|Manias, Panics, and Crashes: A History of Financial Crises
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One of the nations' leading economists and economic historians updates his classic 1978 history of financial crises to include the October 1987 New York Stock Exchange meltdown and the continuing debt crisis.
- Very Disappointing - a book only an "academic" could like.
Aparently Mr. Kindleberger has been cloistered in his "ivory tower" too long to write a book of interest and value to those who do not share his expertise. He expects the reader be intimately familiar with the details of a number of obscure events dating back to more than 350 years ago.
For example, the author mentions, references, alludes to ... "the South Sea Bubble" at least fifty times(!!) in this book, Yet having read the text completely all I know about the famous South Sea Bubble is that it had something to do with speculation in a stock of the South Sea company, that it happened in England, and it occurred in 1720. The simple "Who, What, When, Where, Why and How" are never spelled out. Never. (Yes that simple and straightforward informantion is what I'd really hoped for, thus I wax bitterly.) If you feel you must read this book, first ask yourself if are familiar with all of the following :the south sea bubble, the missippi bubble, the london crisis of 1866, the new york crisis of 1907, the writings of Walter Bagehot, tulipmania (holland, 1600's), Bleichroder, ....... (this list could go on for pages). If "no" then reconsider your desire, as all the above are ASSUMED to be well known by the reader and such knowledge is essential to understanding the arguments and information presented.
It is very scholarly - Plenty of obscure words and fully 50 pages of apendices and endnotes (!! in a 250 page book). But it is poorly written. And the endless "obscure name dropping and event referencing" failed in its intention to make the author appear profoundly knowledgable; I found it little better than irritating.
I was very very very disappointed with this book. It was writen for those who have completed graduate work in "Financial History". If you haven't, you won't find this book readable or illuminating. I am a curious person who enjoys learing from books, but THIS was a painful read. The useful and significant infromation in this book could be very well presented in a concise, well written 20 pages. We all have better things to do with our time and money.
D. J. Tarico, Ph.D....more info
- Presents a correct analysis but should have devoted some more time to the warnings of Smith and Keynes-4 .5 stars
Kindleberger does a great job of demonstrating what the root cause of economic downturns is.The process starts as bubbles of speculation on a sea of enterprise and entrepreneurship as pointed out by Keynes.However,as time passes the bankers decide to shift loans to speculators as well as starting to engage in speculation themselves.The situation changes as one observes a sea of speculation with few bubbles of enterprise floating on top.This sets the stage for the bubble to start growing with the finance coming from the bankers who fuel the expansion in the bubble.This leads to the mania stage.All it takes here is for some tiny liquidity disruption to set off a panic of selling which leads to the Crash as various participants discover that their paper wealth has evaporated ,leaving them with crushing debt loans as their debt leveraging and margin account financing now becomes an albatross around their necks.The end result is various bankruptcies and defaults and a recession or depression.
Kindleberger shows how this pattern occurs over and over again in history.Unfortunately,Kindleberger fails to provide the reader with a simplified summary from the earlier work of Adam Smith and J M Keynes that explains the crucial steps involved in inflating,but not creating, the bubble-(a)loans from the commercial bankers to loanees whom the bank knows for certain are going to be engaged in speculative behavior and (b)the decision by the banks themselves to enter the market as active speculators.It is true that the bubbles themseves start irrespective of the banking system since individuals are free to engage in speculative finance with their own money and assets.However,the bubbles could not grow and expand over time if the bankers refused to allow the speculators to leverage their debt position by obtaining extensive lines of credit from the bankers to expand their debt positions.
Everyone who reads this book should also read pp.290-340 of The Wealth of Nations[1776;Modern Library(Cannan)edition]and chapters 12 and 22 of The General Theory of Employment,Interest and Money(1936).Keynes proves mathematically that it is uncertainty and speculation(the speculative demand for money) that cause involuntary unemployment in chapter 21 on pp.305-306.The neoclassical(monetarism,rational expectations,real business cycles,etc.) schools must,therefore ,deny that there is anything called uncertainty or ignorance;there is only risk, which is represented by the standard deviation sigma.Similarly ,they must deny that there is any significant speculative demand for money;there is only a transactions demand for money.Kindleberger essentially demonstates that the neoclassical schools have absolutely no historical support.This also means that there would be no statistical support for their claims that the normal probability distribution is applicable to a wide range of industrial and financial markets.Kindleberger, as well as the new coauthors of this latest edition, overlooked the immense support that Kindleberger could have used to buttress his overwhelming historical evidence that has been madee available by Benoit Mandelbrot. Benoit Mandelbrot has presented massive amounts of statistical evidence, for over 50 years ,demonstrating that the neoclassical school's claims about the normal distribution do not have a shred of evidence to support them.It should not be surprising to discover that NO neoclassical economist in the 20th or 21st century has ever done a single goodness of fit test on the various time series data sets in order to supply support for their claims that price changes in all markets are normally distributed over time.
