The Silver Crash of 1893
The United States, since the days of George Washington, had based its system on “Bimetallism” — the use of both gold and silver in legal coinage. The Gold Rush to California in 1849 resulted in such large quantities of gold found that the value of gold became less. Previous to this, gold was 16 times more valuable — 16x more silver in a silver dollar than gold in a gold dollar.
People began melting down silver dollars and using the silver for other purpose, such as jewelry and in 1873, Congress terminated the making of silver coins and placed the country on a “Gold Standard” after-wards.
Men where making fortunes in mining silver, railroading and banking industries — over-extended investments and sometimes sheer extravagance ruled the day.
The effects of repealing the “Sherman Silver Purchase Act” in 1893 left deep scars in the economy — especially in Colorado for many years to come as the “Silver Crash” wiped many investors out.
The great silver strikes of the 1880’s in the San Juan mountains and in places like Leadville made silver prices fall even further, but the mining of silver continued to be a profitable venture.
In 1890, President Benjamin Harrison agreed to purchase $4.5 million ounces of silver a month. The “Sherman Silver Purchase Act” was passed by Congress and the price of silver shot up from .84 cents to $1.50 an ounce, but it’s market value would drop from this high.
This created fear among eastern republican business men and foreign investors that the gold dollar would be replaced by a less valuable silver dollar — stores and banks began to go out of business and gold became a commodity to be hoarded.
The pay for mine workers continued to decrease and the hours of work became longer and the unrest of miners resulted in strikes that impacted the economy of the state as well as the mining industry.
1893 spelled the end of an era of silver by the repeal of the “Sherman Silver Act” — almost immediately mines and smelters began to shut down and Silver prices dropped from .83 cents to .62 cents an ounce in one 4 day period — Banks closed their doors and real estate values plummeted.
The repel of the “Silver Act” was felt around the country but not as severely as it was in Colorado as Colorado was producing almost 60% of the nations silver. Thousands of out-of-work miners flooded into Denver swelling its ranks of the unemployed.
Denver was in an economic crisis, and could not continue taking care of the jobless. Railroad offered reduced, and in some cases free, fares out of Denver. Denver’s population in 1890 dropped from 106,000 to 90,000 in 1895.
State expenses were soaring with hard winters, agricultural distress in the grasslands and the over expansion of industry.
One bright spot in the economy was the large gold strike in 1891 at Cripple Creek, later called the “World’s Greatest Gold Camp“.
The passage of the “Gold Standard Act” in 1900 resulted in a further price drop of silver and the few remaining silver camps in the United States were given a death blow — so ended an era.
Tags: 1893, Banking, Benjamin Harrison, Bimetallism, California, Colorado, Cripple Creek, Depression, Economic Crisis, George Washington, Gold, Gold Rush, Gold Standard, Gold Standard Act, Leadville, Railroads, Sherman Silver Act, Sherman Silver Purchase Act, Silver, Silver Mining, World's Greatest Gold Camp