The gold crisis of 1869: Stabilizing or destabilizing speculation under floating exchange rates?
1975; Elsevier BV; Volume: 12; Issue: 2 Linguagem: Inglês
10.1016/0014-4983(75)90013-3
ISSN1090-2457
Autores Tópico(s)Historical Economic and Social Studies
ResumoJay Gould’s manipulation of the gold market during the summer and fall of 1869, culminating in the original Black Friday, September 24, 1869, maintains a favored role in the historians’ repertory of colorful stories of corruption during the “robber-baron” era. Among economists, Black Friday, or the Gold Crisis, assumes added significance. It involved an attempt by private speculators to control the external value of the domestic currency during the one period in U.S. history when the nation was on a freely floating exchange rate with little or no government intervention. Opponents of floating exchange rates, such as Paul Einzig, argue that under such a system “determination of exchange rates would be left to the mercy of speculators,” (Einzig, 1970, p. VII) and insist that “there is no shadow of justification for taking [the] optimistic view” (p. 79) that private speculation would tend to be stabilizing. Previous writers on Black Friday have shared the view that that event provides dramatic evidence of destabilizing speculation. Horace White argued that “Black Friday and its evil consequences were due to the existence of a bad currency and a fluctuating standard of value” (White, 1935, p. 242). “The panic of Black Friday,” according to Barrett, “was one of the items in the great bill of costs which the country paid” for its lapse into a system under which “the temptations to speculate in gold were too strong to be resisted” (Barrett, 1931, p. 95). And Irwin Unger, in his award-winning study of the Greenback era, charged that Black Friday was the product of a system which “put the commercial community at the mercy of speculators” (Unger, 1964, p. 169). This generally accepted interpretation of Black Friday lends support to the view of Einzig and others that private speculative behavior is destabilizing and that a floating exchange rate is therefore an unreliable system. Even among proponents of floating exchange rates, acceptance of this traditional interpretation serves as a nagging reminder of the possible threat of destabilizing speculation. Inadequate economic analysis and lack of empirical examination of the traditional interpretation have resulted in oversimplification of Black Friday. Rather than an example of destabilizing speculation, Black Friday properly interpreted is a striking example of the obstacle offered by speculative capital flows to disequilibrating manipulation. Despite Jay Gould’s extraordinary bold attempt, he was unable to prevail against equilibrating
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