Narratives Trigger the 1893 Bank Runs
The 1893–99 depression in the United States started quite suddenly in the spring
of 1893 with a string of bank runs. Depositors rushed to pull their money out of
banks, thereby fueling the bank failures that they feared. But what triggered the
bank run?
One trigger was a rumor that began on April 17, 1893: the US subtreasury
offices would no longer redeem Treasury notes in gold but would provide only
silver, in amounts worth about half as much as the notes. There was no basis for
this rumor except the news that Treasury reserves were falling. Newspapers had
made big news out of the fact that Treasury reserves had fallen below $100
million, just because it was a round number. But the run was on the commercial
banks, not on the Treasury. Alexander Dana Noyes, later the financial editor of
the New York Times, commented in 1898:
Panic is in its nature unreasoning; therefore, although the financial fright of
1893 arose from fear of depreciation of the legal tenders [federal-
government-issued paper money], the first act of frightened bank depositors
was to withdraw these very legal tenders from their banks.14
Noyes believed that depositors withdrew their money from commercial
banks, which had nothing to do with redeeming legal tenders with gold, because
the paper money was “the only form of money they were in the habit of using”
and because withdrawing from the local bank is what people did in the popular
narratives about past times of financial distress. In other words, they were
playing by a script that they had seen or heard about many times before. They
were used to going to the commercial banks but not to the subtreasury offices
where they could demand gold in exchange for notes.15 So the initial panic of
spring 1893 seems to have been the result of the high contagion of stories of
bank failures. But this story is not enough to explain the extended depression of
1893 to 1899.
In reading accounts of the gold standard in the 1890s, we see an almost
religious attachment to the idea among a large fraction of the US population,
largely easterners and the educated. The support for the gold standard was based
on the idea that contracts were written with the gold standard as an assumption.
Therefore, monkeying with the gold standard could amount to reneging on a

contract.
Beyond its business significance, gold has an enormous spiritual significance
that economists usually do not consider. Wedding rings are made from it. The
word gold appears 419 times in the King James version of the Bible. Paintings of
saints depict a gold-colored nimbus radiating from their heads. In Christian
tradition, these saints were often among the lowly and despised in society, but
the nimbus reveals their true worth. In his 1860 poem to his readers “To You,
Whoever You Are,” Walt Whitman wanted to show that he values every one of
his readers:
But I paint myriads of heads, but paint no head without its nimbus of gold-
colored light
From my hand, from the brain of every man and woman it streams,
effulgently flowing forever.
The narrative in favor of the gold standard took on strong principle-based
symbolic dimensions. In 1874, amidst controversy over the Coinage Act, which
demonetized silver and put the United States squarely on a gold standard, US
senator John P. Jones of Nevada stated (as recorded in The Congressional
Globe):
Gold is the articulation of commerce. It is the most potent agent of
civilization. It is gold that has lifted the nation from barbarism. It has done
more to organize society, to promote industry and insure its rewards, to
inspire progress, to encourage science and the arts than gunpowder, steam or
electricity.16
In the same debate in 1874, Senator William Morris Stewart, also of Nevada, a
gold- and silver-mining state, said:
You may fix up all the propositions you please, but the real thing is when you
come down to it finally, I don’t care how much you discuss it or how many
resolutions you pass, they don’t make any difference; you must come to the
same conclusion that other people have, that gold is recognized as the
universal standard of value.17
These statements, which had political goals, oversimplify history. Indeed,
there has not been a gold standard through much of history. The “standard

model”—a single gold coin representing legal tender, subsidiary coinage of base
metal, and paper money with value based on the government’s unqualified
willingness to exchange it for legal tender—first came about during the
eighteenth century in the United Kingdom. The standard model was not fully
adopted in the United States until 1879.18 Talk about the gold standard began in
1874, but it grew in a nice epidemic curve.