Ivory marked by the Royal African Company. International Slavery Museum, Liverpool. Wikimedia Commons.
By the late 1920s a buyer could control far more stock than the cash in hand would purchase, because the broker lent the rest and held the shares as collateral.
A stretched household had no cushion for that market, and the danger was a tip or a relative’s luck pulling a small savings account in anyway.
A household that bought on margin with the family’s savings could be told to put up more cash on short notice or be sold out.
A broker, or a wealthy customer who could meet a call from other funds, could survive a dip that wiped a buyer with only one account.
If the price fell, the broker asked for more money, and if the money did not come the broker sold the shares.
Those sales pushed the price down further, which is how a fall could feed on the debt that had lifted the rise.
The loan could be ended quickly, because the custom of the market was that the lender did not have to wait.
John Kenneth Galbraith, The Great Crash, 1929 (1955)