People wonder why we didn't go into another great depression... well here it is. The economic straights we would be in would have been so much worse. The depression from the 30s was caused by the same industry that caused our recent economic melt down. Banking, and to a certain extent is not at times concerned with the long term affects of their practices. To deny that is to intentionally overlook this same pattern throughout recorded history. Our economic recovery will happen, and in time an economic collapse will happen again. The important thing to remember is that at the end of the day the vast majority of people want the same things; we want our family, friends, and selves to be happy healthy safe and free!
Are you saying "banking" was the cause of The Great Depression?
ReplyDeleteIn the 1920s, Nebraska and the nation as a whole had a lot of banks. At the beginning of the 20s, Nebraska had 1.3 million people and there was one bank for every 1,000 people. Every small town had a bank or two struggling to take in deposits and loan out money to farmers and businesses.
ReplyDeleteAs the economic depression deepened in the early 30s, and as farmers had less and less money to spend in town, banks began to fail at alarming rates. During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. It's estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures.
Gresham, Nebraska, had two banks – one too many for that small town. The bank in danger of failure merged with the other. Gresham resident Walter Schmitt (right) remembers the deadly consequences for the owner of the failed bank.
When a new president, Franklin Delano Roosevelt was inaugurated in March 1933, banks in all 48 states had either closed or had placed restrictions on how much money depositors could withdraw. FDR's first act as President was to declare a national "bank holiday" – closing the banks for a three-day cooling off period. The most memorable line from the President's speech was directed to the bank crisis – "The only thing we have to fear is fear itself."
Some economists and historians have argued that the bank crisis caused the Great Depression. But others have looked at fundamental economic factors and regional histories and argued that banks failed as a result of the economic collapse.
Whether the fear of bank failures caused the Depression or the Depression caused banks to fail, the result was the same for people who had their life savings in the banks – they lost their money. At the beginning of the 30s, there was no such thing as deposit insurance. If a bank failed, you lost the money you had in the bank. Carla Due's family experienced the fear that a bank failure would wipe out savings.
http://www.livinghistoryfarm.org/farminginthe30s/money_08.html
so in part yes banks had something to do with the great depression ...The lack of regulation, and new ways of making a buck by passing the loss of to others played a major role as well as not having FDIC insurance.
It just seems funny to take a part of a gigantic complex whole (that no two economists have found completely common ground on) and blame the entire thing on that one part. I have always feared reductionism in historical matters.
ReplyDeleteI didn't blame the entire thing on banks, but a HUGE part of the depression was caused directly by under regulated wall street and larg busines practices...peoples holdings became worthless and ...CRASH.
ReplyDeleteWhat would you say the primary cause? Greed would be my word...
Read my words from above : So in part yes the banks had something to do with the great depression...
I answered your question and you changed my ststment into something it wasnt, nowhere did I offer a blanket statment about the only cause of the depression... I just showed a causal link between the two events based on wall street behavior... or is social security and union action the cause of the latest crash as some conservative revisionists would have you believe? Was the depression caused by poor people as those same people would have you believe?
I would also say "it was caused by poor people" would be a great reduction.
DeleteI don't know, Wander, it just seems like there were so many things wrong on so many levels. It was (overused horrible phrase coming up *Warning warning*!!!) kind of a perfect storm really. (*sigh* Can't believe I just typed that :-p) I just can't even chalk up even, "under regulated wall street and large business practices" as a huge part of it.
Greed was a problem. War reparations were a problem. Simply not having a back up plan for banks was a problem (under regulation here). Over-borrowing was a problem (this one might be where the poor people come in). Some argue that under-spending was a problem. I've just seen this as sort of an open ended question with a lot of inability to isolate one factor as even 'the biggest factor.' I could be wrong. I didn't do any economic history in my undergrad.
As far as it goes I do agree that is is a complicated issue. the problem is that the crash in 29 created the need to regulate and insulate the banking system...and business for that matter...over the last thirty years those safeguards (regulations)have been eroded by a constant campaign that government is evil...I think that the repeal of Slass-Steigll set up the stage for a 29 size melt down...the safety-nets put in place from 33 to 35 kept our country stable for 40 years...look at the volatility in the market place over the last thirty years, also the change in the way business's are operated (not all) and it resembles what lead up to the melt down in 29.
DeleteThat is why I can feel comfortable with saying that if the financial industry, that includes business, had still had those safeguards that Reagan, bush, Clinton, and Bush allowed to be removed, actually actively pushed for them being removed, we wouldn't be where we are financially.
Strong working class = strong economy=less debt=more revenue (long term)=less volatile market=upward mobility=less inflation...that is seven wins
I studied the patterns...and the trends don't lie when you allow Greed free reign it destroys...it just cant help itself...:-)
Ben the 4th sentence of the first paragraph needs to be edited...it should say 'and to a certain extent business'
ReplyDeleteThanks
Oh, hear hear!!
ReplyDeletePearl
I'm glad to see a more complex statement here, Wander, about the crash. In the end we all want the same things, but do all of us want them for all? That's what I am left questioning. I am afraid the answer is no.
ReplyDeleteDamn word verifier ;), I can't break the code! I promise, I am not a robot.
hahahaha!
ReplyDeleteAnd side note to Heather, after rereading the wording I used in the initial piece it would lead some to believe that I think the cras was caused only by the banks...thank you for asking for clarification
No problem at all. Thanks for clarifying!
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