: Lower prices triggered a new round of margin calls for other investors, leading to more forced selling and further price drops. Wider Economic Impact The Stock Market Crash of 1929 and the Great Depression

: In the 1920s, investors could buy stocks by putting down as little as 10% of the share value , borrowing the remaining 90% from brokers.

: This "easy credit" fueled rampant speculation, pushing stock prices far above their actual worth and creating an unstable economic bubble.

: Investors who couldn't meet margin calls were forced to sell their stocks immediately.

When the market began to wobble in late 1929, the high levels of margin debt turned a minor correction into a total collapse through a self-reinforcing cycle:

: If a stock’s price fell below a certain point, brokers issued a "margin call," demanding the investor immediately provide more cash to cover the loan. How Margin Buying Caused a "Death Spiral"

: This massive wave of "fire-sales" drove prices even lower.

Buying stocks on margin—using borrowed money to purchase shares—was a central driver of the 1929 stock market crash and the subsequent Great Depression. While it allows for massive gains during a boom, it creates a fragile "house of cards" that collapses rapidly when prices dip. The Mechanics of the Problem