In the 1920’s stocks were considered to be a safe investment that never went down. Because of this stock investors could put down 10% on a stock and take a loan for the rest. In other words $10,000 could buy $100,000 worth of stock.
Stocks continued to skyrocket after this until they were way overvalued. When the first wave of selling occurred it lead to a panic, as stocks only had to go down 10% for an investor to lose all of his money. Panic selling lead to more panic selling and so forth.
