Two Great Depression Questions

  1. During the Run on the Banks following the 1929 stock market crash were most people able to get their savings out eventually, or did lots of people lose their entire life savings if it happened to be deposited in a bank that failed?

  2. If you were able to keep your job, and you hadn’t invested in stocks, and your bank didn’t totally fail (lots of ifs), it seems you would have been okay during the Great Depression. Is that a fair assessment? My grandfather did okay, but he was able to keep working and wasn’t big on investing in the stock market.

  1. Many banks failed at many times. There was no one Run on the Banks. About 650 banks failed in 1929 and that increased with the worst year being 1933.

A Run on the Banks mean that people start pulling their money out of banks. Those people received their money. Banks don’t keep all deposits in hand; they lend them out to make money. At some point the requests for cash are more than the money on hand. If the bank can’t raise more funds it fails. At that point, the rest of the depositors lose their money.

Good essay on Banking Panics of 1930 and 1931.

  1. Even the people who kept their jobs during the Depression probably saw their incomes go down, because virtually every employer cut salaries. It was a vicious cycle. With more people unemployed, there was less consumer spending, so stores and manufacturers saw their revenue go down, which caused them to lay off workers, or cut salaries to keep from closing, which led to less spending and so on. A small number of people did benefit from this cycle because everything cost less and their money went farther. However, the vast majority of average workers suffered a decline for years. And many rich people saw their fortunes greatly reduced because money in the stock market or failed banks and businesses vanished.

People who had money in banks that failed never got it back. But not every bank that had a run on it failed. At the time there were enormous numbers of absolutely tiny local banks and those are mostly the ones that failed. So even though thousands and thousands of those banks ultimately failed, the proportion of the population that had money in them wasn’t huge.

The biggest wave of bank runs was in early 1933, and only then did they start affecting bigger banks. But the new administration responded to it by freezing banking for a few days and then afterwards guaranteeing deposits in all but the least stable 5% of banks. So most of the banks that had runs on them in that crisis didn’t fail.

  1. The average depositor in a failed or suspended bank during the depression lost 20% of the deposited money. That number probably conceals alot of variation.
  2. If you were in a safe job, had a safe bank, and were not leveraged in the stock market you could do okay, though it was a scary time so I’m sure most people were anxious even in they had not been hurt personally. Especially at the start since deflation made the prices of everything cheaper. I think it was Billy Crystal’s book that mentions he had an aunt who thought the great depression was great because her husband had a steady job and she could act like a big shot in the family.

It would seem unlikely that very many people lost a crushing, life-altering amount of money in a bank failure. If my bank failed today, a great majority of the depositors would lose less than their direct deposited paycheck, which is in most cases nearly exhausted by the end of the month anyway. Then, as now, the number of people who had more than a week’s pay in the bank was probably modest. Yes, they lost that, and yes, that was a hard hit to take, but there wouldn’t be many cases in which a wealthy person was reduced to poverty overnight – although surely there were some.

Well, the bank in my home town did not fail or close (other than when FDR declared a bank holiday), and the money seems to have been protected. I assume the key was that the bank did not invest in stocks. Most of the big banks of the time did put their money into the market (there were even stock tickers in the lobby). In addition, banks in the 20s were overextended in offering credit – too many investments that went south when the economy tanked.

Looking it up, the bank actually increased its deposits in 1931-34.

It also was a rural community, and food was still popular (especially their main crop, potatoes). So the community had at least some income (probably cut as food prices dropped), enough to keep them able to pay their bank loans.

My grandfather ran a general store and kept it going. There were tough times, but he managed.

On my mother’s side, my grandfather was a dentist. That still was a source of income, even if it was reduced from the pre-crash rates.

Both sets of grandparents emerged relatively unscathed from the Great Depression. My paternal grandfather owned and operated a hardware store in Hollywood, California with his brother, and it didn’t go under. My maternal grandfather was some sort of elected official in a rural county of Arkansas – county clerk, I think it was. Neither grandfather lost anything much that I could tell.

@jtur88: IIRC, you’re older enough than me that you may have a better handle on it.

But my understanding is that in the 1920s the majority of citizens who had any savings / investments of any kind had simple savings accounts at banks.

Yes, there was some mass market mania in common stock buying in the 1920s leading up to the crash. But if you were a merchant or a professional or some such, most likely whatever money wasn’t tied up in your business was either in a mattress or in a bank. Mutual funds and money market funds hadn’t been invented yet and individual common stock ownership was still heavily concentrated in the wealthy.

The one group that couldn’t be directly hurt by a banking crash were the unbanked laborers. Any money they had was stored in cash in a coffee can until it was spent before the next payday rolled around. The way they got hammered was when their job disappeared.

Same with mine. Part of my father’s side had a hardware/general store that opened in 1902 and made it fine through the Depression. It was the only place in a very small town to buy lots of things with few alternatives. As a matter of fact, it did very well during that period and my great-grandfather used the profits to buy massive amounts of land and mineral rights from individual landowners for very close to nothing. Those started paying off a couple of decades later and have really taken off in the last decade with the introduction of fracking so I can say that my much of my financial future is the direct result of the Great Depression.

Another great-grandfather was busy during that time introducing electricity to tiny little Texas towns that still didn’t have it. He was so successful at it that he was able to retire forever at 40 during the Great Depression. I am not sure how much he had in 1930’s dollars but it was the equivalent of millions today with guaranteed future income from his business deals.

Yet another side were just small-scale farmers near Dallas. They lived that same life before, during and after the the Depression because it didn’t have much impact. The chickens and cows didn’t read the papers so things worked about as well as they always did. They produced their own food, recycled clothes until they fell apart and traded for other things they needed.

