ECON 2200 Lecture Notes - Lecture 46: Commercial Bank, Stock Market, Aggregate Demand
14 May 2018
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ECON 2200
Lecture 46
• Optimism of '20s became pessimism & fear of '30s
o Stock market need to cause Great Depressions, but they do cause
lack in consumer confidence – which makes a economy hard to
get going again
o Most economic historians do not think the stock Markey crash was
the cause of the Great Depression. As noted before, a decline in
aggregate demand was already underway by September 1929.
o However, the duration of the Great Depression may have been
affected by the stock market crashes.
→ There was a psychological impact: There was a lack of
confidence from citizens and uncertainty about the future.
A. 3 Waves of 1930s Bank Failures: Table 23.1
(Preceded by farm foreclosures & rural bank failures of 1920s)
Some economic historians believe the economy might have “bounced
back” after the stock market crash if the banking sector had not collapsed.
• 1st Wave: Late 1930
o Banks in S & MW fail
o Panic spreads
o Dec. 1930: Bank of U.S. (NY commercial bank) fails
→ Confusion because of the name
People thought this was a bigger deal than it
actually was. The “Bank of U.S.” was just a name—
it was not tied with the Fed. This bank could have
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Document Summary
As noted before, a decline in aggregate demand was already underway by september 1929: however, the duration of the great depression may have been affected by the stock market crashes. There was a psychological impact: there was a lack of confidence from citizens and uncertainty about the future: 3 waves of 1930s bank failures: table 23. 1 (preceded by farm foreclosures & rural bank failures of 1920s) People thought this was a bigger deal than it actually was. The bank of u. s. was just a name it was not tied with the fed. This bank could have just been called joe"s bank . When people heard the bank of the u. s. had failed, they panicked not realizing that it was just a single bank, not the official bank for the country. Largest bank to have failed up to that point: 2nd wave: spring-summer 1931. A large number of large european banks fail.
