America’s Gilded Age brought untold fortunes to the heads of the emerging industrial era and an expansion in farming and trade. This would carry the economy to a new high every decade until 1890.
The Sherman Silver Purchase Act of 1890 required the U.S. government to buy millions of ounces of silver above what was required by the 1878 Bland–Allison Act (driving up the price of silver and pleasing silver miners). People attempted to redeem silver notes for gold.
As demand for silver and silver notes fell, the price and value of silver dropped. Holders worried about a loss of face value of bonds, and many became worthless.
One of the first clear signs of trouble came on February 20, 1893, twelve days before the inauguration of U.S. President Grover Cleveland, with the appointment of receivers for the Philadelphia and Reading Railroad, which had just declared bankruptcy.
The 1890 wheat crop failure and a coup in Buenos Aires ended further investments and the uncertainty spread into a full-blown panic.
By the end of the year, 600 banks closed and several big railroads were in receivership. Another 15,000 businesses went bankrupt amid 20 percent unemployment. It was the worst economic crisis in U.S. history up to that time and it deeply affected every sector of the economy.
The economy that emerged from the depression differed profoundly from that of 1893. New industries were rapidly moving to ascendancy, and manufactures were coming to replace farm produce as the staple products and exports of the country. The depression revealed the future of an emerging industrial-urban economy that predicted great changes for the United States.