July 13 , 2014
The Panic of 1893
The Sandburg family knew hard times before the Panic of 1893 came into being. A quit claim deed on a property August Sandburg had purchased, forced him to pay for a previous owner's mortgage.
As a result, Carl Sandburg was unable to attend high school. He kept his newspaper delivery route and performed odd jobs wherever he could find them. His older sister, Mary, had better grades and was allowed to go to high school. She could become a teacher when she graduated in 1894.
The Philadelphia and Reading Railroad was forced into bankruptcy on February 23, 1893. It had debts of $125 million (equal to just over $3 billion in today's money). It was a major carrier on the East Coast. Many businesses and industries which depended on the railroad, went into receivership, as well as the banks which had given loans to it. Railroads, such as the Union Pacific, Northern Pacific and Santa Fe had built new tracks across the western states with borrowed money. They didn't yet have enough traffic to pay for the construction. They had to be reorganized along with about seventy other carriers.
In addition, an 1890 law, the Sherman Silver Purchase Act, passed by Congress forced the government to purchase all silver mined in the country. The market was soon flooded with silver and the price began to fall. Paper money could be redeemed for silver or gold. The paper money was then put back into circulation to be redeemed again. The gold reserves of the nation began to shrink. Europeans who had invested in American companies and the New York stock market began to pull their money out. The stock market collapsed June 27, 1893.
This series of shocks undermined the public's confidence in banks. Many people rushed to local banks to withdraw their money. Smaller banks which kept funds in larger banks were unable to replenish their funds. As a result, more than 575 banks failed or temporarily suspended operations.
Politicians of the time believed that cycles in business and banking were natural events and shouldn't be tampered with. Little was done by the government to correct the situation. President Grover Cleveland did convince Congress to end the silver act.
More than four million people lost their jobs and 15,000 companies failed. The economic depression continued for the next four years.
In Galesburg, the Chicago, Burlington & Quincy Railroad cut the hours of employees by almost half. The whistle which called workers to their jobs blew only in the morning as afternoon hours had been suspended.
During this time the Sandburg children ate lard sprinkled with salt on their bread. They spread molasses on the bread when there was no lard. The neighbors went together and purchased a hog from John Kranz, a cousin of Clara Sandburg. It was butchered and the meat and lard shared. A bumper crop of potatoes and other root vegetables in the family garden helped them get through the winter. Siftings of coal, called slack, was put into the kitchen stove for cooking and heating. The burning of the slack had to be watched carefully as it made large clinkers. If they became too large, the clinkers were difficult to get out of the stove.
August Sandburg struggled to support his family. He had little interest in the events taking place on the national level. He heard about them, but his personal financial problems were his main concern. Thriftily, he had always prepared for a rainy day. Now it had come.