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TeachMeFinance.com - explain Black Friday historic definition... Black Friday -- Friday, September 24, 1869. At that time
gold was subject to considerable fluctuation in value and it was
bought and sold the same as stocks .
Jay Gould, then the president of the Erie Railroad and a
daring speculator, conceived the idea of buying up all the gold
in the market and compelling those who had sold it short to
buy of him at a greatly increased price when their contracts
should mature. He associated others with him in the scheme
and put it in operation. He forced the price up from 133 to 162
in about twenty days. The high price was reached on Black
Friday. The greater part of the increase in price was accomplished
on that day and the day preceding.
On Black Friday the Gold Bank, through which the transactions
in the Gold Room were cleared, failed and the governing
committee of the Gold Room at once ordered a suspension
of dealings in gold for one week. More than half the
members of the Gold Room failed. The corner in gold collapsed
and the price of gold immediately fell.
The attempt of Mr. Gould and his associates to corner gold
was based on the fact that the United States Treasury had discontinued
the sale of gold, which was calculated to place and
maintain a premium on it. Indeed, the purpose of discontinuing
its sale was to establish, not a moderate, but a considerable
premium on it. The balance of international trade at
the time was heavily against the United States and in favor of
Europe. It was thought and it was urged by exporters and
importers of products and manufactures alike that a high premium
on gold would force the exportation of United States
products, which would serve to discharge obligations of the
United States to Europe and thereby obviate the necessity of
sending gold to Europe.
Mr. Gould and his associates counted on a continuance of
the new rule of the Treasury not to sell gold, but when the
corner was in effect and the great increase in the premium on
gold had been accomplished by the speculative coterie in it
there was a widespread appeal to the Secretary of the Treasury
to resume sales of gold. The appeal was acceded to and the
corner in gold collapsed with the disastrous consequences
already recounted.
There are two Black Fridays in British financial history.
On a Friday early in December, 1745, London heard that the
young pretender, Charles Edward Louis Philip Cassimer
Stuart, was at Derby, only 120 miles from London, with his
invading force. A panic ensued with an accompanying run
on the Bank of England, but it was stopped by the sending of
a force under the Duke of Cumberland to meet Charles Edward
and his followers.
The second Black Friday in London was May 11, 1866,
when there was a panic with a run on the banks as a consequence
of the announcement late in the afternoon of the day
before of the failure of the great discount house of Overend,
Gurney & Co., Limited, which had only a year before been
converted from a private concern into a joint-stock company.
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