The Panic of 1893 was an

economic depression An economic depression is a period of carried long-term economic downturn that is the result of lowered economic activity in one or more major national economies. It is often understood in economics that economic crisis and the following recession ...

in the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

. It began in February 1893 and officially ended eight months later. The Panic of 1896 followed. It was the most serious economic depression in history until the

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

of the 1930s. The Panic of 1893 deeply affected every sector of the economy and produced political upheaval that led to the

political realignment A political realignment is a set of sharp changes in party-related ideology, issues, leaders, regional bases, demographic bases, and/or the structure of powers within a government. In the fields of political science and political history, this is ...

and the presidency of William McKinley. The panic climaxed with a run on gold from the United States Treasury. As part of the panic, on May 5, 1893, the Dow Jones Industrial Average fell 24% in a single day after the bankruptcy of National Cordage Company; this was the largest single day drop until the

. Unemployment rates in many states rose above 25% and poverty became widespread.

Causes

Causes of the panic include: * Baring crisis - Heavy investment in Argentina by

Barings Bank Barings Bank was a British merchant bank based in London. It was one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member ...

followed by the 1890 wheat crop failure and the

Revolution of the Park The Revolution of the Park (''Revolución del Parque''), also known as the Revolution of '90, was an uprising against the national government of Argentina that took place on July 26, 1890, and started with the takeover of the Buenos Aires Artill ...

, a failed coup in Buenos Aires, ended further investments in the country. *

Australian banking crisis of 1893 The 1893 banking crisis in the Australian colonies involved the collapse of a considerable number of commercial banks and building societies, and a general economic depression. It occurred at the same time as the US Panic of 1893 (1893–1897). ...

- Speculation in South African and Australian properties collapsed. * Fear of contagion that led to run on gold in the United States Treasury.

Bullion coins A bullion coin (also known as a specie) is a coin struck from highly refined precious metal (bullion) and kept as a store of value or an investment rather than used in day-to-day commerce, or collectable, with numismatic value beyond that of its ...

were considered more valuable than paper money; when people were uncertain about the future, the

hoarding Hoarding is the act of engaging in excessive acquisition of items that are not needed or for which no space is available. Civil unrest or the threat of natural disasters may lead people to hoard foodstuffs, water, gasoline, and other essentials ...

of coins was widespread and paper notes were rejected.Nelson, Scott Reynolds. 2012. A Nation of Deadbeats. New York: Alfred Knopf, p. 189. * During the 1880s, American railroads experienced what might today be called a " stock market bubble": investors flocked to railroads, and they were greatly over-built. * The McKinley Tariff, enacted in 1890 that raised

tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...

s as high as 50%. * The economic policies of President

Benjamin Harrison Benjamin Harrison (August 20, 1833March 13, 1901) was the 23rd president of the United States, serving from 1889 to 1893. He was a member of the Harrison family of Virginia—a grandson of the ninth president, William Henry Harrison, and a ...

, including trade protectionism, veterans' pensions, and silver. During the

Gilded Age In History of the United States, United States history, the Gilded Age is the period from about the late 1870s to the late 1890s, which occurred between the Reconstruction era and the Progressive Era. It was named by 1920s historians after Mar ...

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, which were also affected by the McKinley Tariff of 1890. Exacerbating the problems with international investments, wheat prices crashed in 1893. In particular, the opening of numerous mines in the western United States led to an oversupply of silver, leading to significant debate as to how much of the silver should be coined into money (see below). One of the first signs of trouble came on 20 February 1893, twelve days before the inauguration of U.S. President

Grover Cleveland Stephen Grover Cleveland (March 18, 1837June 24, 1908) was the 22nd and 24th president of the United States, serving from 1885 to 1889 and from 1893 to 1897. He was the first U.S. president to serve nonconsecutive terms and the first Hist ...

