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Genre = Economics, Finance
Intriguing Connections = 1) Get To Know The Peoples Of The World (United States of America), 2) What Goes Into An Economic Crisis?
This book is about the characters who were able to subvert the law and manipulate the gold market during the 19th century. The main characters are Jim Fisk and Jay Gould who were protégées of Daniel Drew, financer of the Erie Railway Company. During the battle against Vanderbilt for the railroad, Jim and Jay learned to trust only each other with one providing charisma and the other brilliance. Part of the plan against Vanderbilt was to sell stock which they have been ordered not to do as the judges were in Vanderbilt’s employee. The event having cost Vanderbilt a lot of money, with the proceeding negotiations left the Erie Railway Company to Jim Fisk and Jay Gould. Using the finances from the company, they were able to make their way in numerous financial fiascos, one of which was the Gold Ring.
Their initial use their position was to create a lock-up. They withdrew so much money from the system which tightened credit which created an artificial depression. They profited from the lock-up by selling short stocks before the lock-up as during a lock-up, stocks lose their value. When the conditions changed, they changed their position from selling stocks short to purchasing them. During this time, the judges were bought to be on the side of the Jay and Jim.
The next big thing the duo did was create a Gold Ring. Jim was opposed to cornering gold but relented when parts of the plan began to come together. As the U.S. government held a lot of gold, they needed an insider and get President Grant on their side. Grant was known to be apposed to raising the gold price which was a problem for the Gold Ring. It was Corbin, Grant’s brother-in-law who facilitated the meeting between Grant and the duo. The story went that increasing the price of gold would help farmers sell more overseas while making higher profits at home. Grant relented after some time, but did not know that he was helping gold speculation which was forbidden for government officials. Speculation being forbidden did not mean prevent Jay and Jim gifting gold accounts to many members of the administration. Having an inside influence within the administration meant that they would be able to benefit before everyone else. At one point, Jay held 2 or 3 times the amount of gold that existed with which he held market power to tailor the price by changing the supply of gold and calling in the loans.
Breaking the gold ring started when Grand found out about Jim and Jay’s bribery of administrative and family members. The ring was broken not by law, but by enough people selling gold to drive the price of gold down. The events breaking the hold of Jay and Jim caused a panic for which many lost all of their finances. Jay and Jim were blamed for the debacle. Jay used bought judges to prevent losing money. Over time, many who participated in the gold ring were either persona non grata in the financial community, brought to trial for many additional legal issues, or lived in obscurity.
There are parts of the book for which Ackerman provides an understanding of how life was different than and now. Those aspects were integral to understanding the situation that was playing out as many of the issues would have been impossible later on due to technology or law. The problem is that there were also many times when something important happened but there was no understanding on what actually happened and why it happened. Those gaps in explanations did not prevent an understanding of who the event helped or how it changed the situation, but it did make reading and understanding the story more difficult.
Pages to read: 288
1st Edition: 1988
Ratings out of 5: