Tuesday, March 24, 2009

An Economic Meltdown

It’s a strangely familiar story, almost as if ripped from today’s headlines. Years of a booming economy with wide-spread investment in speculative building projects and bonds is followed by a sudden panic and the crash of the financial markets. Banks begin closing; businesses are forced to declare bankruptcy and rampant unemployment results, eventually hitting 14%.

It happened in 1873, when the post Civil War boom, especially the growth in manufacturing and railroad construction, fueled tremendous speculation in the financial markets.

Financier Jay Gould embarked on a scheme to corner the gold market and drive up the price when it appeared the country would go to a gold standard. Up to this point, both silver and gold were used as currency and to back the paper dollars, (greenbacks) that started to circulate during the war. Unexpectedly - the government released more gold for sale and the speculators who had invested in the scheme were ruined, suffering huge financial losses.

At the same time, the firm of Jay Cooke and Company planned to build the Northern Pacific Railway. Cooke was relying upon a $300 million loan from the US government for construction, but when it was revealed his credit was shaky, the loan was canceled and he was forced to declare bankruptcy. Other bank failures quickly followed and the New York Stock Exchange was temporarily closed for ten days.

In Europe, there was stock market speculation in railways, steamships, and manufacturing much like that in the US. On May 9, 1873, the Vienna Stock Market crashed, and a series of bank failures followed, throwing the world into economic chaos and a depression.

As credit tightened, factories laid off workers, construction declined, wages were cut and real estate values tumbled. Between 1873 and 1875, over 18,000 businesses failed. Known as The Long Depression, the economic instability lasted for 6 years.

The US government monetary policy of the time, to attempt to control inflation by taking money out of circulation, was a primary root cause of the depression. The Fourth Coinage Act of 1873 embraced the gold standard, and de-monetized silver.

This gave birth to the Free Silver Movement, a political division that pitted the Republicans, who supported the gold standard against the Democrats, who supported a silver standard. The debate raged for years in the late 19th century and created division within the country.

In my book, Promise Me, the hero is a Secret Service agent working for the Treasury Department. He’s in Montana investigating a consortium of miners he suspects are plotting to reduce the supply of silver to drive the price up and benefit when the country adopts the silver standard. He makes a bargain with the mine owners to seduce a rich widow and humiliate her in an effort to gain the confidence of the men.

Pruitt shuffled the cards. “I think we need somebody to court this widder woman, crawl into her bed and then humiliate her in front of the whole entire town. That’d teach the bitch a good lesson— that she ought to be minding her Christian”—he spit the word out as if he were cussing— “concerns back in Helena instead of messing with men’s business. We need to run her out of town with her tail between her legs.”

Sam raised an eyebrow. “And just who could be cold-hearted enough to take advantage of a woman determined to do good for the less fortunate?” His voice dripped with sarcasm.

Pruitt never looked away from Sam as he finished dealing the cards. “Why, I think you’d be the best candidate for the job, Calhoun. You got all that smooth charm that draws the ladies like bees to a rose garden. You got the looks, too, and you sure enough know your way around a petticoat.”

The rest of the men joined Pruitt in laughter before he continued. “Seems you don’t have no trouble getting into a woman’s drawers, if the gossip can be believed.”

Sam slowly sucked in a large gulp of air and then searched his pocket for a cheroot to hold his temper in check. Once, a long time ago, he would have shoved himself from the table and delivered a beating to any man who’d dared to insult his character. Those days were long gone and nearly forgotten. Life had taught Samuel Calhoun some hard and mean lessons; more than anything, he’d learned to survive and to make the most of every opportunity fate threw in his direction.

Deborah Schneider


Celia Yeary said...

Deborah--a familiar story, isn't it? Greed began when man first walked on the earth,when he grabbed something that belonged to another man.
You've cleverly taken an event in history and created a romance story. I can't wait to read this one about Sam Calhoun and the "widder" woman. Your excerpt is excellent!Celia

Paty Jager said...

Wonderful information and sounds like a great book!

Linda LaRoque said...

Oh Deborah, I love stories like this. Can't wait to read it.