Josie Mansfield

Transcription

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.