The Panic of 1893 “The Panic of 1893

The Effects, Causes, and Outcome of the Panic of 1893 “The Panic of 1893 was one of the worst in American history with the unemployment rate exceeding ten percent for half a decade.” Businesses and workers were more open to a national downturn because the economy was more centralized and integrated. The Panic of 1893 had a huge impact on the United States causing us to lead to a depression.The worst depression in the United States happened in 1893. U.S. Treasurys gold reserves dropped below $100 million in 1893 of april. As investors it set off a financial panic. On May 4th the national cordage company collapsed and made the crisis worse. Banks quickly called in loans, west and south banks withdrew deposits from New York banks. In the Beginning of 1893 bank failures began to spread. In the first months six hundred failed and by the end of 1893 four thousand did. During the same time an estimation of fourteen thousand businesses collapsed. ( Rezneck )The Panic of 1893 was pretty much the same to the panic of 1873 but the Panic of 1893 started with the collapse of railroad overbuilding and railroad financing that made many banks fail ( Timberlake 516 ). Bimetallism was a policy that when gold and silver metals at a fixed 16:1 rate for pegging the value of the U.S. dollar. May 1893 to november 1893 158 national banks failed, 172 state banks, 177 private banks, 47 savings banks, 13 loan and trust companies, and 16 Guerrero 2mortgage companies ( Kelley ). Banks in chicago passed the issue of clearinghouse loan certificates for suspension of cash payments in july 1893 ( Kelley ).the United States one of the most severe crisis ever was the panic of 1893. In 1890 the U.S. Treasury fell to $100 million to $190 million. The falling gold reserves made depositors withdraw banknotes and convert their wealth into gold. One hundred banks suspended operations and bank runs swept through Chicago and Los Angeles. Money center banks began selling assets to satisfy withdrawal requests. ( Richardson ) In The Panic of 1893 was the worst United States depression until the Great depression ( Timberlake 516 ).The Panic of 1893 started its roots in argentina. Investors in britain invested a lot into the argentinean bank. The wheat crop in argentina failed ending foreign investment of any kind. ” Then a run on gold in the United States treasury as investors liquidated their holdings.”  Under president Benjamin Harris the Sherman Silver Act and the Mckinley Tariff Act were two forces that caused the balloon to burst in february 1893. In parts of the country there were many difficulties while there was a big growth in the economy. The government was required to purchase and coin silver in a bill presented to congress by senator John Sherman. The bill was passed and to purchase silver, currency was printed. ” There was a price inflation due to an expansion of precious metals backing the currency.” Raising prices and slowing the economy the Mckinley Tariff Act was passed in 1890. After failing to make payments on its debt the declaration of bankruptcy cracked in february of 1893. ( Adelmann )”In May, the final straw was the National Cordage Company failed attempt to corner the hemp market, resulting in a selloff of its stock and triggering the indiscriminate selling of stocks Guerrero 3across the stock exchanges.” The depression following the panic lasted five years, and resulted in the failure of more than 15,000 companies and 500 banks.On February 26th, the Philadelphia and Reading Railroad, a large Eastern concern, failed. This created some concern about the solvency of other firms and caused a decline in the stock market for the months of March and April (Sprague 1910). On May 5th, the National Cordage Company failed. This led to a collapse in the stock market and led to a large increase in the interest rate on call loans (Noyes 1909). Despite the collapse of stock market prices, money from the interior continued to flow into New York, possibly to take advantage of the high interest rates on call loans. Then in early June, these inflows to New York reversed and money flowed back to the interior. The reverse of flows was large and sudden enough to cause the New York, Boston, Philadelphia, and Pittsburgh Clearinghouses to authorize the issuance of clearinghouse certificates (Noyes 1909).6 There was, however no widespread suspension of payments in these financial centers. Sprague (1910) argues that the reason for the sudden shift was the failure of banks in the South and West. By the middle of July, the situation seemed to have calmed. Then, on July 25th, the Erie Railroad failed. Within two days “suddenly and unexpectedly the banks throughout the country, beginning with those in New York, partially suspended cash payments (Sprague 1910, p.177).” Once New York and some of the other financial centers refused to allow depositors to make large withdrawals, a premium for currency was generated. Noyes (1909) reports widespread hoarding of currency. Banks continued to fail and there was a marked increase in the number of banks completely suspending operations. It was not until September that the currency premium disappeared, banks reopened and the crisis was resolved. The next four years the economy faced the worst depression ever. Fifty railroads shut down and 30 steel companies collapsed because of railroad failures. The government cut off silver purchases while they struggled to handle the crisis. In 1894 unemployment jumped to 20 percent. This left about 2.5 million men jobless and looking to work in and out of cities. Thirteen hundred strikes that involved 750,000 workers. ( Rezneck )The unemployment rate raised over ten percent for half a decade in 1893. From January 1893 to june 1894 the economic contraction began. By December 1895 the economy grew, then hit by a second recession that went to june 1897. Averaging over 500,000 immigrants per year in the 1800’s, beat one million per year in the 1900’s, Only 270,000 from 1894 to 1898. ( Rezneck )Farms raised to 80 percent from 1870 to 1890 while property for farm land raised to 75 percent and another 25 percent by 1900. Over 2.3 million farm mortgages nationwide had been observed in 1890 worth 2.2 billion. The people more likely to be in debt was the farmers in the plains. Railroads were really big at the time and opened new areas to agriculture leading to rapid changing markets. Farming operations expanded by new techniques and faster productivity. Between 1870 and 1890 corn, cotton, and wheat doubled while fiber and grain flooded the domestic market. The expansion of railroads was important to economic growth when eight thousand miles a year were built from 1879 to 1883. ( Hoffman 24)”Jacob S. Coxey, an Ohio steel-mill owner, was forced in the financial panic to lay off forty of his quarry workers.” To provide jobs for the unemployed Jacob S. Coxey came up with an idea to make a federal public works program. It would help the poor by increasing the amount of money in circulation. Coxey said he would march from Ohio to Washington D.C. to send a petition. He started off with only 100 marchers and as they passed through cities they gathered thousands and cheered them on. The federal government feared the protest because it grew so much. “President Grover Cleveland announced he intended to use laws prohibiting parades on the Capitol grounds, and on May 1st he had Coxey and two of his lieutenants arrested.”( Rezneck)By 1897 the economy was stabilizing and the United States was slowly recovering. In 1973, 1884, and 1893 the economy fell into recession and one of the biggest depressions. “Meanwhile local, state, and Federal authorities had proven inadequate to meet the economic turmoil that seemed to attend this new economy and its fluctuations.” ( Rezneck )