Part 6/10:
While the crash is often cited as the cause of the Great Depression, it merely acted as a trigger. The true catalyst lay in the banking sector, fraught with bad loans and reckless speculation. The collapse of numerous banks ensued, leading to widespread panic among depositors, who rushed to withdraw their savings from even solvent banks, resulting in a series of bank runs.
Economic Catastrophe and Its Aftermath
The banking crisis led to a severe contraction in the money supply, which plunged by 31% between 1929 and 1933. The absence of deposit insurance meant that ordinary Americans lost their life savings when banks failed. The Federal Reserve's passive stance during this crisis has drawn significant criticism, with many citing it as a significant error that exacerbated the downturn.