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2. What Caused the Market to Crash in 1929?

Rapid economic growth in the 1920s created a climate where speculating on the stock market was a hobby for many upper-class individuals. Consequently, buying stocks on margin (paying a mere percentage of the price but borrowing the remainder from a broker or bank) became standard practice. An excess of products hit the market in the late '20s. Forced to sell or dump products for big losses, share values decreased rapidly. With millions of shares purchased on margin and no ready cash available, liquidation of portfolios compelled the downward spiral of the stock market.

 

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