The 1930’s is one of my favorite decades for some reason. Not everyone or even most people suffered greatly during that time. It was terrible if you were an immigrant factory worker that lost their job or a farmer in the Dust Bowl region but that didn’t apply to most people. However, It was also the Golden Age of Cinema and Art Deco style. Just like the recent Great Recession, most people took a moderate hit, adapted their lifestyle and did what they could. Some people went completely broke and overall wealth shrank but, even then, some businesses and industries were booming during that period as well.

Instead of investing in stocks, my immigrant grandfather put every penny he had in real estate.

That didn’t work out so well, either.

I have to admit, your questions are very good. Not sure if I’d call them great, though.
mmm

My grandfather on my mother’s side had a job as a telephone lineman (for the county) and grandma said that they had 8 to 10 of their neighbors at the dinner table every night,

My father’s father was a newspaper reporter (my father was born in 1930), and that happened to be a profession that fared pretty well during the Depression. In fact, he had the crime beat. He worked at a couple of different papers in New York, and then got an offer to work for the Wichita Eagle, so he packed up everything he could fit into the car, and drove (before the highway system) to Kansas. He worked there for forty years, and retired just before the BTK crimes started. They called him up to advise the reporter who was covering them. After he retired he wrote a syndicated column on numismatics for a couple of years, because coin collecting had been one of his hobbies for years.

My mother’s parents were just a little too young, and her grandparents owned their homes and cars outright. Her grandfathers had to work after they should have been retired, but they found work, and her mother (my grandmother), who was her high school valedictorian, got a scholarship to secretarial school in 1934. My mother’s father played minor league baseball for a few years in the early 30s. Seriously. He worked in the coal mines in Southern PA in the winter.

In Aus, the “Great” depression was by no means the worst depression: the late 19th century Melbourne depression was much worse here, but gets less press, for a number of reasons. In Aus, being “unemployed” in the “Great” depression mostly meant that you couldn’t get a job in your trade, and had to work as a labourer. They didn’t think they were OK, any more than you would if you lost your job and had to go on minimum wage. Some people were hungry. Some kids left home at 8 to work, because they were hungry. (If you were 8 in 1938, you’d be 86 in 2016, and still working if you could) Some farm kids were naked.

Details of the previous debression are hard to come by, except for the repeated reports of suicides.

My father in law was a school teacher in NYC during the 30s and survived okay although every once in a while “payless days” were declared.

My father started a gas/service station and hung on till about when I was born, 1937, when he went broke. He eventually got a job, but it was with my mother’s uncle who had a going business. It was not a pleasant time.

[quote=“Shagnasty, post:9, topic:745160”]

Same with mine. Part of my father’s side had a hardware/general store that opened in 1902 and made it fine through the Depression. It was the only place in a very small town to buy lots of things with few alternatives. As a matter of fact, it did very well during that period and my great-grandfather used the profits to buy massive amounts of land and mineral rights from individual landowners for very close to nothing. Those started paying off a couple of decades later and have really taken off in the last decade with the introduction of fracking so I can say that my much of my financial future is the direct result of the Great Depression.

Another great-grandfather was busy during that time introducing electricity to tiny little Texas towns that still didn’t have it. He was so successful at it that he was able to retire forever at 40 during the Great Depression. I am not sure how much he had in 1930’s dollars but it was the equivalent of millions today with guaranteed future income from his business deals.

Yet another side were just small-scale farmers near Dallas. They lived that same life before, during and after the the Depression because it didn’t have much impact. The chickens and cows didn’t read the papers so things worked about as well as they always did. They produced their own food, recycled clothes until they fell apart and traded for other things they needed.

**The 1930’s is one of my favorite decades for some reason. Not everyone or even most people suffered greatly during that time. It was terrible if you were an immigrant factory worker that lost their job or a farmer in the Dust Bowl region but that didn’t apply to most people. However, It was also the Golden Age of Cinema and Art Deco style. Just like the recent Great Recession, most people took a moderate hit, adapted their lifestyle and did what they could. Some people went completely broke and overall wealth shrank but, even then, some businesses and industries were booming during that period as well.[/**QUOTE]

It’s also one of my favorite decades because the world of and corrections was so interesting. I’ve worked on Alcatraz for many years now and I wish I had a time machine to visit the island during that decade.

Of course it would have been pretty horrible to live in many parts of Europe.

That’s one thing I heard, the entertainment industries did very well. Professional sports even grew. Mah Jong was also popular.

One thing that hurt the farm economy was the conversion from horses to motorized vehicles so there was less market for hay and oats.

Broadway nearly died. Vaudeville did die. The movie companies cut all salaries and caused widespread labor backlash, resulting in the first unions. Theaters resorted to lotteries and giveaways to get people in. The St. Louis Browns baseball team had attendance of a million: not for a year, for the entire decade of the 30s. Pulp magazines kept cutting prices, from a quarter down to some experiments at 5 cents, and still saw hundreds of titles fold.

Radio, which required no regular entry fees, did boom in popularity. Other forms of entertainment which charged money had one of the worst decades in history. There was little to no disposable income, so entertainment did not do very well or even well. There was some recovery toward the end of the decade - ten years is along time to generalize about - but overall it was such misery that the government overcame the then historic refusal to provide money to entertainers and created the Federal Writers Project and similar programs for Art, Theater, and Music. Fun, fun, fun.

Movie theaters were so successful, especially during the summers, because they were pretty much the only air-conditioned buildings at the time, and the summers of 1934 and 1936 remain the hottest on record in the United States.