Gould enlisted a friend of
his, a guy named Jim Fisk.
Now, Fisk was as flamboyant
as Gould was quiet.
Almost nobody knew what
Jay Gould looked like.
He was this young guy with
a big, dark black beard.
But he kept out of
the limelight.
He stuck to the offices
of the Erie Railroad.
Jim Fisk, on the other
hand, was the
face of the Erie Railroad.
He was a showman.
He was the P.T.
Barnum of Wall Street.
He was called Diamond
Jim or Jubilee Jim.
He made a show wherever
he went.
He had a very notorious--
Notorious?
Yes, I guess so, affair.
With a woman name
Josie Mansfield.
Josie Mansfield was, the term
of the day, was actress.
She was an actress.
But actress covered all
sorts of activities.
And Josie was Jim Fisk's
kept woman.
Now Mrs. Fisk existed, but she
never came to New York.
Fisk lived in Boston.
She stayed in Boston.
And down in New York, Jim
Fisk was carrying
on with Josie Mansfield.
And this scandalized much of
New York and titillated the
rest of New York.
And Fisk was famous.
Fisk was notorious.
And Fisk was going to be the
face of Gould's plan to corner
the gold market.
So the plan develops over
the summer of 1869.
And slowly, carefully, Gould and
Fisk begin to buy up gold.
They enlist various brokers, and
none of the brokers know
what the other brokers
are doing.
Because if word gets out that
Gould and Fisk together are
trying to buy up all the gold,
then people would realize that
something is afoot.
But there was just this
mysterious groundswell of
support for gold.
And as the price of gold
rose, more people
jumped on the gold bandwagon.
They didn't know what was
driving up the price of gold,
but something was.
And when the speculators that
the price of gold was rising.
They wanted to get
on board as well.
And naturally, this happens
in bubbles all the time.
The more people who
got on board, the
higher the price went.
And as the price of gold went
up, then all those good things
that Jay Gould had predicted
to Ulysses
Grant began to happen.
And as in all sorts of, pick
your bubble, real estate
bubble, dot com bubble, while
the ball is rising, everybody
thinks this is a grant thing.
Business is exuberant.
Everybody's making money.
But as the price of gold rose
further and further, people
began to bet that it couldn't
be sustained.
The price rise could
not be sustained.
Now, gold is different, I guess,
in this respect, than
say real estate.
And I'm sure many of you here
experienced the rise of the
real estate bubble of
the last decade.
And a lot of people seem to
think, or act as though, real
estate bubbles are different.
Because the saying is that the
price of land can only go up,
because they're not making
any more of it, and all
this sort of thing.
And so in the case of real
estate, now maybe some of you
have different experiences than
I do, but almost nobody
was selling real estate short.
Now, short sales are basically
bets that the price will fall.
And people weren't selling
real estate short.
They sell other thing short.
And people began to take short
positions in gold in the early
part of September 1869.
And they began to think,
OK, the price
rise cannot be sustained.
The price will have to fall.
And when you take a short
position, you bet
the price will fall.
Essentially what you do is you
promise future delivery of
gold at a lower price.
And meanwhile, you are going
to borrow the gold.
You sell gold that you have
borrowed, and then you're
going to buy it at a lower
price to pay off.
And the people who take the
short position, the ones who
are betting on a fallen
price, these are the
bears of the market.
And the bulls are the ones were
betting on a price rise.
So in September of 1869 in Wall
Street, there is this
special room, in which
gold is traded.
In fact, the gold market was so
active during the last part
of the Civil War that this brand
new arena was developed.
It's called the Gold Room.
And in the Gold Room, in the
middle of the Gold Room, there
was this pearly fountain that
showed this little Cupid
shooting out water.
And this was considered a
sumptuous sort of thing.
But the big deal was
this indicator of
the price of gold.
They didn't have tickers
in those days.
And people kept up with the
prices just by listening to
people shouting.
OK, so what bid, what's
asked, and all this.
And so it was difficult to know
what the price was of
commodities or stocks
at any given time.
And here I'll pause and say
parenthetically that one of
the biggest differences between
the economy in the
19th century and the economy
now is now, things are very
transparent, comparatively
speaking.
