stock market crash background economic trend of 1920s/ potential risk

buying on margin

-investors bought stocks with borrowed money, paying a small down payment

-risk: might not be able to make your money back, when prices fell, they couldn’t repay loans → leads to massive defaults

overproduction

-factories and farms produced more goods than people could buy

-risk: unsold goods led to changing prices and layoffs

uneven wealth

-top 5% held most of the nation’s money/ wealth

-risk: weak consumer demand, fragile middle class

speculation in stocks

-many americans interested hoping for quick profits rather than long-term growth

-risk: inflated stock prices beyond real value - created a “bubble”

weak banking system

-banks gave risky loans and invested heavily in the stock market

-risk: when the market crashed, banks failed and people lost savings