|The Depression of the Mid-1890s
|Digital History ID 3125|
The Gilded Age ended with the financial panic of 1893. A conflict
over the value of the nation's currency led lenders to call in
their loans. A weakening American currency frightened foreign investors,
helping to start a four-year depression.
One way to limit the supply of money is to tie the dollar to
gold. This was the practice in the Gilded Age. The government
pledged to convert each dollar into a fixed amount of gold. Since
there was not much gold available, federal government could not
print many dollars. This galled farmers. Partly because of overproduction,
prices for farm crops kept falling. Farmers needed low-interest
credit to keep going, and because of the gold standard, they could
not get it. Nor could they raise prices. Thousands of farmers
lost their land.
Their solution was silver, which was much more abundant than
gold. Under pressure from the Populists, Congress in 1890 authorized
the Treasury to issue dollars backed by silver as well as gold.
This greatly increased the money supply and made credit available
at lower rates. But the dollar lost value. The currency was in
effect devalued, particularly in the eyes of lenders in Britain,
a country on a pure gold standard. Nervous already from various
bankruptcies, they called in their dollar loans and converted
them into gold.
President Grover Cleveland got the silver act repealed within
months. But this did not lessen the concern that the dollar would
be devalued. When gold reserves fell below $100 million in April
1893, the panic was on.
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