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Panic of
1893
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 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 favour
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. 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.
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.
See also
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