So you know what the price of
a given stock is right now.
You can go on the ticker and the
ticker will say, what the
last bid was.
You know what the price
of any commodity is.
You know what the government
is doing.
You know this, you know that.
One of the reasons we know this
is that by law, this has
to be reported.
And the reason the laws are the
way they are is, well, in
part because of what happened
on the day that
I'm coming up to.
Black Friday.
And this was the first Black
Friday, there had been blacks
all sorts of other things.
On this Black Friday, have any
you scratched your heads in
the last 10 years or so, at the
reference to when people
say Black Friday these days.
What do they mean?
The day after Thanksgiving.
Now, I knew Black Friday
from 1869.
And Black Friday was black
because it was a very
disastrous day.
And when I hear Black Friday
after Thanksgiving, it took me
a few years, what in the world
are they talking about?
But anyway, so the name has
been [UNINTELLIGIBLE].
So leading up to the end of
September 1869, the price of
gold is going higher.
But there is this countervailing
force.
The camp of the bears who are
betting that the prices are
going to have to fall.
And if you have taken a short
position, if you are betting
off of fallen prices, then
you are in grave danger.
It's a very dangerous position
to be in, because there is no
upper limit on the price
of a commodity.
If you promise to deliver gold
at let's say, and the price
we're talking about now, is gold
was at about 150, which
meant that it took 150
green back dollars
to buy $100 in gold.
And if you're betting on a fall
in the price of gold, and
you say, OK, I'm going
to deliver
gold at 130 in a month.
Well, you have to
deliver at 130.
What if the price of
gold goes to 200?
What if the price of
gold goes to 300?
What if the price of
gold goes to 400?
There is no upper limit
on how much you can
lose if you're a bear.
There is an upper limit
on how much you can
lose if you're a bull.
If you bought something at 100,
and then it falls to 80,
you've lost 20.
If it falls to 0,
you've lost 100.
You can't lose any more
than you've invested.
But the bears can
lose everything.
And as the price of gold kept
mounting and mounting, the
bears saw their lives passing
before their eyes.
Because they might all be
financially ruined by the end
of the week, by the
end of the day.
And amid all of this, Jay
Gould had this habit.
In the middle of a complicated,
tense financial
transaction, he wouldn't
say anything.
He wouldn't speak to anyone.
He would remain in his office.
And he would think, and he had
a habit of taking pieces of
paper, and just tearing them
into small little bits.
And you knew that things were
getting tense as the pile of
confetti grew around
Gould's feet.
Meanwhile, Jim Fisk had an
entirely different reaction.
Fisk wanted to be out in public,
so he went into the
Gold Room, where everybody
was gathered.
And there was no electronic
trading in
those days, of course.
The trading was by voice.
And people were shouting,
all bid 140 for gold.
I'll take it.
I'll bid 145 for gold,
I'll take it.
And in the middle of this, Fisk
was the one standing up
bellowing, I'll take all the
gold anybody will sell me at
150, and then 155.
Now, the innovation in the gold
market was in this Gold
Room, was this big indicator,
this arrow that showed what
the price of gold was.
And the arrow kept going
up and up and up.
And the gold bulls, as the arrow
went up, they cheered
and hollered.
And the bears began to
scream and swoon.
As the gold price
went up and up.
It came to a climax on September
24, a Friday, 1869.
And the markets in those
days opened at 10
o'clock in the morning.
But even before the markets
opened, the price was being
bid up on the curb.
So there was the curbside
traders.
There was the informal trading
that took place before the
markets opened.
And the gold price was being bid
up, but the arrow wouldn't
move until the market
actually opened.
And so people who were
watching the arrow.
OK, the other was stuck at
whatever it was, 145.
And as soon as the market
opened, it leaped 10 points to
reflect the overnight trading.
And the bears were even
more distressed.
And there was talk
of inflicting
mortal harm on the bulls.
And Jay Gould got out there
and said, I'll buy all the
gold I can get at 160.
And at least one of the bears
got so desperate that he
pulled a gun on the bulls.
And another one another one of
the bulls, got up on top of a
table, and said, you
wanna shoot me?
