Thomas Tooke

December 30th 1861, end of specie conversion, Gold price trading immediately at a premium to paper.

In The Greenback inflationary period on May 27, 2012 at 6:07 pm

It seems that whenever Governments want to announce something which is going to displease the population, they do it at times when the people are suspecting the least, usually holidays periods are fair game. Wesley C. Mitchell wrote an excellent books with plenty of statistics which are very instructive about the set of price movements between Gold and Paper, Paper and commodities. This is a interesting set of data because the rest of the world is on a Gold Standard, and essentially there is no inflation in other countries, the United States´ price history under a paper standard operates a little like as an economic Lab as a result.

From Mitchell´s writing:

[…]

When the New York banks suspended specie payments on Monday, December 30th 1861, gold coin at once commanded a premium in paper money. For two weeks there was no organized market for gold; but people who desired to buy or sell coin resorted to the brokers in foreign money. On the 13th of January, however, the New York Stock Exchange began dealing in gold, a step which put the resources of a highly organized market at the disposal of those who wished to buy or sell coin or to speculate in “futures”. Dealing in gold continued on the Stock Exchanges until June 21st, 1864, when the short-lived law prohibited sales of gold outside of brokers´ offices became effective. After this law was repealed transactions on the Stock Exchange were not regulated resumed, except for a brief period in October, 1869 when the Gold Exchange was closed because of the liquidation following “Black Friday.”

Meanwhile other organized markets had been established. (1) The “Open Board” of stock brokers was a younger rival of the “regular” Stock Exchange, and like the latter added gold to the list of commodities dealt in. Its separate existence came to an end in 1869, when it was united with the Stock Exchange. (2) The “Evening Exchange” began informally when a number of men formed the habit of meeting in the corridors of the Fifth Avenue Hotel to continue speculating after the day exchanges had been closed. An enterprising Mr. Gallagher opened a luxurious room for the use of this company opposite the hotel in March, 1864. Here gold, together with railway and petroleum stocks, was bought and sold until midnight. This exchange was regarded with disfavor by many business men, ostensibly because speculating both night and day was detrimental to health and morals. After the discovery of the Ketchum gold-certificate frauds in August, 1865, the banks and the other exchanges united to suppress trading at night, by forbidding their members to frequent Gallagher´s room. Accordingly the Evening Exchange was closed. (3) The market known popularly as the “Gold Room” and formally as the the “New York Gold Exchange” grew out of the operations of a knot of men who began in 1862 to buy and sell gold in a basement in William Street. As the numbers and prosperity of the company increased, they moved the “Gold Room” several times to obtain more commodious quarters. After the Stock Exchange dropped gold from the “call list” in June 1864, the “Gold Room” became the most important market for gold in the country and continued such until specie payments were resumed January 1st, 1879. At first its organization was very loose; but in October, 1864, it adopted a constitution and by-laws, and began to elect regular officers. May 1st, 1877, it affiliated with the Stock Exchange, and was thereafter styled “The New York Stock Exchange, Gold Department.”

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