As we look at China something to consider there is that buying on margin was what caused so many to jump out of windows to their deaths when the market crashed in 1929.
So, actually what the government of China is doing to punish investment houses that allow people to buy on margin is good for their economy long term. The more people are allowed to buy on margin the more likely they will have a similar event to one that brought on our Great Depression only this time in China.
Another thing that brought on the Great Depression was that the middle class in the U.S. was very small then. Too many people were either rich or poor.
Unless you have a strong middle class to police the system because of their relative wealth and education, you tend to bring about scenarios that might resemble the Great Depression in countries.
So, watch out when there are just rich and poor in any country without enough middle class to encourage rights and education for all. This also includes the U.S.
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