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Friday, March 11, 2011

Origins of Great Depression in 1 short paragraph

During the 1920's one special kind of loan was very popular among the Wall St. traders.  It was called the Margin Loan. Here, you could pay 10% of the original price of a stock and "buy" it, wherein the rest (90%) will be lent to you through the broker.   In other words, you could own $500 of stocks with only $50 down. But one condition: the loan could be called back anytime, and you HAD to pay it back in 24 hours.  This was called a Margin Call.  So in late October, 1929, J.D. Rockefeller exited his wealth from the Market quietly and within 24 hours, traders began calling off the margin loans in a massive wave.  The result: Wall St. bled, and the worst Depression in US History till this point, started.
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~ Minnesota Senator Charles Lindberg (1930s), not to be confused with the famous aviator Charles Lindbergh

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