Why were there so many “panics” during the gold standard?

Nobel-prize-winning economist Paul Krugman wrote,

Under the gold standard, America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. Oh, wait….returning to the gold standard is an almost comically (and cosmically) bad idea.

There were different stages of the gold standard (currency backed by gold), but economists consider the classical gold standard era from 1880–1914 to be its purest form because it wasn’t diluted like it was during the Civil War or later with the creation of the Fed.

For example, Fed Chairman Ben Bernanke blamed the Fed for the Great Depression (1930, 1931, 1932, 1933).

So let’s focus on the “financial panics” where everyone agrees the US was still on a true gold standard: 1884, 1890, 1893, 1907.

But before you panic, let’s define a panic…

A financial panic is a sudden, drastic, widespread economic collapse. All at once, many people become convinced their money or investments are at risk and rush to the institutions holding their assets.