Between 1929 and 1933, the public succeeded in increasing its cash holdings by 31 per cent; commercial bank reserves were scarcely altered {indeed, surviving banks built up excess reserves}; but commercial bank deposits decreased by 37 per cent and loans by 47 per cent. The absolute numbers reveal the lethal dynamic of the 'great contraction'. An increase of cash in public hands of $1.2 billion was achieved at the cost of a decline in bank deposits of $15.6 billion and a decline in bank loans of $19.6 billion, equivalent to 19 per cent of 1929 GDP.91
Between 1929 and 1933, the public drastically increased its cash holdings by 31%, while commercial banks experienced minimal changes in their reserves. Surviving banks managed to accumulate excess reserves; however, there was a significant decline in both commercial bank deposits, which fell by 37%, and loans, which dropped by 47%. This period is characterized by a severe financial contraction that transformed the economic landscape.
The statistics highlight the devastating impact of this 'great contraction'. The public's gain of $1.2 billion in cash came at a staggering cost of $15.6 billion in lost bank deposits and $19.6 billion in reduced bank loans. This contraction represented about 19% of the Gross Domestic Product (GDP) from 1929, illustrating the dramatic consequences of the economic turmoil during that era.
