- Whaples on Wicker, 'The Banking Panics of the Great Depression'
- Bank Panic of Definition
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- Causes of the Great Depression
His findings challenge many of the commonly held assumptions about the events of and , for example the belief that the increase in the discount rate in October initiated a wave of bank suspensions and hoarding. This meticulous account will be of wide interest to students of the Great Depression, monetary and financial historians, financial economists and macroeconomists.
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Whaples on Wicker, 'The Banking Panics of the Great Depression'
Bank panics usually involved bank runs that spread from bank to bank throughout the economy. Bank panics, as the name suggests, were crises in the banking industry in the s and early s usually created when the general public had serious questions about the solvency of banks and the safety of their deposits. Bank panics were often sparked by bank runs in which an usually large number of depositors sought to withdraw funds at the same time from their banks. The run on a single bank, and its subsequent failure, often created the uncertainty and distrust of the banking system that led to an economy-wide bank panic.
While all too common a century ago, bank panics have largely vanished from the modern economic landscape thanks to government deposit insurance Federal Deposit Insurance Corporation. Because such insurance guarantees bank deposits, customers are less concerned about losing their deposits and thus likely to panic if problems emerge.
A Panic Contraction In the s and early s business-cycle contraction s were, more often that not, caused by economy-wide bank panics.
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For this reason economic downturns were more commonly termed bank panics than recession s or contractions. Bank panics triggered economic downturns by reducing the amount of money in circulation. Before the advent of deposit insurance, the run on a bank was likely to deplete the bank's available reserves, causing it to fail and making any remaining deposits worthless. When such bank runs spread throughout the economy as bank panics, a significant amount of the economy's bank deposits literally vanished.
Bank Panic of Definition
These lost deposits reduced the economy's stockpile of financial wealth and, more importantly, the supply of available money. With less money in circulation, less output was purchased, meaning production , employment , and income all declined. This was, and continues to be, one sure recipe for a business-cycle contraction. Some Notable Panics Bank panics were a common occurrence in the U.
The first notable bank panic took place in after the war of in large part due to tight lending policies by the Second Bank of the United States.
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The last of note was in , during the depths of the Great Depression , which then prompted the formation of the Federal Deposit Insurance Corporation. Other major panics that marked the U. The bank panic of was the result of European speculation in the construction of the U.
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When the speculation investment bubble burst, the panic began. These events included the major, such as openings, closings, reopenings, receiverships, and consolidations, and the minor, such as changes in Federal Reserve membership, capital stock, charter type, and even street address.
The forms also included financial information for each bank on the date of each transaction. This project will computerize and analyze the data. The potential broader impacts of this project spans four broad areas. First, the project will help to illuminate the causes and consequences of the Great Depression. Understanding is a necessary step in efforts to prevent similarly severe contractions from occurring in the future.
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Second, the project will help scholars to understand financial systems, banking panics, and the links between commercial banking and the broader economy. Third, the project addresses a wide array of issues important for the regulation of banks. Fourth, the educational component of my project contains a mentoring and outreach program with a proven track record of encouraging minorities and women to pursue careers in academics, law, and government.
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Causes of the Great Depression
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Richardson, G. A Comment on? Gary RIchardson. Patrick Van Horn. Alejandro Komai.