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Quote of the Day
“We are the good guys. We are on the side of angels.”
-Jeff Skilling, CEO and Chairman of Enron, in an interview aired on PBS on this day in 1991.
June 5th – This Day in Stock Market History
June 5th, 1883 – John Maynard Keynes is born.
Keynes is perhaps one of the more famous economists in history. The term “Keynesian Economics” still fills headlines today as global financiers look for ways to restart economic growth.
But what you may not have known is that the same Keynes that created Keynesian Economics, is also responsible for some of the earliest thoughts on value investing, diversification and behavioral finance. He also had a pretty stellar investing track record (after some initial troubles!):
We have a whole post on John Maynard Keynes investment philosophy, and further reading here:
The Evolution of a Super-Investor: John Maynard Kenyes
June 5th, 1933 – The United States goes off the gold standard.
President Roosevelt initially ordered that all U.S. citizens turn in their gold on April 5th, 1933. Because the great depression caused those worried about their “paper savings” to hoard physical gold, the U.S. Federal Reserve was unable to keep up with redemption demand for its gold and honor its prior commitment of exchanging dollars for gold.
The Federal Reserve has a great article on this history of the U.S. dollar’s relationship with the gold standard in a article here:
Roosevelt’s Gold Program – Federal Reserve History
On June 5, a congressional resolution abrogated gold clauses in all contracts, both government and private. Gold clauses guaranteed that contracts would be repaid in gold or in gold’s monetary equivalent, at the value set in 1900. A series of cases in the United States Supreme Court upheld the constitutionality of these actions.
Together, these measures weakened the dollar’s link to gold. The dollar nominally retained its value, but the Department of the Treasury would not exchange dollars for gold and forbade the Federal Reserve from doing so. The administration could, at any time, change the dollar’s value or begin backing the dollar with silver. In the future, the government might (or might not) allow the conversion of paper dollars into gold (or silver or both) at some price that the government would announce at some point in the future. To ordinary men and women, in other words, the dollar’s value in terms of gold (and other goods) was uncertain.
June 5th, 1991 – PBS airs interview with Enron’s Jeff Skilling, where he infamously says:
“We are the good guys. We are on the side of angels.”
It turns out, they weren’t. But it would be 10 years before the world would find out and company would declare bankruptcy.
Videos from each of the segments of the show can be found here.
Also, PBS’s Frontline page offers a summary of the story.
Looking for more on Enron? We have a collection of significant days in the downfall of Enron from our ‘This Day in Stock Market History’ collection, along with book and video recommendations for those looking to dig deeper:
A Brief History of Enron, Enron Stock Chart Included
Best June 5th in Dow Jones Industrial Average History
1934 – Up 2.08%, 1.93 points.
Worst June 5th in Dow Jones Industrial Average History
1940 – Down 2.19%, 2.54 points.
Read of the Day
You can read the transcript of Skilling’s entire 1991 interview on PBS’s Frontline page. It is cringe worthy with the hindsight we now have.
Go To Next Day: June 6th, 1944: D-Day as allied troops storm the beaches at Normandy –>
