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The Role of Leverage in Amplifying Every Major Crisis

Financial History and Market Crises • Beginner Investing • 7 min

The 1929 crash, Long-Term Capital Management's 1998 collapse, and the 2008 financial crisis. These events had little in common. They happened in different decades, involved different assets, and were triggered by different events. Yet, one key factor appears in all three crises: leverage. The idea is straightforward. Borrowed money allows investors or institutions to increase their position size beyond what their…

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