USA HISTORY

Detailed explanation-1: -The Depression Many of the small banks had lent large portions of their assets for stock market speculation and were virtually put out of business overnight when the market crashed. In all, 9, 000 banks failed–taking with them $7 billion in depositors’ assets.

Detailed explanation-2: -Millions of Americans used credit to buy all sorts of things, like radios, refrigerators, washing machines, and cars. The banks even used credit to buy stocks in the stock market. This meant that everyone used credit, and no one had enough money to pay back all their loans, not even the banks.

Detailed explanation-3: -It wasn’t until the stock market crashed and fearful Americans flocked to banks to demand their cash-so they could stow it under the mattress or use it to offset their massive stock market losses-that banks realized what they’d done.

Detailed explanation-4: -Three things happened: (1) many of those who had savings lost them in bank failures; (2) those who managed to hand onto cash found it more valuable as prices fell substantially; (3) many didn’t have money because they lost their jobs or farm ouput fell and prices of farm goods collapsed.