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Exploding That Panic Fallacy Again
Ralph Jacoby, Plymouth, Ind., writes: "What
I would like to know more than anything else
at this time is tho true cause of the panic of
1892 and 1893 and whether people are Justi
fied In blaming the democratic party for it. Tho
fact of the hard times following democratic
occupancy of the presidential chair is going to
deter many from voting our ticket. I am a
young voter and know very llttlo about tho
history of those times."
Tho Commoner has received several lettors
asking for similar information. Tho Commoner,
therefore, invites its readers' attention to a
general article on the panic fallacy.
The republican panic of 1907 provided a
forceful denial of the truth of tho claim com
monly made by republican leaders that demo
cratic legislation and hard times decreased
tariffs and panics are found coexisting
throughout our history.
The panic of 1907 has seriously embarrassed
republican orators. But the truth is that every
panic since tho Civil war originated under re
publican rule and developed under republican
The great panic which gave "Black Friday"
to history occurred during the month of Sep
tember, 1869, when tho republican party was
The great panic marked by the failure of
Jay Cooke & Co., occurred in September, 1873.
Then tho republican party was In power, and
eleven months prior to the beginning of that
panic that party had been re-elected to power.
The "panic of 1893" began long prior to that
year and, indeed, long prior to the presidential
election of 1892; and It Is a fact, although
republican orators and republican organs try to
forget it, that the so-called panic of 1893 began
and played its greatest havoc under that famous
tariff law known as tho. McKinley bill.
It may be well for Commoner readers to keep
readily at hand some of the facts and .figures
relating to this question.
The republican party was restored to power
March 4, 1889.
The McKlnley tariff bill became a law October
6, 1890, and remained in effect until August
The Wilson tariff law, enacted by a democ
ratic congress, went into effect August 27, 1894.
If any one will take the trouble to examine
the republican campaign textbook for 1904,
pages 125, 120 and 127, he will find considerable
space devoted to a statement of business dis
asters from July 18, 1893, until November 13,
1894. The republican managers expected their
readers to remember that the Cleveland ad
ministration was inaugurated March 4, 1893,
and that all these disasters occurred under
democratic administration; but they expected
their readers to forget that the republican tariff
law was in force up to August 27, 1894, or
covering more than twelve months of the sixteen
months' period of business disasters" as described
by the republican text-book.
In their references to the panic of 1893 re
publican orators and organs habitually over
look the date when tho McKinley law ceased
and the Wilson law wont into effect. But when
In their tariff discussions they are required to
face the fact thafthat panic played its greatest
havoc during tho life of tho republican tariff
law they answer that it was the anticipation of
tariff legislation growing out of democratic vic
tory in 1892 which brought on these business
disasters. For this reason In their list of busi
ness disasters they place July 18, 1893, as
marking the beginning of that great paiic.
Let it bo remembered that the McKinley
tariff bill became a law October 6, 1890, and
that the first indications of the so-called panic
of 1893-4 were given November 11, 1890, a
little more than thirty days after the McKinley
tariff bill became a law. From that date the
The Harrison administration was inaugurated
March 4, 1889, and when the first indications of
this panic were given, President Harrison had
not exhausted the half of the term for which he
was elected. It is admitted by everyone familiar
with the facts that President Harrison's adminis
tration had plates prepared for the bonds and
Mr. Harrison's secretary of the treasury made a
visit to New York for the purpose of negotiating
the bond deal. He was wired by Mr. Harrison
to return to Washington. Mr. Harrison said
that he had concluded not have any bond issues
under his administration and in order to" avoid
the stigma tho Harrison administration warded
oft the bond Issue and unloadod it on tho incom
ing Cleveland administration.
It may not bo out of place to point out that
when the democratic administration surrendered
the reins of government, March 4, 1889, thero
was in the federal treasury tho largest surplus
in history. Whon tho republican party wont
out of power, March 4, 1893, thero was a large
deficit and tho incoming administration was
finally persuaded to make tho bond Issues which
its republican predecessor had at one time
thought to bo nocessary, but had skillfully
Tho claim that tho business disasters of the
period referred to were due to tho popular foar
of tariff legislation to bo enacted by democrats
is, as has been said, met by tho fact that this
panic began two years prior to tho presidential
election day of 1892. Tho following will servo
as reminders on this point:
November 11, 1890, tho reports showed
financial distress in Now York. Tho Now York
Clearing House association voted its certificates
to banks in need of assistance.
Tho Boston Clearing Houbo association did
tho samo thing Novembor 17. Barker Bros. &
Co., big bankers in Philadelphia, suspended at
that time, with liabilities placed at $5,000,000.
Novembor 19, 1890, thero was a run on tho
Citizens' Saving Bank of New York, and a re
ceiver was appointed for the North River Bank.
November 22, 1890, the United Rolling Stock
company of Chicago assigned, with liabilities
November 28, 1890, B. K. Jamieson & Co.,
the Philadelphia bankers, failed, with liabilities
December 6, 1890, tho Oliver Iron and Steel
Mills of Pittsburgh shut down, discharging
2,000 employes. On the same dato tho cotton
firm of Myer & Co., of New Orleans, failed, with
liabilities at $2,000,000.
January 3, 1891, tho Scottdalo Rolling Mills
and Plko Works and the Charlotte Furnace and
Coke Works in Pennsylvania closed, throwing
10,D00 employes out of work.
January 18, 1891, tho American National
Bank at Kansas City suspended, with liabilities
May 8, 1891, tho Spring Garden National
Bank at Philadelphia closed its doors,
and the Pennsylvania Safe Deposit and Trust
company made an assignment.
