Tavakoli Structured Finance LLC

The Financial Report

By Janet Tavakoli

The Great Gold Conspiracy of 1869

William Worthington Fowler’s Twenty Years of Inside Life in Wall Street or Reflections of the Personal Experience of a Speculator is a joy to read. The speculator and author met the most influential financiers of his day including Jay Gould, James “Diamond Jim” Fisk, Jr., Cornelius Vanderbilt, Jacob Little, Daniel Drew, Leonard Jerome, Addison Jerome, David Groesbeck, and Henry Keep. Their fortunes rose and fell on margin, carry, and derivatives including puts, calls, and futures. They risked everything speculating in equities and a wide range of commodities including gold, silver, cotton, and more. Fowler’s tale entertains as he exposes the great corners, trading rings, conspiracies, bear twists, manipulations, and frauds.

Twenty Years of Inside Life in Wall StreetFowler’s ripping yarn covers the New York traded markets from 1860-1880, a period that spanned the Civil War, the post war bubble, worthless paper money, the Black Friday Gold Panic of 1869, the Great Panic of 1873, and the consequent first and worst seven year Great Depression.

Fowler witnessed how U.S. government paper money replaced specie leading to bubbles, panics, and crashes. It is time to revisit Fowler’s classic, especially since our current crisis has similarities with events preceding the crash of 1873 followed by the first Great Depression.

Conspiracies “R” U.S.

One of my favorite conspiracies is The Great Gold Conspiracy of 1869. Fowler provides details of the New York financiers who plotted in style.

“Here, sitting at their ease, surrounded by luxury, in a magnificent apartment, with shrewd lawyers at their elbow, two confederates plotted The Great Gold Conspiracy of 1869, and coolly organized the ruin of thousands.”

“From April, 1865, to September, 1869, a period of more than four years, the movements of gold had been brought about by artificial means, in conjunction with commercial causes, or rather pretexts. The price of Government Bonds abroad, wars or rumors of wars in Europe, disturbances of trade, the shipments of the precious metal in payment of our imports, sales of gold by our government; these and a thousand other strings were harped upon by the gold gamblers to produce those singular upward and downward oscillations in the price, which enriched the members of the Gold Board, while they disturbed the peace of commerce and beggared a host of infatuated outside dealers.”

“Wall Street, like history, repeats itself. Every summer, since 1865, there had been a rise in gold. In March, 1869, gold fell to 131. The astute intellect of Jay Gould now foresaw another opportunity to push up the price of gold, and having purchased $7,000,000 of it, by playing on the strings of the Cuban insurrection, the Alabama difficulties, the prospect of a war between France and Prussia, etc., terrified the bears and rushed up the price to 145. Emboldened by the success of this move, he formed a new and daring scheme.”

Today, it is unsurprising to find Deutsche Bank in the news as part of a multi-bank ring that fixed gold and silver prices, an activity the Commodities Futures Trading Commission (CFTC) has not stopped. In fact, the CFTC closed probes, even though price manipulation in silver and gold remains rampant. In the words of former CFTC Commissioner Bart Chilton:

“It’s been the most frustrating and disappointing non-policy related item since I joined the CFTC in 2007. Our manipulation standard remains too high a hurdle for regulators to overcome; not enough bad actors are being punished.”

History repeats itself, especially in finance, as the U.S. (along with other governments) once again stretches its credit and prints money backed by promises.

See also: “How to Corner the Gold Market

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