Panic of 1893: A Rope Company's Collapse, Pullman and Morgan's Gold

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The Panic of 1893 grew out of a strained Gilded Age economy: the McKinley Tariff of 1890 raised import taxes to as much as 50%, and the 1890 Barings crisis, set off by Argentine defaults after a wheat failure and the Revolution of the Park, pushed British investors to sell American railroad securities and ship the gold home. Railroads added 100,000 miles of track between 1878 and 1896 on borrowed money, and the Philadelphia and Reading Railroad went into receivership on February 20, 1893, 12 days before Grover Cleveland's inauguration. Cleveland blamed the Sherman Silver Purchase Act and pushed its repeal, pitting gold-standard Eastern bankers against farmers and Western miners who wanted free silver.

On May 5, 1893, stocks plunged 24% as the National Cordage Company, which had used its own stock as collateral for loans to corner imported hemp, collapsed when banks called the loans. Over 15,000 companies and 500 banks failed, the Northern Pacific, Union Pacific and Santa Fe railroads collapsed, and unemployment reached 43% in Michigan. Cleveland sent the Army to enforce an injunction that broke the 1894 Pullman strike, Eugene V. Debs went to federal prison, and with Treasury gold down to $42 million in February 1895, Cleveland borrowed $65 million in gold from J.P. Morgan and the Rothschilds.

• Within a year, a quarter of all US rail mileage was in receivership.
• Detroit mayor Hazen S. Pingree's Potato Patch Plan turned vacant city lots into food plots.
• George Pullman cut wages about 30% without lowering rents in his company town.
• The Populist Party's 1892 presidential candidate won over 8% of the popular vote.
• The Morgan syndicate warned New York firms not to ship gold abroad, lifting reserves back above the $100 million legal minimum.