Financial Panic of 1893

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  • Financial Panic of 1893
    • intro
      • Serious economic depression in US, was the worst crisis to hit the nation in its history to that point.
      • sudden downturns in the economy led to hard conditions for farmers, small businesses and workers
    • Causes of the financial panic of 1893
      • Railway over building and shaky railroad financing which set of a series of bank failures
        • many companies tried to take over many others, seriously endangering their own stability in order to do so.
        • Many mines also opened (with railway links) and their products mainly silver flooded the market
          • Concerns of the economic state worsened, people rushed and cause bank runs.
            • Meanwhile Smart European investors only took payment in gold weakening the US gold reserve which further dropped to US dollar's value.
              • People attempted to redeem silver notes for gold; ultimately the statutory limit for min. amount of gold in federal reserves was reached and US notes could no longer be redeem for gold.
                • As demand for silver and silver notes fell its value dropped. Holders worried about a loss of face value of bonds and many became worthless
                • Sharp drop in  gold reserves  led to pressure being out on the government to bring in a high "Protective Tariff'
                  • 'P.T' - a protective tariffs to be imposed on imported goods making them more expensive to buy, thereby protecting the home market by reducing competition
      • Gold and silver was used as a peg for the US Dollar values
        • As demand for silver and silver notes fell its value dropped. Holders worried about a loss of face value of bonds and many became worthless
    • Bankruptcy of many companies, over 15,000 companies and 500 banks failed
    • 17-19% of workforce was unemployed in peak of the panic
    • Unemployment combined with loss of life savings due to bank failures meant the once secure middle-class could no longer meet their mortgage obligations
      • Many walked away from recently built houses
    • farm distress was great because of the falling price of export crops e.g. wheat and cotton
    • reactions
      • Coxley's army- highly publicised march of unemployed men from Ohio and Pennsylvania to washington to demand relief
      • A severe wave of strikes took place in 1894
        • E.g. the midwestern bituminous coal strike of the spring 1894 which led to violence in Ohio
        • The Pullman strike which shut down most of the nations transportation system in July 1894
    • The US economy began to recover in 1896 after the election of Republican President McKinley, confidence was restored.
    • populist and progressives quick to blame big businesses and campaign for 'trust-busting' by the federal govt. to restrict the power of rail oads and big industrial conglomerates.
      • protests rarely achieved success, big business kept its economical and political power, shown during the 1896 election which was described as the 'struggle of the robbers against the robbed'
      • big business contributed to the political dominance of the Republicans until 1912.
      • Many mass newspapers promoted ideas of the rich and helped ensure that efforts to bring about reforms against the interests of the business men were frustrated

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