Panic in 1893

Panic in 1893 was a serious economic recession in the United States, which began in 1893.

Financial events/

1. Panic in 1893

Panic in 1893 was a serious economic recession in the United States, which began in 1893.

2. Reasons

One of the causes of the panic in 1893 can be traced back to Argentina. Barings brothers bank's Argentinian agent has made a large investment in Argentina. However, the poor harvest of wheat in 1890 and the coup d'etat in Buenos Aires made investment unsustainable. As European investors worried that these problems might spread, they began to run on gold from the U.S. Treasury because it was relatively easy for them to convert dollar investments into exportable gold.

In the gilded era of the 1970s and 1980s, the United States experienced economic growth and expansion, but most of the expansion depended on high international commodity prices. However, in 1893, wheat prices plummeted.

The first obvious sign of the problem appeared on February 20, 1893, 13 days before President Grover Cleveland's inauguration. On that day, the receiver of the bankruptcy of Philadelphia and reading railway company, which had been greatly over expanded, was appointed.

After taking office, Cleveland dealt with the crisis directly with the Ministry of finance, and successfully persuaded Congress to repeal the Sherman Silver Purchase Act. Cleveland believed that the bill should bear the main responsibility for the economic crisis. [7] As concerns about the country's economic situation intensified, people scrambled to withdraw deposits from banks, resulting in bank runs. The credit crunch has spread across the economy. The financial panic in the UK and the decline in European trade led foreign investors to sell US stocks in order to obtain US funds supported by gold.

3. People's party members

The people's party is a short-lived agricultural Populist Party, which is politically welcomed by wheat growers in the West and poor cotton growers in the south. They see the ensuing panic as evidence that groundless global financial values are eroding traditional American values. Hasia diner, a historian, points out that some populists believe that the policies of the Jewish international financier class have destroyed small family farms. They asserted that the Jewish people who owned the bank pursued the gold standard, which was the main cause of their poverty. Agricultural radicalism assumes that cities are the opposite of American values and claims that Jews are the essence of urban corruption.

4. Silver

The rise of the free silver movement has won the support of farmers (trying to stimulate the economy and trigger inflation so that they can repay their debts with cheaper dollars) and mining interest groups (fighting for the right to include silver in the currency). The Sherman Silver Purchase Act of 1890 did not achieve the goal of the free silver movement. It required the U.S. government to buy millions of ounces of silver, which exceeded the requirements of the brand Ellison act of 1878 (which raised the price of silver to please silver miners).

People are trying to redeem gold with silver certificates. Finally, the Federal Reserve's gold reserves reached the minimum legal limit, and the U.S. currency was no longer convertible into gold. [8] During this period of panic, investment activities were mainly financed by high interest bonds. Rumors in the market that the national rope company, the most actively traded stock at the time, was in financial trouble led bankers to demand repayment of the company's loans, which led the company into bankruptcy management. The rope manufacturing company tried to monopolize the national market of imported hemp. As the demand for silver and the value of silver bonds declined, the price and value of silver plummeted.

Bondholders worry about the loss of face value, many of which are worthless. A series of bank failures followed. North Pacific Railway, Union Pacific Railway, Acheson Topeka and Santa Fe Railway went bankrupt. Many other companies went bankrupt; more than 15000 businesses and 500 banks went bankrupt, most of them in the West. According to higher estimates, about 17% to 19% of the workforce is unemployed at the height of the panic. The sharp rise in unemployment, coupled with the loss of living savings due to bank failures, means that the once safe middle class can no longer repay their home mortgages. As a result, many people lost their original houses.

5. Impact

The panic led to a fall in share prices. 500 banks closed, 15000 businesses went bankrupt, and many farms stopped operating. The unemployment rate is 25% in Pennsylvania, 35% in New York and 43% in Michigan. The porridge house is open to help the destitute. In the face of hunger, people cut firewood, break rocks and sew in exchange for food. In some cases, women support their families through prostitution. To help the people of Detroit, mayor Hazen pingley opened pingley potato field, a community farm.

The Sherman Silver Purchase Act of 1890, which may also include the trade protectionism McKinley tariff of the same year, has been regarded as part of the cause of the panic. Because the bill was passed at the request of Western silver mine owners, who have overproduced silver, and the bill requires the U.S. Treasury to buy Silver with silver or gold backed notes. Democrats and President Cleveland have been blamed for the depression. Treasury gold reserves have also fallen to dangerous levels. This forced President Cleveland to borrow $65 million worth of gold from Wall Street bankers J.P. Morgan and the Rothschild family in England to support the gold standard.

In the general election of 1894, the Democratic Party and the people's party were defeated. The election was the biggest Republican victory ever.

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