, 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 convinced the

United States Congress The United States Congress is the legislature, legislative branch of the federal government of the United States. It is a Bicameralism, bicameral legislature, including a Lower house, lower body, the United States House of Representatives, ...

to repeal the Sherman Silver Purchase Act, which he 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 run A bank run or run on the bank occurs when many Client (business), clients withdraw their money from a bank, because they believe Bank failure, the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking sys ...

s. The

credit crunch A credit crunch (a credit squeeze, credit tightening or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from banks. A credit crunch generally ...

rippled through the

economy of the United States The United States has a highly developed mixed economy. It is the world's largest economy by nominal GDP and second largest by purchasing power parity (PPP). As of 2025, it has the world's seventh highest nominal GDP per capita and ninth ...

. A

financial crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with Bank run#Systemic banki ...

in London combined with a drop in continental European trade caused foreign investors to sell American stocks to obtain American funds backed by gold.

Populists

The People's Party, also known as the ' Populists', was an agrarian-populist political party in the United States. From 1892 to 1896, it played a major role as a left-wing force in American politics. It drew support from angry farmers in the West and South. It was highly critical of

capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...

, especially banks and railroads, and allied itself with the labor movement. Established in 1891 as a result of the Populist movement, the People's Party reached its height in the 1892 presidential election, when its ticket, consisting of James B. Weaver and James G. Field, won 8.5% of the popular vote and carried five states (Colorado, Idaho, Kansas, Nevada, and North Dakota), and the 1894 United States House of Representatives elections when it won nine seats. Built on a

coalition A coalition is formed when two or more people or groups temporarily work together to achieve a common goal. The term is most frequently used to denote a formation of power in political, military, or economic spaces. Formation According to ''A G ...

of poor, white cotton farmers in the South (especially North Carolina, Alabama and Texas) and hard-pressed wheat farmers in the Plains States (especially Kansas and Nebraska), the Populists represented a radical form of

agrarianism Agrarianism is a social philosophy, social and political philosophy that advocates for rural development, a Rural area, rural agricultural lifestyle, family farming, widespread property ownership, and political decentralization. Those who adhere ...

and hostility to elites, cities, banks, railroads, and gold.

Silver

The Free Silver movement arose from a

synergy Synergy is an interaction or cooperation giving rise to a whole that is greater than the simple sum of its parts (i.e., a non-linear addition of force, energy, or effect). The term ''synergy'' comes from the Attic Greek word συνεργία ' f ...

of farming and mining interests. Farmers sought to invigorate the economy and thereby end

deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% and becomes negative. While inflation reduces the value of currency over time, deflation increases i ...

, which was forcing them to repay loans with increasingly expensive dollars. Mining interests sought the right to turn silver directly into money without a central minting institution. The Sherman Silver Purchase Act of 1890, while falling short of the Free Silver movement's goals, required the U.S. government to buy millions of ounces of silver above what was required by the 1878 Bland–Allison Act (driving up the price of silver and pleasing silver miners). People attempted to redeem silver 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 redeemed for gold. Investments during the time of the panic were heavily financed through bond issues with high-interest payments. Rumors regarding financial distress at the National Cordage Company (NCC), then the most actively traded stock, caused its lenders to call in their loans immediately, and the company went into

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...

receivership as a result. The company, a rope manufacturer, had tried to corner the market for imported hemp. As 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 Northern Pacific Railway was an important American transcontinental railroad that operated across the northern tier of the Western United States, from Minnesota to the Pacific Northwest between 1864 and 1970. It was approved and chartered b ...

, the

Union Pacific Railroad The Union Pacific Railroad is a Railroad classes, Class I freight-hauling railroad that operates 8,300 locomotives over routes in 23 U.S. states west of Chicago and New Orleans. Union Pacific is the second largest railroad in the United Stat ...

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, many of them in the West, failed. According to high estimates, about of the workforce was unemployed at the panic's peak. The huge spike in unemployment, combined with the loss of life savings kept in failed banks, meant that a once-secure middle-class could not meet their

mortgage A mortgage loan or simply mortgage (), in civil law (legal system), civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners t ...

obligations. Many walked away from recently built homes as a result.

