, Columnist
The Conventional Wisdom on Margin Debt Is Wrong
Doomsayers are citing an incomplete history of the crash of 1929. Here’s what they are missing.
An excess of margin debt was blamed for the crash of 1929.
Photographer: Icon Communications/Archive PhotosThis article is for subscribers only.
As the pandemic hit last March, total margin debt – money borrowed to invest in the stock market – stood at $479 billion. Since that time, the stock market has boomed, and margin borrowing has only increased. This past January, it hit an all-time high of $798.6 billion.
In response, mainstream commentators and iconoclasts alike are sounding alarms about systemic risk and warning of a repeat of the crash of 1929, arguably the worst in the nation’s history. But they are citing some history while missing critical pieces of it, relying on an old narrative that has proven deeply flawed.