Hey guys!
I don’t know how many people were wondering this, but during this section Jay Gould’s name has been mentioned a few times, but I don’t really know what happened or why he’s famous. I figured I’d do a little researching and post it, in case anybody else was wondering the same thing.
First, to summarize Gould’s background, he was dubbed the “Mephistopheles of Wall Street.” Mephistopheles is a German demon, sometimes considered the Devil. He had ways of getting his hands on money that shouldn’t have been his (through fraud, bribery, etc.). (He also worked with Boss Tweed.)
In 1869, Jay Gould decided he would corner the gold market by buying huge amounts of gold and hoarding it, driving the price up. Then he could control the price of gold and sell it off slowly to make extremely large profits. Unfortunately for him, President Grant’s monetary policy at the time was to buy back greenbacks from the people using gold (and so the U. S. Treasury controlled the price of gold). And so Gould made friends with Grant’s brother-in-law, Abel Corbin, and the two struck a deal. Corbin would get a split of the profits in exchange for insider’s information. Corbin convinced Grant to hold onto gold and not sell; he reported this to Gould and Gould began buying. (He let Jim Fisk in on the plan, which is why the their names appear together in reference to the event.) The price of a $100 gold piece rose from $132 (in greenbacks) to $160. Finally, Grant realized what they were up to when Corbin was too nosy, asking too many questions about Grant’s plans. On September 24, 1869, Grant flooded the market with gold, immediately dropping the price back down to $133. But by then Corbin had warned Gould, and Gould had sold his gold for a profit of about $12 million. (Gould didn’t pass this information to Fisk, though Fisk got out without too many losses.)
The effects of the sudden drop in the price of gold was felt across the American economy. The stock market dropped 20%, speculators were ruined, and the value of wheat and corn dropped by nearly 50% (destroying American farmers). Grant earned a bad reputation from the scandal, and Gould got out with no consequences (and a lot of money).
I hope this helps clear some things up :)
Just a note, since we’ve been talking a lot about perspectives, I wonder if there is another way of spinning this story so that Gould looks like a good guy (similar to how Carnegie or Morgan can be viewed as good or bad, depending on your perspective).
(By the way, Gould rhymes with “fooled.” It isn’t pronounced “gold.” That would have been awesome though…)
http://www.history.com/news/the-black-friday-gold-scandal-145-years-ago
Thanks for this post, Julia! After reading this, I too wondered if Gould did anything positive. I did some more research, and it seems as though he was one of the true robber barons. He was not philanthropic in the slightest, and one source said he died with over $77 million; unlike Carnegie, Gould clearly did not see a problem with dying rich (and disgraced).
ReplyDeleteAll in all, he doesn't seem to be the most integrous of people. One source I found stated that before the "Gold Scandal," he helped direct the Erie Railroad with Fisk and another man named Daniel Drew. In 1868, Cornelius Vanderbilt aimed to incorporate it into his railroad empire by buying up most of the company's stock Gould, Fisk, and Drew tried to stop him by simultaneously creating and circulating fraudulent stock to make Vanderbilt's shares worth less. Vanderbilt ultimately lost at least $7 million and gave up.
ReplyDeleteTo sort of bring it full circle, two years later in 1870, Gould betrayed Drew with the exact same tactic, costing him $1.5 million and ultimately driving him intro bankruptcy.
Awesome read Julia, this is an interesting story/topic. Mr. Gould (can we just call him Mr. Gold please?), like Josh and Sierra mentioned, seemed like a true robber baron. Just to put this into a modern perspective, Mr. Gould made over $300 million (Modern US Dollars) off this scheme and retired with almost $2 billion modern US Dollars. Gould ranks #9 on the all time wealthiest Americans, with his 1/185 wealth/GDP ratio. That ratio would equal $90.8 billion in modern times!
ReplyDeleteEven though I'm reading this super late, it's really helpful. Thanks, Julia! One reason why I think that he wasn't mentioned much in the book/not mentioned in class is because there actually is not a way to spin the perspective so that he is the "good guy". Because he has no significance (other than cheating people out of their money), maybe historians don't find his acts important to the furthering/bettering of the US economy to make a big deal out of him. However, a part I am confused about is that in your post, Gould's plan worked (made him richer/economy ruined), however, but if I read correctly from the textbook, it said that his plan failed because the treasury sold gold anyways. Can someone clarify this for me?
ReplyDeleteGould's plan to corner the market technically failed. The government caught on in time to return the price of gold to what it was before. But Gould got out in time to make some money for himself (because Corbin warned him).
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