Panic of 1893
The
Panic of 1893 was a financial crisis that hit the
United States upon the concurrence of several events. First, too many people attempted to redeem notes for
gold, ultimately the statutory limit for the maximum amount of gold in federal reserves was reached and gold could no longer be successfully redeemed. The
United States Secretary of the Treasury, John Carlisle 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 National Cordage Company, the most actively traded stock, went into receivership. A series of bank failures occurred, and the price of silver fell. The Northern Pacific Railroad, 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.
The US 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, gave confidence to the public and the markets.
The causes are several, but a major cause was the Sherman Silver Purchase Act of 1890, perhaps along with the protectionist McKinley Tariff also of 1890. The Sherman Act required to the Treasury to purchase silver using notes backed by either silver or gold.
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