Bank failures caused the Depression or the Depression

caused banks to fail?

By Mongi Bellili

Preview

• The causes of bank failures.• The manifestations of the failure.• The effects of the banking system collapse.

The causes of bank failures1. The market crash.2. The people

Consumerism was built on credit.In 1929, 6 billions of goods are bought

on credit. 80% of Americans have no savings.

Businesses could not repay their loans.depositors attempted to withdraw their

deposits en masse.

The causes of bank failures3. The government

Effects of money supply, and central banking decisions.

No regulations and no insurance.The federal reserve bank gave little help.Ineffective use of the news.

4. The bankers:Involvement in the stock market.No backup money.

The causes of bank failures

5. Complexity:The liquidation of debt could not keep

up with the fall of prices.

The liquidation increased the value of each dollar owed, relative to the value of declining assets.

The trigger event

The manifestations of the failure1. The number of failed banks:

Throughout the 1930s over 9,000 banks failed.Surviving banks stopped providing loans.

The manifestations of the failure1. The amount of money lost:

By April 1933, around $7 billion in deposits had been frozen in failed banks.

2. The bank owners: Bankruptcy, debt and suicide

The effects of the failure

1. People:Panicked and stayed away from banks.Loss of confidence led to a reduction in

consumption.Everyday, 1000 of homes are repossessed.

The effects of the failure2. Economy:

Debt deflation.the demand dropped.Unemployment.

Contents

• The causes of bank failures.• The manifestations of the failure.• The effects of the banking system collapse.

Conclusion• A vicious cycle developed.

• This self-aggravating process turned a 1930 recession into a 1933 great depression.