Today I was reading about the Black Friday of 1869. What happened is that some greedy robber barons tried to corner the gold market. What they did was used a connection they had to Grant to convince him not to sell gold from the US Treasury by telling him it would hurt farmers. Then they bought up more and more of it raising the price. When Grant found out what they were up too he immediately ordered the Treasury to sell $4 million in gold by redeeming “greenbacks” to instill faith in the nation’s currency and thus crushed the attempted gold corner. ANYWAY if you read this: It says that the price of gold rose from $132.50/oz to $137/oz. My question: How is that possible? Didn’t Double Eagles circulate during this time? If the price of gold was $137/oz it would make more sense to sell Double Eagles as bullion than have them minted in coins. I thought the US Government fixed the gold price at $20.67? Can anyone explain how the gold price rose to $137/oz while Double Eagles were circulating with a $20 face value despite containing (almost) a full troy oz of gold?
I don't know what article you're reading, what your source is, but that isn't what happened. But I do know there are other articles that made the same mistake of using that number per ounce. The price of gold wasn't $132.50 an ounce, it was $132.50 of paper money per $100 in gold specie. From this source - https://www.britannica.com/biography/Jay-Gould The four men’s attempt to corner the market in loose gold caused the panic of “Black Friday” (September 24, 1869), when the price, in paper money, of $100 in gold specie, after being driven up to $163.50 by market bidding, fell to $133 when the U.S. Treasury placed $4 million in specie on the market. Of course this was all only possible because the govt. had suspended payment in gold and silver for what were considered to be "worthless greenbacks" in 1862. And once that happened it allowed the "theoretical" or paper trading of gold to begin. But the actual spot price of gold per ounce, this chart shows what that was at the time. and as you can see the price per ounce in 1869 was $25.11 - That was high, but it quickly dropped back to normal levels by 1870. You can see the 200 years historical spot price of gold here - https://onlygold.com/gold-prices/historical-gold-prices/
I love the reference, but whoever decided on that layout for the data -- that person needs some education. I'd be happy to recommend a couple of good books on data visualization, and a nice knuckle-ruler for motivation.
Ahhhh PAPER money prices. So if the price was driven up to $163.50 that means it would cost that much in paper money to buy 5x $20 Double Eagles or any combination of $100 in gold coin? Thanks for explaining
Funny you mention this, we were just talking about this in my AP US History class last week. And what @GDJMSP said makes sense, I was assuming that if you were to sell one of these coins back then, the payment would be in unstable paper currency and who wants that?
Well it would only be unstable if there was no convertibility. If the paper money can be converted into gold coinage then there should be no instability. Think about it would you rather carry around 5 heavy coins (gold is very heavy) or would you rather have a lightweight bill? If the bill can be converted into coins at any time they both should be accepted as equal. I mean I’m sure you’d rather have a $20 bill than 2,000 pennies even though the intrinsic value of the copper in all those pennies is worth more than the value of the cotton paper of the $20 bill. In fact at this time President Grant had been wanting Americans to bring their war bonds to the bank and redeem them for gold coin because he believed that if the US government had the ability and people knew that paper money was redeemable for specie it would make the US Dollar a currency on par in strength with the European nations such as the French franc and Italian lira and such. Although it’s true the Pound Sterling was the monetary hegemony at the time. There are even stories of AMERICANS traveling overseas and bring with them British pounds instead of American dollars. £1 = ~$5 at the time which is pretty crazy when you realize a $20 gold Double Eagle was only worth £4.
Ehhh, theoretically perhaps, but to a degree there pretty much always has been a certain amount of instability. Assuming of course that one defines instability as price/value fluctuation. Which is easily confirmed simply by looking at the historical spot price in those charts. And it becomes even easier to see when one looks at the historical silver to gold value ratios. They sometime fluctuated wildly by some definitions. And always did, and still do. Also, even though there's probably a lot of folks who don't realize it, so called paper money has been around a whole longer than most people think. The first documented example of paper money/bank notes comes from China in 118 B.C. when one foot square pieces of white deer skin with hand drawn colorful borders and a value of 40,000 cash drawn on them. What all of this tells us is that for as long as it has existed money could quite literally be anything, in any form. That's because money is and always has been nothing more than an idea that people decide to agree on for a given time. And given that, instability to one degree or another is inherent.
Sigh.....the number of World Central Banks that just closed their doors in appalled terror, that there is even a possibility of this "new" (it is not) theory of historical monetary basis of destabilization could actually be reconstituted by the masses.
It’s interesting you mentioned paper money. Have you ever read the Travels of Marco Polo? He wrote: “All these pieces of paper are, issued with as much solemnity and authority as if they were of pure gold or silver... with these pieces of paper, made as I have described, Kublai Khan causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends... and indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan's dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold..” It’s crazy that way back then banknotes were actually accepted as if they were pure gold. Although I have read that Chinese merchants preferred silver at that time.
There is nothing inherently evil or unstable about paper money or even money that exists only on computers in the form of data entries. The trouble comes when government authorizes too much paper money relative to the size and growth of the macro economy. Given the huge costs of waging the Civil War, both the Union and the Confederacy issued a great deal of paper money to pay for their war efforts. The Confederacy economy collapsed and was no longer able to produce the goods and services that the citizens needed. That combined with massive issues of paper money in 1863, ’64 and ’65 crushed their monetary system. The Union Government had to issue paper money to pay for the war, which exceeded their productive capacity. It took a while, but the Grant administration was able to restore convertibility between gold and paper in the mid 1870s. There is nothing magic about the gold standard. All it does is limit the amount of money that can be in circulation. That can be a good or a bad thing. Too little money in the economy can choke off growth and result in economic hardship.
Yup. I remember in economics class there was always a mention about the problem being undisciplined money creation. I’ve always thought maybe the government should have to have some backing in gold/silver for every X dollars printed/minted. Like maybe 1 oz of gold or 100 oz of silver for every $10,000 printed/minted. Obviously that’s not full backing but at least it would keep a limit on production. But I do NOT think banknotes should be redeemable for gold & silver. Just fractionally backed by it. We can’t just print more and more money to pay for everything. Eventually foreign nations won’t want dollars and then domestic people won’t want them due to high inflation like in Zimbabwe and Venezuela. The inflation rate last year was 7%. The highest since the 1980s. The government ideally wants it at 2%.
Evil ? No. But unstable ? Absolutely ! And it's not just paper money, it's all money, regardless of its form. The very definition of unstable, or instability is - prone to change. And the value of money in any and all of its forms is constantly changing, and it always has. History proves this beyond any and all doubt. And it doesn't matter why it happens, there are literally a thousand reasons for it to happen. It only matters that it does happen. And nothing, that anyone has ever done throughout recorded history, has ever been able to stop it from happening.
But a government can greatly accelerate the process by engaging in irresponsible increases in the supply of money.
let us not forget cowrie shells: Cowrie shells were traded for goods and services throughout Africa, Asia, Europe, and Oceania, and used as money as early as the 14th century on Africa's western coast.
