Question

How did buying on credit in the 20s cause problems in the 30s?

Answer 1

People enjoying the economic boom, from the post ww1 period bought virtually everything in credit and were in constant credit cycles. They would borrow credit to pay credit, sell and buy in credit, etc until the cycle of borrowing could not  be managed any further. Banks lost a lot of money to the unrestricted economy as people could not pay their credits and banks collapsed with depositors money.