In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. Only a small part of the money you put into the bank is kept in currency -- an amount which in normal times is enough to cover the cash needs of the average citizen. In other words, the total amount of all the currency in the country is only a small fraction of the total deposits in all of the banks.
What, then, happened during the last few days of February and the first few days of March? Because the public confidence in the system was shaken, there was a general rush by a large portion of our population to turn bank deposits into currency or gold. The rush was so great that the soundest banks could not get enough currency to meet the demand. The reason for this was that on such short notice it was, of course, impossible to sell perfectly sound assets of a bank and convert them into cash except at panic prices far below their real value.
By the afternoon of March 3rd, scarcely a bank in the country was open to do business. Notices temporarily closing them in whole or in part had been issued by the governors in almost all the states.
