Financial panic of 1893

The Panic of 1893 was a serious economic depression in the United States that began in 1893 and ended in 1897. It deeply affected every sector of the economy, and produced political upheaval that led to the realigning election of 1896 and the presidency of William McKinley.

One of the causes for the Panic of 1893 can be traced back to Argentina. Investment was encouraged by the Argentine agent bank, Baring Brothers. However, the 1890 wheat crop failure and a coup in Buenos Aires ended further investments. Because European investors were concerned that these problems might spread, they started a run on gold in the U.S. Treasury. At that time, it was comparatively simple to cash in dollar investments for exportable gold. During the Gilded Age of the 1870s and 1880s, the United States had experienced economic growth and expansion, but much of this expansion depended on high international commodity prices. In 1893, wheat prices crashed.

One of the first clear signs of trouble came on February 20, 1893, thirteen days before the inauguration of U.S. president Grover Cleveland, with the appointment of receivers for the Philadelphia and Reading Railroad, which had greatly overextended itself. Upon taking office, Cleveland dealt directly with the Treasury crisis, and successfully convinced Congress to repeal the Sherman Silver Purchase Act, legislation Cleveland felt was mainly responsible for the economic crisis.

As concern for the state of the economy deepened, people rushed to withdraw their money from banks, and caused bank runs. The credit crunch rippled through the economy. A financial panic in London combined with a drop in continental European trade caused foreign investors to sell American stocks to obtain American funds backed by gold.

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