Panic of 1893
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The Panic of 1893 was a serious decline in the economy of the United States that began in 1893 and was precipitated in part by a run on the gold supply.
The Panic was the worst financial crisis to hit the United States in its history to that point, and occurred upon the concurrence of several events. First, too many people attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and U.S. Notes could no longer be successfully redeemed for gold. John Griffin Carlisle, the U.S. treasury secretary, threatened to redeem notes in silver which was not as respected by the market (i.e. the redemption rate was thought to favor silver). Next, the Philadelphia and Reading Railroad went bankrupt.
Then, the National Cordage Company (the most actively traded stock at the time) went into receivership as a result of several banks, the majority of which were in New York, calling their loans in response to rumors that had circulated regarding the NCC's financial distress. A series of bank failures followed, and the price of silver fell. The Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad all failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). About 18% of the workforce was unemployed at the Panic's peak. Coxey's Army was a march of the unemployed to Washington to demand relief.
The Sherman Silver Purchase Act of 1890, perhaps along with the protectionist McKinley Tariff of 1890, have been partially blamed for the panic. The Sherman Act required the U.S. Treasury to purchase silver using notes backed by either silver or gold.
The U.S. economy finally began to recover in 1896, when an issue of notes was able to sustain gold reserves above $100 million, along with new gold production, and gave confidence to the public and the markets.
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References
Secondary Sources
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