Advanced Search
MyIDEAS: Login to save this paper or follow this series

Deflation, Silent Runs, and Bank Holidays, in the Great Contraction

Contents:

Author Info

  • Hugh Rockoff

    ()
    (Rutgers)

Abstract

This paper argues that the banking crises in the United States in the early 1930s were similar to the “twin crises” -- banking and balance of payments crises -- which have occurred in developing countries in recent years. The downturn that began in 1929 undermined banks that had made risky loans in the twenties. The deflation that followed further weakened the banks, especially in rural areas where deflation in prices and incomes was the greatest. Depositors in those areas began transferring their deposits to banks they regarded as safer, or purchasing bonds. These “silent runs,” essentially a capital flight, have been neglected in many accounts of the banking crises. But evidence from the Gold Settlement Fund (which recorded interregional gold movements) and from regional deposit movements suggests that silent runs were important, especially in the crucial year 1930. When the crisis worsened, state and local authorities began declaring “bank holidays,” which limited the right of depositors to make withdrawals, a movement that culminated in the declaration of a national bank holiday by President Roosevelt. In retrospect the policy advocated periodically by the Federal Reserve Bank of New York, the purchase of government bonds on the open market, was right for the country as a whole. But a majority of the Governors of the other Federal Reserve Banks were opposed. Some opponents of open market purchases thought they would benefit the stock market without contributing significantly to the revival of business in the interior. The result was a minimalist policy that led to an unprecedented financial and economic collapse.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://snde.rutgers.edu/Rutgers/wp/2003-02.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200302.

as in new window
Length:
Date of creation: 05 Feb 2003
Date of revision:
Handle: RePEc:rut:rutres:200302

Contact details of provider:
Postal: New Jersey Hall - 75 Hamilton Street, New Brunswick, NJ 08901-1248
Phone: (732) 932-7482
Fax: (732) 932-7416
Web page: http://snde.rutgers.edu/Rutgers/wp/rutgers-wplist.html
More information through EDIRC

Related research

Keywords: Great Depression;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Wallis, John Joseph, 1987. "Employment, Politics, and Economic Recovery during the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 516-20, August.
  2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  3. Karl Brunner & Allan H. Meltzer, 1968. "What Did We Learn from the Monetary Experience of the United States in the Great Depression?," Canadian Journal of Economics, Canadian Economics Association, vol. 1(2), pages 334-348, May.
  4. Smiley, Gene, 1981. "Regional Variation in Bank Loan Rates in the Interwar Years," The Journal of Economic History, Cambridge University Press, vol. 41(04), pages 889-901, December.
  5. Brandt, Loren & Sargent, Thomas J., 1989. "Interpreting new evidence about China and U.S. silver purchases," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 31-51, January.
  6. Garlock, Fred L., 1941. "Country Banking in Wisconsin During the Depression," Technical Bulletins 169025, United States Department of Agriculture, Economic Research Service.
  7. Mark Carlson, 2001. "Are branch banks better survivors? Evidence from the Depression era," Finance and Economics Discussion Series 2001-51, Board of Governors of the Federal Reserve System (U.S.).
  8. Barry Eichengreen, 2002. "Still Fettered After All These Years," NBER Working Papers 9276, National Bureau of Economic Research, Inc.
  9. Charles W. Calomiris & David C. Wheelock, 1997. "Was the Great Depression a Watershed for American Monetary Policy?," NBER Working Papers 5963, National Bureau of Economic Research, Inc.
  10. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April.
  11. Miller, Victoria, 1998. "The Double Drain with a Cross-Border Twist: More on the Relationship between Banking and Currency Crises," American Economic Review, American Economic Association, vol. 88(2), pages 439-43, May.
  12. Rawski, Thomas G, 1993. "Milton Friedman, Silver, and China," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 755-58, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rut:rutres:200302. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.