Tho Homestead strike and other strikes dur
ing 1892, and prior to election day, aro well
romembered by the people.
Tho record discloses that the first indications
of tho so-called panic of 1893 were given No
vember 11, 1890, a little more than thirty days
after the McKinley tariff bill became a law.
From that date tho panic raged, and while its
effects were felt for several years it reached
its worst stage in 1893, and during tho early
days of 1894, during all of which time the re
publican tariff law was in effect.
The late Thomas B. Reed, after his retire
ment from tho speakership, delivered a speech
in New York in which he said: "Another thing
which led this whole country into tho error of
1892 was tho history of the last thirty years.
During all that time wo have been prosperous."
The New York World called this "cold, colossal
and impudent falsification of history," and said
that it must have astonished thoso among his
hearers whose memories were moro than one
year long. Then this New York paper gave Mr.
Reed these Interesting reminders:
"The panic of 1873, under republican rule and
twelve years of high tariff taxation, was tho
most disastrous and the period of business de
pression for five years thereafter was the most
severe of any in history. It was officially esti
mated that 3,000,000 worklngmen were out of
employment. Bankruptcy was widespread. A
tidal wave of ruin and distress swept over the
"From 1881 to 188G, under two republican
tariffs, there wore labor strikes involving 22,304
establishments and 1,323,203 workmen. Of
these strikes 9,439 were for an Increase of
wages and 4,344 against reduction of wages.
"Mr. Reed's party tinkered the tariff in 1883.
In that year there were 9,184 business failures,
involving $172,874,000. In 1884 thero were
10,968 failures, involving $226,343,000. In the
next year, still under the republican tariff and
currency laws, there was a general business de
pression. More than 1,000,000 mon woro out of
"In 1890 tho McKinley bill was pasaod, and
there woro 10,673 falluros In that yoar, and
12,394 tho next, with liabilities in each year
amounting to nearly $200,000,000. Tho tariff
was raised to nearly fifty por cent, but wages
cither stood still or declined, whllo the prices
of necessaries advanced. Tho protected manu
facturers kept all their 'bonus' as usual.
"Tramps and trusts, tho twin products of a
monopolists tariff woro practically unknown In
this country until wo had endured uninterrupted
republican rulo for a dozen years.
"The worst labor troubles, tho bloodiest riots,
tho most destructive strlkos, tho most brutal
lockouts ever known In any country havo
occurred hero under tho high tariffs, bought,
mado and paid for -by tho contributors of tho
republican campaign funds."
MR. HARRISON PREPARED THE BOND
It Is a fact that during tho closing hours of
tho Harrison administration in 1893, tho re
publican secrotary of tho treasury caused to bo
prepared the platos for a bond issue. This Issue
was by the hardest kind of effort postponed, and
it was finally mado by tho Cleveland adminis
tration. Sometimes republican politicians deny
that tho Harrison administration contemplated
a bond issuo, but thoy do this only when thoro
Is no ono present propared to show tho truth.
Tho records at Washington show that Secrotary
of tho Treasury Charles Foster Issued an order
February 20, 1893, directing tho chief Of the
United States bureau of engraving and printing
to preparo plates for thoso bonds. The story is
told very briefly In "Thirty Years of American
FInanco," a volumo wrltton by Alexander Dana
Noyos, financial editor of tho New York Even
ing Post. This volume may be found In almost
any public library.
On pago 183 tho following appears:
"By tho closo of January, 1893, the treasury's
gold reserve had fallon to a figure barely olght
millions over tho legal minimum. With Febru
ary's early withdrawals ovon larger, Secretary
Foster so far lost hope of warding off tho crisis
that ho gavo ordors to proparo tho engraved
plates for a bond issuo under the resumption act.
As a last resort, however, ho bethought himself
of Secretary Manning's gold borrowing opera
tion of 1885. In February Mr. Foster camo In
person to Now York to urge tho banks to give
up gold voluntarily In exchango for tho treas
ury's legal tender surplus. (See New York
Financial Chronicle, February 11 and February
18, 1893.) From a strict commercial point of
view, thero was good reason why tho banks
should not make any such exchango. But tho
plea that a panic must at all hazards be averted,
combined with tho argument of patriotic sup
port of the government, at length prevailed.
Tho New York banks turned over to tho treas
ury, In exchange for notes, six to eight million
dollars in gold. (See Now York Tribune,
February 9, 10 and 11, 1893; Now York Finan
cial Chronicle, February 11, 1893.)"
HARRISON BOND PLATE ORDER
When any ono denies that plates for bonds
wero ordered under the Harrison administra
tion, show him this letter written by Lyman J.
Gago, when he was secretary of the treasury,, to
Representative Gaines of Tennessee:
"Treasury Department, Office of the Secre
tary, Washington, D. C, March 25, 1897. Sir:
I havo tho honor to acknowledge tho receipt of
your letter of this date, requesting the original
letter, or a certified copy thereof, written by Mr.
Secretary Foster, February 20, 1893, addressed
to tho chief of tho bureau of engraving and
printing, authorizing tho preparation of certain
plates. In compliance with said request I sub
mit below a correct copy of the letter in ques
tion, also a copy of the text of the proposed
Copy of letter.
"Treasury Department, Office of the Secretary,
Washington, D. C, February 20, 1893. Sir:
You are hereby authorized and directed to pre
pare designs for the 3 per cent bonds provided
in a senate amendment to tho sundry civil bill
now pending. The denominations which should
first receive attention are 100s and 1,000s of
tho coupon bonds, and 100s, 1,000s and 10,000s
of the registered bonds. This authority is given
In advance of the enactment, in view of press
ing contingencies, and you are directed to hasten