The economic collapse of the Philadelphia and Reading Railroads was the first step toward the Panic of 1893. A growing depression in Europe resulted in British investors selling their American investments and redeeming them for gold. This fostered a growing American gold loss, creating a panic. There was a run on the banks and over 500 were forced to close

By May 15, stock prices reached an all-time low. Many major firms; such as the Union-Pacific, Northern-Pacific and Santa Fe railroads; were forced to declare bankruptcy. Unemployment steadily grew, rising from 1 million in August 1893 to 2 million by January 1894 By the middle of the year, the figure had reached 3 million.

The government had no plan to end the economic panic. President Cleveland blamed the Sherman Silver Act and Congress repealed it, but that had little impact. Most relief for those without jobs was provided by local voluntary organizations, who were quite overwhelmed by the need.