The Great Depression occurred after the stock market crash in 1929, but lasted for years after, until 1940. One reason the crash occurred was because banks were failing. Banks were lending out money to anyone even if those people did not have good credit. Another reason was that productivity of products were high, but the demand for those products decreased. Since people were not buying, companies were losing money, which led to lay-offs. Inflation, played a role in the crash, “an unwarranted increase in currency and bank credit” (Patterson). Employment is what led to people not able to make payments back to the banks, which in turn made the banks fail. Some people were even taking out their money of the banks which also forced banks to close. …show more content…
It essentially is when the someone borrows money from a brokerage to purchase stocks, which allows them to buy more stocks than they normally would. The loans are backed up by the borrows past investments.
To buy a home with an on-margin loan, it would be similar as to buying stocks. It is backed by past investments, and essentially can be used for anything, but in this case, it is used for a home. One positive thing about getting a loan through an on-margin loan, is that borrowers do not have to pay closing costs, appraisal fees, nor are there any prepayment penalties, such as paying the loan off early. Brokerages usually have their own fees though.
I believe another crash can occur. For example, some houses cost more than most people make. People buy way over their head, and what they can afford, and end up defaulting on their loans. Which in turn makes it so banks are not getting their money back that they lent out. Unemployment also plays a role into it. Right now, unemployment rates are lower than the last couple years, but jobs also have been created due to the natural disasters we’ve experienced here in Texas, and Florida. Such as medical, and food services