Financial Markets & Institutions

1 - GREAT DEPRESSION (1.i) PREVAILING CONDITIONS & MAJOR CAUSES During 1920/21 widespread deflation in the value of US farms, on average 50%, led to record numbers of farm foreclosures. Banks responded by radically tightening lending polices, effectively ceasing to draw new loans to legitimate customers and businesses. Farm foreclosures weakened the balance sheets of hundreds of rural banks leading to a epidemic of Bank failures averaging 600 per year throughout the 1920s and predominately in the agricultural …

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