Agricultural Recession/ Buying on the Margin
AGRICULTURAL RECESSION
- Overproduction lowers prices
- "Farmers have always been poor
- First sign of the coming Depression
- Borrowing money to buy stock in hope that it will go up and you can repay the loan and collect the difference
Interesting Fact
People could buy stocks for only a 10% down payment.
Quote
"In the 1920s you could buy stocks on margin. You could put 10 percent down and borrow the rest against your stocks."
--Ron Chernow
--Ron Chernow
Subjunctive Question
Would the depression have still occured if the government had not allowed people to buy on margin?
Summary
Agricultural recession was the first sign of the Depression. It was said that farmers have always been poor but this was more extreme. Overproduction had been lowering prices and famers were becoming even more poor than they already were. Buying on margin was another sign of the Depression, however no one knew about this one. Buying on margin was borrowing money to buy stock in hope that it will go up and you can repay the loan and collect the difference. This casued the stock market to crash.