Shoot me!
But he didn't.
He was hauled away.
The guy with the gun
was hauled away.
OK, now, attention shifts.
From New York to Washington.
Because Ulysses Grant has
been watching this.
And Ulysses Grant is a firm
believer in small government,
in laissez-faire attitudes
toward the financial markets.
And Ulysses Grant has pretty
much decided to keep
hands off of this.
This is an affair among
the speculators.
This is a matter among
the traders.
And for the government to step
in, well, why should the
government step in?
Because the rise in the price
of gold, it seems
to be moving products.
But furthermore, Grant realizes
that to intervene
would take the part of one
side against the other.
And he strongly tempted to just
remain on the sidelines,
and let the market
sort things out.
But as the price of gold gets
higher and higher, it begins
to threaten the ordinary
economy.
There were the speculators who
wanted the price of gold to go
up or down, but there were all
the ordinary users of gold.
People, for example, who had
foreign transactions.
The dollar wasn't any
good overseas.
You had to deal in gold.
There were people who had to
have gold to pay their taxes.
One of the curious exclusions
in the legal tender aspect.
It was called, by the way, the
Legal Tender Act that created
the green backs, was that these
notes were legal tender
for all debts, public
and private.
Except for paying your taxes.
The government insisted on being
paid in gold, rather
than its own money.
A nice exception.
So they're all these people who
had to pay their taxes in
gold, and they typically didn't
buy the gold to pay the
taxes until right before
the taxes were due.
But now the price of gold was
going through the roof.
And they work in dire straits.
So Grant finds himself in a
situation where on the one
side, his philosophical view is
that what the he needs to
do is just stay out.
Let the markets do
what markets do.
On the other hand, he's hearing
cries of pain from,
we'll just call them, ordinary,
honest business
people, who need to have gold
to conduct their business.
And they're being
squeezed out.
So what does the president do?
He knows.
And Gould knows.
And Fisk knows.
And everybody knows.
That if the government decides
to enter the market, the
government has enough gold in
the vault in New York to break
any attempt at a corner.
The corner will work simply
because there's not enough
gold to cover all the
future's contracts.
But Gould has based his
calculation on the knowledge
of how much gold is
in private hands.
And it's a guess, because nobody
knows exactly how much
gold is in private hands.
But Gould knows, Fisk knows,
Grant knows that there is
enough gold in that US Treasury
vault in New York,
that if Grant gives the orders
to open vault doors, if the
government sells gold, it
will break the corner.
So Grant has to decide
what to do.
And he's thinking about this.
And he is hearing on the one
hand, from his brother-in-law
Abel Corbin that the government
ought to stay out,
that the government ought to let
the private market do what
the private market does.
But then he begins to wonder,
why is Abel Corbin so
interested in this?
What is it to Abel Corbin?
Grant knows Corbin
only vaguely.
This is his new brother-in-law.
And so he's thinking
to himself, what's
Corbin go to do?
He begins to inquire.
And he learns that Corbin has
a connection to Jay Gould.
This is something new.
Grant didn't know this.
And he suspects that Corbin
is in on the gold scheme.
And so he gives the order.
Grant gives the order to his
Secretary of the Treasury,
George Boutwell, that the
government will sell gold.
The government will
break the corner.
Now, this is where things
get very interesting.
Because in 1869, there
was no standard time
in the United States.
Now we have Eastern time,
Central time, Mountain time,
Pacific time.
There were no standard
time zones in 1869.
Do you know why, by the way, we
have standard time zones?
For the railroads.
The railroads needed to know
when the trains were going to
leave and when they're
going to arrive.
The railroads did not yet
have that kind of clout.
They didn't span the
continent yet.
And so every city had
its own local time.
And so the time in New York was
12 minutes ahead of the
time in Washington.
It's just that much farther
east. And the way they
normally did it is they just
set it by when the sun goes
over head, and that's noon.
And the sun was 12 minutes ahead
in New York from what it
is in Washington.
Now this is a critical
element.
This 12 minute difference is
critical in, well, not so much
in what happened at the time,
but how somebody like me
coming along later is trying
to unravel what happened.
