John Moser

There was another round of bank failures in 1931 in response largely to stuff happening in Europe.

There was a third that happened toward the end of 1932 and into 1933.

That was probably the worst of the three.

So...

There isn't a natural progression from the stock market crash to the bank failures.

They're both critically important.

They both contribute to the sense of crisis.

But in a way, these are separate issues.

Yeah, yeah.

So the crash is important.

There's absolutely no doubt about that.

But what's often forgotten is in the months that followed, the market recovered most of what it lost.

The thing is, the crash had a ripple effect in that it convinced people that bad stuff was happening.

And that caused people to stop spending.

There was a huge drop in spending on durables in the last quarter of 1929, and that would continue for the next several years.

In fact, when Herbert Hoover, who was sometimes very falsely portrayed as a do-nothing president, Hoover jumped into action with this plan to keep wages high.

He secured promises from most of the country's major corporations not to reduce wages, to let their profits be hit before their wages did.

And most of those companies maintained that pledge until 1931.

And at that point, they said, we can't do this anymore.

The idea was if you keep wages high at a time of deflation, right?