Sometimes runs occur simultaneously at many individual banks. People lose
confidence in the whole banking system, and depositors everywhere try to
withdraw their money. This event is called a bank panic.
Nationwide bank panics were once common in the United States.Between
1873 and 1933,the country experienced an average of three panics per decade.
Bank panics occur because a loss of confidence is contagious.A run at one
bank triggers runs at others, which trigger runs at others, and so on.
Suppose a run occurs at Melvin’s Bank. Gertrude’s Bank is next door to
Melvin’s, and Gertrude’s depositors notice the run. It occurs to these
depositors that the same thing might happen at their bank. To be safe, they
withdraw their money, and Gertrude’s experiences a run. Now runs have
hit two banks. Seeing this, depositors at other banks get nervous. More runs
occur, and the panic spreads through the economy.
In the United States, a typical bank panic started with runs on New York
banks. These triggered runs in other parts of the East, and then the panic
spread westward. The next case discusses the last and most severe bank panics
in U.S. history.
Sometimes runs occur simultaneously at many individual banks. People loseconfidence in the whole banking system, and depositors everywhere try towithdraw their money. This event is called a bank panic.Nationwide bank panics were once common in the United States.Between1873 and 1933,the country experienced an average of three panics per decade.Bank panics occur because a loss of confidence is contagious.A run at onebank triggers runs at others, which trigger runs at others, and so on.Suppose a run occurs at Melvin’s Bank. Gertrude’s Bank is next door toMelvin’s, and Gertrude’s depositors notice the run. It occurs to thesedepositors that the same thing might happen at their bank. To be safe, theywithdraw their money, and Gertrude’s experiences a run. Now runs havehit two banks. Seeing this, depositors at other banks get nervous. More runsoccur, and the panic spreads through the economy.In the United States, a typical bank panic started with runs on New Yorkbanks. These triggered runs in other parts of the East, and then the panicspread westward. The next case discusses the last and most severe bank panicsin U.S. history.
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