Because there is a telegram
that is sent
from Washington, DC.
From Boutwell goes from Grants,
from the White House,
to his office in the Treasury,
and sends a
telegram to New York.
The telegram is, I think, is
time stamped in Washington at
something like 11:50
in the morning.
And it arrives in New York at
12:07, or something like this.
Now when I first saw this, and
I seen the telegrams. OK, I
thought, well that's kind
of a long time lag.
Telegraphy is more or
less instantaneous.
And then I thought,
oh wait, there's a
difference in the time.
OK, and so that will account
for some of it.
But for the rest of it, there
were just a few minutes that
were unaccounted for.
Now, it turns out that the word
that the Treasury was
going to sell gold.
There was the official
announcement.
And the official announcement
occurred as soon as the
Treasuries office in New
York got the word.
But before the Treasury's office
in New York got to
word, somehow the Gold Room in
New York got the word, 4 or 5
minutes ahead of when the
announcement was made.
And this goes back to what I
was saying last night and
again this morning about how the
speculators had their own,
I think maybe last night
I called them spies.
What apparently happened is that
Gould, as I told you, Jay
Gould did not want the
government to do anything.
He didn't even want Abel Corbin
to do anything, except
to give word that if
the government
was going to do something.
Because if the government was
going to do something, there's
only one thing the government
would be doing, and that would
be selling gold.
The government wouldn't be
buying gold, it would be
selling gold.
So at some point, Corbin got
the word to Gould that the
government was going to
start selling gold.
And as a result of this, Gould
himself started selling gold
before the word got out.
And Gould did it.
This just goes to show there's
no honor among thieves.
Gould started selling gold
behind the back of Jim Fisk,
his own partner.
And Fisk was out there bidding
up the price of gold.
And Gould silently tearing the
little pieces of paper, and
given orders to his
guys to sell gold.
Well, when the news hit the
market, and other people found
out that the government was
going to sell gold, because
everybody had spies.
And there were people watching
the White House to see who
went in and out of
the White House.
And they saw that the Treasury
Secretary went into the White
House on that morning.
So they had one ear to the
ground in New York.
What's going on in the Gold
Room, and then they're
watching the White House.
And the Treasury Secretary goes
into the White House, and
the Treasury Secretary comes
out of the White House.
And he goes to his office in the
Treasury Department across
the street.
And they follow him to the
Treasury Department, and then
they see a courier going from
the Treasury Department to the
local Western Union office.
And they assume this can
mean only one thing.
Now, one of the things we can't
know, at least nobody's
been able to figure out is
whether and to what extent
people in the Western Union
office were in on the scheme.
Because it was the most natural
thing in the world for
speculators to want to get
advanced notice from the
Treasury, from the Western
Union operators.
Because they would know
what the content
of the message was.
It was a clue in itself that
a message was being sent.
But the message could have said,
hold on, or sell gold.
The Western Union guys
would know exactly
what was being said.
And if they would, one would
think that for a tip of $200,
they'd just say, oh, this
is what it said.
Or another thing that they could
do is perhaps delay the
message for just a minute or
two, while sending another
message on.
There is something coming out,
an expected announcement from
the Treasury Department.
In any event, nobody knows
exactly how that happened, but
when the news hit the
Gold Room, there
was a financial panic.
And the bulls who had been
seeing great riches just
within their grasp, all of a
sudden had those riches taken
away from them.
And the bears, whose lives had
been passing before their eyes
and trying to explain, figuring
out how they're going
to survive this, all of a sudden
they breathe this great
sigh of relief.
And the bears are cheering.
The bulls are running.
And the bulls are angry.
And they decide that the focus
of their problem, the person
that they're going to take this
out on, the two people
are Jim Fisk and Jay Gould.
And so Gould and Fisk literally
have to run for
their lives, because there's
this mob of angry speculators
chasing them down Wall Street.
And they take refuge in
their offices at the
office of Erie Railroad.
It was in a place called
the Grand Opera House.
Why this was in the Grant Opera
House, well, this is
because Jim Fisk wanted to make
Josie Mansfield , his
girlfriend, into an actor.
And so he bought her
this opera house.
