Black Friday But Not What You Think!

  I'm sure the minute you read the words "Black Friday", dreams of bargains popped into your head.  If you are like an aunt of mine, you'll have scoured the papers, figured out which store opens at what time, and you've got your time table set, the GPS loaded, ready to head off for all the bargains.

As you know, the term "Black Friday" as we know it, began in Philadelphia back in the 1950's to describe the onslaught of shoppers who descended on the city for two days after Thanksgiving to shop. The same day when the police department had to make its officers work 12 hour days to handle the crowd.

Today's column is not about this.  Its not about the history of the sales day.  Its about the term meaning of "Black Friday" that predates this use.  The term was first applied to September 24, 1869, when two men tried to take over the gold market at the The New York Gold Exchange.

The two men, Jay Gould and Jim Fisk, headed the Erie Railroad and quite a lot of financial clout.  They were known on Wall Street as being ruthless and cutthroat.  They were known for issuing worthless stock while bribing judges and politicians to stay out of jail.  In fact, they were known for their ability to add to their fortune while ripping people off.

Early in 1869, Gould got the idea of going after the gold market it was still the official currency for international trade even though the United States no longer used gold as currency.  They issued "Greenbacks" during the civil war but after were willing to buy them back at a set price, thus the government controlled the price of gold.

He decided that if someone with enough money could buy enough gold out there, they could hoard it, cause the price to go up before selling gold at a significant price but to keep the government from selling off enough gold to keep him from succeeding he paid President Grants brother-in-law a cool 1.5 million to influence Grant from doing that.

The brother-in-law managed this by getting someone into the Treasury department who would listen to Gould and support him.  This new Treasury employee offered a $1.5 million share in the scheme and given a $10,000 loan.  Then he suggested that keeping gold prices high would help the farmer who sold product overseas and arranged for a meeting between Grant and Gould to discuss the issue.

By September, after everyone had a chance to speak to Grant, he decided the Treasury department should not release any gold for sale over the coming month.  Gould and others were thrilled because they'd begun stockpiling gold the previous month.  With this decision, they began buying more gold by using brokers and others such as Jim Fisk to make the actual purchases.

This caused the price of gold to increase to the point that a $100 began selling for $132 and then rose to $141 in greenbacks.  Suddenly, investors who were short sellers found themselves in trouble and called for the Treasury to sell its gold reserves. In addition, rumors began spreading that people were trying to drive the gold market up.  Gould and Fisk stayed quiet because by this point they had gathered $60 million in gold which was three times the public supply in New York.

At about the same time, Grant became suspicious when his brother-in-law kept after him to remain firm and not let the treasury flood the market.  Gould was told this on September 23rd but he didn't bother sharing the information with any of his cohorts yet he took steps to protect himself by secretly selling off his personal gold supply.

On September 24, 1869, people were getting upset.  They congregated on Wall Street because gold closed at 144 1/4 the night before and opened at 160.  Fisk kept purchasing gold, confident it would get to $200 soon but he was unaware that the president and the head of the Treasury were in communications.

It was announced that the government would sell off $4 million in gold the next day and prices started dropping immediately from $160 to $133. The stock market itself dropped 20 percent at the same time causing many Wall Street firms to go bankrupt or become unstable and many investors were left ruined. 

Due to financial wrangling, neither Gould nor Fisk served any time in jail and it appears they both survived the episode relatively intact financially but the economy suffered for many years afterwards.

Let me know what you think, I'd love to hear.  Have a great weekend.