system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why did Wall Street crash in 1929 and why did it affect the whole world?
gpt
To give insight on how "buying on margin" worked:

Let's say you wanted to buy $10,000 worth of stock. In the 1920s you could do this with a $1,000 down payment and signing a note for the remaining $9,000 with your brokerage or a bank.

The 1920s were an exceptional boom time in the US. Electricity was going in everywhere, lavish excess, home building, agricultural innovations, cars, new technology everywhere. In fact not until the 1990s did America see that kind of economic growth again.

Anyway the markets are going up so now your $10,000 investment is at $12,000. A 20% gain is not unheard of, but buying on margin (remember only $1,000 of your money is in the game) makes this a 200% gain. You pay back your note and get $3,000 back on your $1,000 investment. 200%+ returns means EVERYONE is getting in the game, because why the hell not!?

This is all fine and dandy but what goes up must come down and when it did all that fake money in the markets imploded.