And he set her up just around
the corner from the opera
house, and besides, Jim
Fisk thought it was
great to run an opera.
It was equivalent to
being a Hollywood
producer in those days.
Well, the other thing is, that
aside from Josie, it gave him
access to all those aspiring
actresses.
And so he thought it was cool
to have this office.
It was the equivalent of having
the-- I mean, what
would it be?
It was sort of like having the
offices of Exxon Mobil in a
real high class brothel.
But anyway, Gould and Fisk also
had this small army of
thugs hired from the Five Points
District in the Battery
and the other parts of New York
who were their enforcers.
And their protectors,
in this case.
And as this army of small group
of speculators began
chasing up the street, they took
refuge behind the heavy
oak doors of the Erie offices
in the opera house.
And then this big cordon
of thugs just
formed this human wall.
And the angry speculators
come in and they sort of
bounce off the wall.
And they mill around, not
knowing what to do.
Well, this was Black Friday.
The financial panic with the
fallen price of gold spread to
the stock market, because
credit had been
flowing back and forth.
And stocks swooned, and
the economy was
pitched into a nose dive.
Over the course of the next
several months, Congress did
investigations.
Because somebody had been
tampering with the money
supply, with the gold supply,
and all that stuff.
And everybody who was involved
was invited,
required to come testify.
And Jay Gould was brought up,
and he explained everything
that he had done.
And his testimony was fairly
honest. He didn't say that he
had bribed Abel Corbin.
Somebody else had to say that.
He didn't say that he had bribed
the Assistant Treasury
Secretary, who was based
in New York.
That had to come out from
another source.
Jim Fisk went before the
committee, and he was happy to
give the testimony.
Fisk was happy for any kind
of stage he could get.
And when asked where all the
money went, for because there
was all sorts of money
circulating around, and at the
end of the time, nobody could
find out where the money went.
And Fisk was very good with-- He
said the money went "where
the woodbine twineth." Now, I'm
still trying to figure out
exactly what that means.
Except maybe some of you have
a better notion, maybe it
resonates more with you.
But woodbines have this way of
twineth thing down gutter
holes, and down to where
the sewer pipes go.
So this is what Fisk
was talking about.
And when asked, it became
obvious in the course of the
investigations, that Gould had
been selling while Fisk was
still buying.
And there was this double cross
between the two of them.
The striking thing was
that Fisk didn't take
this amiss at all.
And one wonders about this.
He was a very good
natured guy.
Some people thought, well, maybe
Fisk and Gould had a
deal whereby they would just
pool there gains and losses,
and so they'd even
it up later.
But Fisk's comment at the end
of this was, yes, it was one
of those disastrous days, where
it was each man drag out
his own corpse.
And so that was the
end of that story.
Now I'm going to finish
up today.
I was going to give you this
grand, theoretical explanation
of the Guilded Age and the
rise of Capitalism and
challenges to democracy.
And I'll go in that direction
if you want me to, but I do
have to tell you the end
of the Fisk story.
Because it does give me
an opportunity to
plug my next book.
And my next book is in
fact, is not the book
about Ulysses Grant.
That's coming out next year.
But I've got a book that's
coming out this spring.
And the title of the book gives
away what the story is.
The title of the book is, The
Murder of Jim Fisk for the
Love of Josie Mansfield.
And the story that I've begun
to describe of the
relationship between Fisk
and Mansfield gets more
complicated.
Because Josie Mansfield, 23
years old, has won the heart
of Jim Fisk, who is this big
hearted character, big living
character, married, but
nonetheless he falls head over
heels for Josie.
And Josie likes Fisk's
money but isn't
that crazy about Fisk.
Fisk is not a particularly
handsome guy.
Now, Ned Stokes, on the other
hand, Ned Stokes came from--
He was, I'm trying to think of,
he was the, oh the Clark
Gable type.
There are photographs
of Ned Stokes.
And he's a darkly, dangerously
handsome guy.
And Josie falls for Ned.
She still wants Fisk's money, so
she's lives with Fisk while
carrying on this affair
with Stokes.
This complicates the fact that
she's living with Fisk, and
Fisk is married to his
wife in Boston.
