1. Bank failures caused the
Depression or the Depression
caused banks to fail?
By Mongi Bellili
2. Preview
• The causes of bank failures.
• The manifestations of the failure.
• The effects of the banking system collapse.
3. The causes of bank failures
1. 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.
4. The causes of bank failures
3. 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.
5. 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.
7. The manifestations of the failure
1. The number of failed banks:
Throughout the 1930s over 9,000 banks failed.
Surviving banks stopped providing loans.
8. The manifestations of the failure
1. 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
9. 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.
10. The effects of the failure
2. Economy:
Debt deflation.
the demand dropped.
Unemployment.
11. Contents
• The causes of bank failures.
• The manifestations of the failure.
• The effects of the banking system collapse.
12. Conclusion
• A vicious cycle developed.
• This self-aggravating process turned a 1930
recession into a 1933 great depression.
