Causes
The 1880s were a period of remarkable economic expansion in the United States, an expansion that eventually became driven by railroad speculation. Railroads were over-built, with expenses that could not be covered by revenues. New mines flooded the market with silver; its price fell. Farmers, particularly in the wheat and cotton regions, suffered from low prices.
One of the first signs of trouble was the bankruptcy of the Philadelphia and Reading Railroad, which had greatly over-extended itself, on February 23, 1893, ten days before Grover Cleveland's second inauguration. Upon becoming President, Cleveland dealt directly with the Treasury crisis, and successfully convinced Congress to repeal the Sherman Silver Purchase Act, which he felt was mainly responsible for the economic crisis.
As concern for the state of the economy worsened, people rushed to withdraw their money from banks and caused bank runs. The credit crunch rippled through the economy. A financial panic in the United Kingdom and a drop in trade in Europe caused foreign investors to sell American stocks to obtain American funds backed by gold.
Read more about this topic: Panic Of 1893