Effects

As part of the panic, on May 5, 1893, the

Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indice ...

fell 24% in a single day after the bankruptcy of National Cordage Company; this was the largest single day drop until the

. Five hundred banks closed, 15,000 businesses failed, and numerous farms ceased operation. The unemployment rate reached 25% in Pennsylvania, 35% in New York, and 43% in Michigan.

Soup kitchen A soup kitchen, food kitchen, or meal center is a place where food is offered to Hunger, hungry and homeless people, usually for no price, cost, or sometimes at a below-market price (such as coin Donation, donations). Frequently located in Low i ...

s were opened to help feed the destitute. Facing starvation, people chopped wood, broke rocks, and sewed by hand with needle and thread in exchange for food. In some cases, women resorted to prostitution to feed their families. To help the people of Detroit, Mayor Hazen S. Pingree launched his "Potato Patch Plan", which were community gardens for farming. President

was blamed for the depression. Gold reserves stored in the U.S. Treasury fell to a dangerously low level. This forced President Cleveland to borrow $65 million in gold from Wall Street banker

J. P. Morgan John Pierpont Morgan Sr. (April 17, 1837 – March 31, 1913) was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age and Progressive Era. As the head of the banking firm that ...

and the

Rothschild banking family of England The Rothschild banking family of England is the British branch of the Rothschild family. It was founded in 1798 by Nathan Mayer Rothschild (1777–1836), who first settled in Manchester before moving to London, Kingdom of Great Britain (in pre ...

, through what was known as the Morgan-Belmont Syndicate His party suffered enormous losses in the 1894 elections, largely being blamed for the downward spiral in the economy and the brutal crushing of the

Pullman Strike The Pullman Strike comprised two interrelated strikes in 1894 that shaped national labor policy in the United States during a period of deep economic depression. First came a strike by the American Railway Union (ARU) against the Pullman Company' ...

. After their defeat in 1896, the Democrats did not regain control of any branch of the Federal Government until 1910. The building of the

Love Canal Love Canal was a neighborhood in Niagara Falls, New York, United States, infamous as the location of a landfill that became the site of an environmental disaster discovered in 1977. Decades of dumping toxic chemicals killed residents and harm ...

was abandoned due to the panic, and the excavated remnant of only 1 mile length would later be repurposed as a toxic waste dump that led to a serious environmental disaster.

Shipping

The Panic of 1893 affected many aspects of the

shipping industry Maritime transport (or ocean transport) or more generally waterborne transport, is the transport of people (passengers or goods (cargo) via waterways. Freight transport by watercraft has been widely used throughout recorded history, as it provi ...

, both by rail and maritime. It arrested the acquisition of ships and rolling stock and depressed shipping rates.

Fluctuations in railroad investment after the Panic of 1893

The bad omen of investors switching from equity based

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

s to constant return bonds in 1894 was mirrored in the corporate finance actions of railroads which reduced their acquisition of

rolling stock The term rolling stock in the rail transport industry refers to railway vehicles, including both powered and unpowered vehicles: for example, locomotives, Railroad car#Freight cars, freight and Passenger railroad car, passenger cars (or coaches) ...

. Railroad expansion including capital expenditures rose again in 1895, but slowed in 1897 during another economic trough.

Receivership

In 1893, the total railroad mileage in the U.S. was 176,803.6 miles. In 1894 and 1895, railroads only expanded 4,196.4 miles, although 100,000 miles of rail was added from 1878 to 1896. In 1893, the year following the panic, one fourth of all rail mileage went into receivership. The U.S. Census placed this value at close to $1.8 billion (not adjusted for inflation), the largest amount recorded between 1876 and 1910. This was over $1 billion (also not adjusted for inflation) more than the next largest amount, in 1884.

Pullman Strike

In 1894, the U.S. Army intervened during a strike in Chicago to prevent property damage. The

began at the

Pullman Company The Pullman Company, founded by George Pullman, was a manufacturer of railroad cars in the mid-to-late 19th century through the first half of the 20th century, during the boom of railroads in the United States. Through rapid late-19th century d ...

