The Panic of 1893 was a serious economic depression in the United States that began in 1893. This panic is sometimes considered a part of the Long Depression which began with the Panic of 1873,[1] and like that of earlier crashes, was caused by railroad overbuilding and shaky railroad financing; which set off a series of bank failures. Compounding market overbuilding and a railroad bubble was a run on the gold supply and a policy of using both gold and silver metals as a peg for the US Dollar value.

Estimates of Unemployment during the 1890s (Source: Romer, 1984)
Year Lebergott Romer
1890 4.0 4.0
1891 5.4 4.8
1892 3.0 3.7
1893 11.7 8.1
1894 18.4 12.3
1895 13.7 11.1
1896 14.5 12.0
1897 14.5 12.4
1898 12.4 11.6
1899 6.5 8.7
1900 5.0 5.0


The 1880s had been a period of remarkable economic expansion in the United States. In time, the expansion became driven by speculation, much like the tech bubble of the late 1990s and housing bubble of the early 21st century, except that the preferred industry was railroads. Railroads were vastly over-built (and fortunes were made[2]), and many companies tried to take over others, seriously endangering their own stability to do so. In addition, many mines were opened (frequently with rail connections), and their products, especially silver, began to flood the market. Farmers, particularly in the Midwest, suffered a series of droughts which left them short of cash to pay their debts, and drove down the value of their land. The Free Silver movement arose, gaining support from farmers (who sought to invigorate the economy and cause inflation, thus allowing them to repay their debt with cheaper dollars) and mining interests (who sought the right to turn silver directly into money). The [[Sherman Silver Purchase Act of 1890], while falling short of Free Silver's goals, required the U.S. government to buy millions of ounces of silver (driving up the price of the metal and pleasing silver miners) for money (pleasing farmers).

One of the first signs of trouble was the bankruptcy of the Philadelphia and Reading Railroad, which had greatly over-extended itself, on February 23, 1893,[3] ten days before Grover Cleveland's second inauguration.[4] Some historians consider this bankruptcy to be the beginning of the Panic.[5]

As concern of the state of the economy worsened, people rushed to withdraw their money from banks and caused bank runs. The credit crunch rippled through the economy. European investors took payment only in gold, depleting US gold reserves and threatening the value of the US dollar,[citation needed] which was backed by gold. People attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and US notes could no longer be successfully redeemed for gold. Investments during the time of the Panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC's financial distress. As the demand for silver and silver notes fell, the price and value of silver dropped. Holders worried about a loss of face value of bonds, and many became worthless.

A series of bank failures followed, and the Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad 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). According to high estimates, about 17%-19% of the workforce was unemployed at the Panic's peak. The huge spike in unemployment, combined with the loss of life savings by failed banks, meant that a once secure middle class could not meet their mortgage obligations. As a result, many walked away from recently built homes. From this, the sight of the vacant Victorian (haunted) house entered the American mindset.[6]


The 1896 Broadway melodrama The War of Wealth was inspired by the Panic of 1893.

The severity was great in all industrial cities and mill towns. Farm distress was great because of the falling prices for export crops such as wheat and cotton. Coxey's Army was a highly publicized march of unemployed laborers from Ohio and Pennsylvania to Washington to demand relief. A severe wave of strikes took place in 1894, most notably the Midwestern bituminous coal strike of the spring, which led to violence in Ohio. Even more serious was the Pullman Strike, which shut down much of the nation's transportation system in July, 1894.

The Sherman Silver Purchase Act of 1890, perhaps along with the protectionist McKinley Tariff of 1890, have been partially blamed for the panic. Passed in response to a large overproduction of silver by western mines, the Sherman Act required the U.S. Treasury to purchase silver using notes backed by either silver or gold. Politically, the Democrats and President Cleveland were blamed for the depression. The Democrats and Populists lost heavily in the 1894 elections, which marked the largest Republican gains in history.

Many of the western silver mines closed, and a large number were never re-opened. A significant number of western mountain narrow-gauge railroads, which had been built to serve the mines, also went out of business. The Denver and Rio Grande Railroad stopped its ambitious plan, then under way, to convert its system from narrow-gauge to standard-gauge.

The depression was a major issue in the debates over Bimetallism. The Republicans blamed the Democrats and scored a landslide victory in the 1894 state and Congressional elections. The Populists lost most of their strength and had to support the Democrats in 1896. The presidential election of 1896 was fought on economic issues and was marked by a decisive victory of the pro-gold, high-tariff Republicans led by William McKinley over pro-silver William Jennings Bryan.

Many people abandoned their homes and came west. The growing railway towns in the west of Seattle, Portland, Salt Lake City, Denver, San Francisco and Los Angeles took in the populations, as did many smaller centers.

The U.S. economy finally began to recover in 1896. After the election of Republican McKinley, confidence was restored with the Klondike gold rush and the economy began 10 years of rapid growth, until the Panic of 1907.


  1. ^ Fels, Rendigs (1949). "The Long-Wave Depression, 1873-97". The Review of Economics and Statistics.
  2. ^ Steel magnate Andrew Carnegie, for example, made millions selling steel rails.
  3. ^ James L. Holton, The Reading Railroad: History of a Coal Age Empire, Vol. I: The Nineteenth Century, pp. 323-325, citing Vincent Corasso, The Morgans.
  4. ^ The History Box, The Panic of 1893 - Financial World; accessed 2009.04.08.
  5. ^ The Encyclopedia of Arkansas History and Culture, The Panic of 1893; accessed 2009.04.08.
  6. ^ Hoffman, Charles. The Depression of the Nineties: An Economic History. Westport, CT: Greenwood Publishing, 1970. Page 109.

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