Interesting little piece of history, where two men conspired to manipulate the gold market. The goal was to post false damning news of the Unions forces, which would send people panicking in the markets. Then they would buy it up on the cheap.
Next time someone says: “Elites cannot/do not conspire to control markets/industries, blah blah blah”. Just teach about this little fun fact (among many other examples) 🙂 .
Civil War gold hoax
On May 18, 1864, two New York City newspapers, the New York World and the New York Journal of Commerce, published a story that President Abraham Lincoln had issued a proclamation of conscription of 400,000 more men into the Union army. At the time, there were fierce battles taking place between Union and Confederate troops in Virginia and the public took it to mean that the war was not going well for the Union. Share prices fell on the New York Stock Exchange when investors began to buy gold, and its value increased 10%.
During the day a number of people — one of them former Union commander General George McClellan — became suspicious of the fact that the proclamation had been published in just two newspapers, and went to the offices of the Journal to determine the source. Editors of the paper showed them an Associated Press dispatch they had received early in the morning.
Before noon, the Associated Press issued a statement that the dispatch had not come from them, and at 12.30 p.m. the State Department in Washington DC sent a telegram to verify that the proclamation was “an absolute forgery”. By then, however, the stock market had already been affected.
Further investigation revealed that the dispatches had been delivered by a young courier just after the night editors had gone home. The timing had been perfect: the night foreman had had to make a decision as to whether to include the proclamation in the next day’s paper or not. Night foremen in various other newspapers had tried to verify the message, and when they found out that not every paper had received the message, they decided to delay it pending further proof. Only foremen for the World and Journal of Commerce had added it.
President Lincoln was enraged when he heard about the case: he gave an order to close the two papers down and had their editors arrested for suspicion of complicity. Soldiers seized the two offices and, for some reason, the office of the Independent Telegraph Line. Lincoln eventually had the editors released.
Detectives tracked down the culprits. They found the messengers and questioned them. On May 21 they arrested Francis Mallison, a reporter for the Brooklyn Eagle who informed on his city editor Joseph Howard, Jr., who was also arrested. Howard came quietly and confessed.
Howard had bought gold on margin May 17, and started the ruse because he knew that any news of a prolongation of the war would cause a rise in the price of gold when investors wanted to transfer their savings elsewhere. He had forged the two AP dispatches, and sent them to various city newspapers in an appropriate time. The next day, during the furor, he had sold his investment and profited immensely.
Howard spent only three months in prison and was released on August 22, 1864. With perfect irony, at that time Lincoln had to issue a call for 500,000 more soldiers.