And it's sort of a
semi-open secret.
But Mrs. Fisk apparently either
doesn't know, she
doesn't read the papers from New
York, and she doesn't heed
the gossips.
Because she knows that
the gossips, they say
all sorts of things.
And she's quite happy for her
marriage to Jim Fisk to take
place at a distance.
Well, Jim Fisk is the one who--
His heart is broken when
Josie finally runs off
with Ned Stokes.
Now, one would think, Jim Fisk,
the one who-- He's a
speculator.
He's a gambler.
He's cheating on his wife.
But he seems to have fallen
in love with Josie.
And when Josie throws him
over for Ned Stokes,
he's horribly upset.
And he decides, oh, well if
Josie had simply had the honor
of breaking it off with Fisk,
then he probably would've
said, oh well, that's
the way to goes.
But while she was carrying
on with Stokes, she still
continued to take
Fisk's money.
And Fisk thought this was
all little bit too far.
And he also thought-- And who
knows the way of the heart.
Fisk didn't blame Josie.
He blamed Ned Stokes, his rival
in love, for somehow
turning Josie's head.
Stokes had had some business
dealings with Fisk, which was
the beginning of Stokes'
downfall.
Because Stokes did not have
the head for business.
The head for speculation.
The head for cheating and skull
duggery that Fisk did.
So Fisk decides that he's going
to get back at Stokes by
ruining Stokes financially.
And Stokes was something of an
innocent when it came to the
speculative games that
Fisk played.
So Stokes finds himself
ruined by Jim Fisk.
And there are suits
and counter suits.
Oh, the story gets complicated
by the fact that Josie has
Fisk's love letters.
She has kept the love letters,
and although he is a very
canny guy in business, he's just
pouring his heart out in
these letters.
The kind of snookums, dear, and
all this stuff, that he's
going to be embarrassed that
the world will see.
And she's got the letters.
And she has threatened to take
the letters to a newspaper and
sell them to the newspaper, and
they will love to print
them, because this will
boost circulation.
So Fisk sues to have these
letters embargoed.
So that there will
be an injunction.
The letters cannot
be published.
He gets more interesting than
this, because one of Fisk's
friends, one of the friends who
comes to Fisk's box at the
grand opera is none other
than William Tweed.
William Tweed is boss
tweed of New York.
William Tweed is up to his
neck in dirty deals.
And it is assumed with some good
basis, in fact, that the
letters that Fisk has sent Josie
have damaging material
not simply on the state of
Fisk's heart, but on the
finances of Boss Tweed.
So Boss Tweed gets involved.
The letters must not
be published.
In order to prevent the letters
from being published,
Tweed and Fisk manage to bribe
judges in New York.
Justice in New York is fully for
sale to the highest bidder
and the near highest bidder.
And they get injunctions against
Stokes, not only to
prevent the publication
of the letters.
But to get Stokes put away in
prison for trumped up charges.
Stokes becomes outraged by this,
and he thinks, oh my
gosh, there is no
way out of this.
So Ned Stokes goes to the Grand
Central Hotel in New
York, the finest new hotel, on
what's now lower Broadway.
It's Broadway and about 20th,
it's no longer there.
And lies in wait.
Jim Fisk enters the hotel.
As he's coming up the stairway
of the Grand Central Hotel,
Stokes pulls out a small pistol
and shoots him twice.
[BANG]
[BANG]
Fisk is astonished.
Fisk has known that
speculation.
and even rivalries
in love, can be
sometimes bitter, but deadly?
And he falls with his astonished
look on his face.
He's a big man.
He's carried into one of the
adjacent hotel rooms, where he
bleeds to death and dies.
Meanwhile, Stokes has tried
to make his escape.
He's running out of the hotel.
And he's throwing people off by
saying, somebody shot that
guy back there.
But somebody sees him, and they
tackle him just as he's
about to escape.
He is arrested.
And a series of murder
trials ensue.
The first murder trial
ends in a hung jury.
The second murder trial, well,
I can't tell you the end of
the story, because you wouldn't
buy the book then.
I'll leave it there.
OK.
Anyway, I'll be happy to take
questions if you have any.