Chicago Chicago is the List of municipalities in Illinois, most populous city in the U.S. state of Illinois and in the Midwestern United States. With a population of 2,746,388, as of the 2020 United States census, 2020 census, it is the List of Unite ...

after Pullman refused to either lower rent in the company town or raise wages for its workers due to increased economic pressure from the Panic of 1893. Since the Pullman Company was a

railroad car A railroad car, railcar (American English, American and Canadian English), railway wagon, railway carriage, railway truck, railwagon, railcarriage or railtruck (British English and International Union of Railways, UIC), also called a tra ...

company, this only increased the difficulty of acquiring rolling stock.

American merchant tonnage

The maritime industry of the United States did not escape the effects of the Panic of 1893. The total gross registered merchant marine tonnage employed in "foreign and coastwise trade and in the fisheries", as measured by the U.S. Census between 1888 and 1893, grew at a rate of about 2.74%. In 1894, U.S. gross tonnage decreased by 2.9%, and again in 1895 by 1.03%.

Rates

In 1894, the rate for a

bushel A bushel (abbreviation: bsh. or bu.) is an Imperial unit, imperial and United States customary units, US customary unit of volume, based upon an earlier measure of dry capacity. The old bushel was used mostly for agriculture, agricultural pr ...

of wheat by rail dropped from 14.70¢ in 1893 to 12.88¢. This rate continued to decrease, reaching a terminal rate in 1901 of 9.92¢ and never reached 12 cents between 1898 and 1910. Between 1893 and 1894, average shipping rates by lake or canal per wheat bushel decreased by almost 2 cents, from 6.33¢ to 4.44¢. Rates on the transatlantic crossing from

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

Liverpool Liverpool is a port City status in the United Kingdom, city and metropolitan borough in Merseyside, England. It is situated on the eastern side of the River Mersey, Mersey Estuary, near the Irish Sea, north-west of London. With a population ...

also decreased, from 2 and 3/8 pence to 1 and 15/16 pence, but this reflected a continuing trend downward from a high of 3 and 1/8 pence in 1891.

The Morgan-Belmont Syndicate

In February 1895, the U.S. Government turned to private

financial institution A financial institution, sometimes called a banking institution, is a business entity that provides service as an intermediary for different types of financial monetary transactions. Broadly speaking, there are three major types of financial ins ...

s to underwrite the sale of Treasury bonds, stabilize

exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

s, and return the Treasury to its

gold reserve A gold reserve is the gold held by a national central bank, intended mainly as a guarantee to redeem promises to pay depositors, note holders (e.g. paper money), or trading peers, during the eras of the gold standard, and also as a store of v ...

requirement. The result was a contract drawn with what was called "The Morgan-Belmont Syndicate". The persistent balance of payments deficit in the 1890s which drained the Treasury gold reserves, caused concern from both domestic and foreign investors that the U.S. would abandon the gold standard. This prompted further gold withdrawals and bond liquidations which exacerbated the deficit. By February 2, 1895, the Treasury's gold reserves fell to approximately $42 million, well below the $100 million level required by the Resumption Act of 1875. After a series of failed attempts to restore reserves by issuing bonds and depreciating specie issued for

legal tender Legal tender is a form of money that Standard of deferred payment, courts of law are required to recognize as satisfactory payment in court for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything ...

, the Treasury negotiated a contract with the Morgan-Belmont Syndicate to restore confidence in the government's ability to maintain the convertibility of legal tender into gold. The full list of syndicate members was not made public, however the contract named Drexel, Morgan & Co.., A. Belmont & Co., J. S. Morgan & Co., and N. M. Rothschild & Sons. The syndicate achieved its goals through a combination of purchasing gold from smelters, convincing its members to purchase Treasury bonds with gold, inspiring confidence in bond and railroad securities investors, and unofficial

capital control Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account. These meas ...

s by convincing members and gold-exporting houses to "ship no gold" overseas.