Today, margin requirements are much stricter (usually 50%), but the 1920s remain the ultimate cautionary tale of what happens when the world trades on borrowed time and borrowed dimes [1].
Buying on margin in the 1920s was the ultimate "get rich quick" hack that defined the Roaring Twenties—until it didn't [1, 2]. Imagine walking into a brokerage with $1,000 and walking out with $10,000 worth of stock [1]. In the 20s, you only needed to put down ; the broker lent you the rest, using the stock itself as collateral [1, 3]. buying on margin 1920s
But margin is a double-edged sword [1]. When the market wobbled in October 1929, brokers issued [1, 4]. If your stock value dropped, you had to provide more cash immediately to cover the loan [1, 3]. When investors couldn't pay, brokers sold the stocks to recoup the debt, which flooded the market with sell orders, driving prices even lower [3, 4]. This "forced selling" turned a market dip into the catastrophic Great Crash [3]. Today, margin requirements are much stricter (usually 50%),