The Problem With Banks

During the initial market crash of 1929, many banks experienced bank runs and a lot just went out of business. Benanke pointed out that while the loss of money in the system was an issue, there was something more important at play. The difficulty and expense in getting a new loan caused by the breakdown in banking relationships is what turned a large but not unprecedented downturn into the most severe economic collapse in history. We can break the GFC and the Great Depression into two distinct parts, the financial crisis and the subsequent economic depression. Financial crises can happen without causing depressions or even recessions and recessions can happen without cause financial crises. But in both the case of the G FC and the Great