Thursday, March 13, 2008

Panic of 1893

"By the time of Cleveland's inauguration, farm foreclosures and railroad bankruptcy signaled economic trouble. On May 3rd, 1893, the stock market crashed." (America, pg. 588) This crash led to a depression, which in effect left the country with an unemployment rate of over 20 percent. The democrats, who had gained power in the House of Representatives and governorships, "bore the brunt of the responsibility for the economic crisis." (America, pg. 592) From this crisis arose the hard focus on the silver question, and the bimetal standard became a critical issue as many were calling for more money to be put in circulation. The depression and dwindling money supply also led to the gold purchase by J.P. Morgan and other private bankers to replenish the country's gold supplies. Other events spurred by the Panic of 1893 include the Pullman Strike and Coxey's Army marching on Wasbington.

1 comment:

A. Mattson said...

A good post.

It is fascinating to compare the causes of previous panics with the current economic downturn. What can we learn from the Panic of 1893 that will help us make sense of 2008?

Monetary policy is an issue today as well. Can the Fed increase the money supply to stop the recession? That's why the populists were calling for the monetization of silver.

Just today, J.P. Morgan Chase stepped in to bail out Bear Stearns, but only with federal guarantees. Private bankers acting together, just like 1893. Did it work then?