Displacement: the real technological boom of the 1920s, built on electrification, the automobile, radio, mass production and consumer credit. American industry genuinely was being transformed, and profits genuinely rose.
What caused the 1929 stock market crash?
Boom & euphoria: the stock market became a national obsession, and the fatal mechanism was that it was bought on margin as low as 10%, meaning 10× leverage: a $1,000 stake controlled $10,000 of stock, and a mere 10% price fall wiped out the entire equity. Layered on top were investment trusts, leveraged closed-end funds that bought other leveraged trusts, pyramiding borrowed money on borrowed money (a 1920s echo of the CDO-squared of 2008). "New era" thinking reigned; economist Irving Fisher declared stocks had reached "a permanently high plateau" days before the crash. The Dow ran to ~381 (September 1929).
Trigger/Minsky moment: the Fed, worried about speculation, had been tightening; as prices wobbled, the 10×-levered structure detonated. A fall triggered margin calls, forcing sales, which lowered prices, which triggered more margin calls (the credit cycle's cascade in its purest form). Black Thursday (Oct 24) and Black Tuesday (Oct 29, 1929) saw the market break.
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Why did the crash become the Great Depression?
The crash, and the response that was the real disaster: the initial crash need not have caused a depression. What did was the policy catastrophe that followed (Friedman & Schwartz's thesis): the Fed, wedded to the gold standard and fearful of speculation, let the money supply collapse by roughly one-third and allowed ~9,000 banks to fail, wiping out deposits and credit; Congress passed the Smoot-Hawley tariff (1930), strangling world trade; and fiscal orthodoxy demanded balanced budgets into the teeth of the collapse. The Dow bottomed at ~41 in 1932, down ~89%, and unemployment hit ~25%.
Lesson (two, both foundational): first, leverage turns a correction into a collapse. The margin structure is what made 1929 lethal, and every subsequent bubble's danger is measured by the leverage inside it. Second, and more important, the policy response determines whether a crash becomes a depression. The Fed's failure to be the lender of last resort, and to keep money and credit from imploding, is the single most-studied mistake in macroeconomics, and it is precisely the mistake Bernanke's Fed set out not to repeat in 2008 and Powell's in 2020.
1929 is the "what not to do" against which every modern crisis response is written.