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Crisis Chronicles: Gold, Deflation, and the Panic of 1893

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Abstract

In the late 1800s, a surge in silver production made a shift toward a monetary standard based on gold and silver rather than gold alone increasingly attractive to debtors seeking relief through higher prices. The U.S. government made a tentative step in this direction with the Sherman Silver Purchase Act, an 1890 law requiring the Treasury to significantly increase its purchases of silver. Concern about the United States abandoning the gold standard, however, drove up the demand for gold, which drained the Treasury’s holdings and created strains on the financial system’s liquidity. News in April 1893 that the government was running low on gold was followed by the Panic in May and a severe depression involving widespread commercial and bank failures.

Suggested Citation

  • Thomas Klitgaard & James Narron, 2016. "Crisis Chronicles: Gold, Deflation, and the Panic of 1893," Liberty Street Economics 20160513, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87128
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    More about this item

    Keywords

    panic; 1893; gold; silver; bimetallism; Bryan Friedman; monetary policy standard;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • N2 - Economic History - - Financial Markets and Institutions

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