This week in 1869: The run-up to Black Friday

In America from the 1850s strong economic growth and the need for money to finance the construction of railroads led to the rapid growth of Wall Street. In the absence of effective regulation, this was accompanied by rampant speculation, endemic corruption and scandal in many cases even more naked than the examples we see today. Among the most high profile was an attempt by robber barons' Jay Gould and Jim Fisk to corner the gold market in 1869.

To pay for the cost of the Civil War, the US government issued a large quantity of paper currency, known as greenbacks'. Because this was highly inflationary, Washington tried to reverse the process by exchanging these dollars for gold. The corresponding drop in the money supply led to deflation and recession as money was sucked out of the economy, and as a result the process was halted in 1868.

A year later Gould and Fisk started buying up gold, in the hope that this would push the price higher.They also lobbied President Ulysses S Grant aided by Grant's brother-in-law, Abel Corbin against any further government gold sales, arguing that higher prices would benefit farmers. This market manipulation worked a treat, as other speculators copied their behaviour.

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Grant realised their motives were not altruistic, and ordered an immediate resumption of sales. However, thanks to bribery, Gould at least knew exactly when the extra gold was due to hit the market, which enabled him to sell out near the top. Many of the speculators who had tried to copy him were not so lucky, losing heavily as the price of gold collapsed from its peak of $169 ($2,940 at 2012 prices) an ounce to $130 on 24 September 1869 (Black Friday'). Gould made an estimated $10m ($174m) profit, and became one of the wealthiest men in America. Despite other scandals, Grant was re-elected in 1872.