I recommend this book .It will allow a reader to understand the negatives that could very well happen in the 2008-2010 time period.Ben Bernanke's 1.2 trillion dollar banker and Wall Street bailout,from August,2007-May,2008, has merely delayed the inevitable while creating massive new bubbles in oil and commodities and driving the value of the dollar to new lows.Bernanke has merely substituted future stagflation for recession.
- Much Improved 4th Edition of an Investment Classic
If you are interested in how Alan Greenspan will probably handle the financial weakness that follows the year 2000 collapse of the Internet stocks, this book is a good guide. Chairman Greenspan is basically a follower of Professor Kindleberger. Both believe that pragmatic, flexible activism by the Federal Reserve can shorten up the pain from financial excesses.
Those who are interested in the psychology of financial markets are often drawn to Professor Kindleberger's book after reading Charles MacKay's classic, Memoirs of Extraordinary Delusions and the Madness of Crowds. In this new edition, Professor Kindleberger has added useful perspectives on the Mexican and Asian financial crises of the 1990s and adjusted his interpretation to allow for more differentiation among crises than he did before. I found this edition by far the most satisfying of the four he has written.
Professor Kindleberger is one of the few remaining literary economists, those who make their points in essays rather than through long equations that depend on questionable assumptions. This makes his work very accessible, even though it is as rigorous as it can possibly be while still remaining a popular work.
If you believe in efficient markets or the overriding importance of macroeconomics, you will be angered and annoyed by this book. Milton Friedman and John Maynard Keynes each take their shots here, although in polite ways.
As Peter L. Bernstein summarizes nicely in his introduction, Professor Kindleberger's argument boils down to four principles:
(1) Irrational behavior does occur from time to time in financial markets.
(2) There is a general, repeatable pattern in how this irrational behavior plays out (a positive economic displacement is followed by euphoria that takes the form of overtrading, then distress following revulsion, discredit by lenders in the overtraded assets, and then panic leading possibly to a crash brought on by those who bought high).
(3) The economic system needs a lender of last resort to step in at the right time and in the right way to restore confidence and liquidity.
(4) Trying to solve these problems by being doctrinaire is "wrong . . . and dangerous."
Chapter one looks at how financial crises often accompany peaks in the economic cycle. Chapter two looks at the patterns of typical crises, described by "lumping" them together. Chapter three considers how speculative mania are begun by knowledgable insiders who then unload on overoptimistic outsiders who buy high and sell low. This chapter looks at how the crises differ from one another. Chapter four shows how either excess credit or too fast monetary expansion adds fuel to the flames. Chapter five considers the frequent association of swindles with these manias. Chapter six looks at the psychological stages of the whole process in more detail. Of central importance is the discomfort that many feel as they see a neighbor or friend become wealthy. Chapter seven looks at how the economic impact spreads to other domestic markets. Chapter eight looks at the transference to other international markets. Chapter nine looks at the pros and cons of trying to let these cycles take care of themselves. Chapter ten looks at the role of domestic lenders of last resort (the Federal Reserve in the U.S.). "How much? To whom? On what terms? When?" are the questions that require different answers each time in terms of who should get credit. In Chapter eleven, you see the special problems of the IMF. Will someone take the lead in time, or will everyone dally? The conclusion in Chapter twelve nicely summarizes the book. He argues tentatively that "a lender of last resort does shorten the business depression that follows the financial crisis." He also says there is "a presumption . . . that halting a cumulative deflation helps shorten the depression that follows."
One issue that is not addressed in this edition is how such crises may occur more rapidly and with greater amplitude than before due to improved information flows. As a result, it will be more difficult for lenders of last resort to take correct action in a timely way. Clearly, "jawboning" such as talking about "irrational exuberance" will do little good.
As we sort out the results from the crash of the "dot com" stocks, the groundwork is probably being laid for a fifth edition. How will you respond to the next mania that builds?
Keep sight on rational values, even in times of irrational exuberance. For a deflation along with a credit squeeze will usually follow....more info
- Little value added
The book is a mess where the author seems to try to show off all the names he learned reading history books. I would expect to find some descriptional or analytical value of financial crisis, but by page 60 I still haven't found any, and thought I should report this to you.
So if you want 232 pages of.. "Bouvier's interest lies in whether Bontoux, a Catholic, failed of his own mistakes or was done in by a conspiracy of establishment Jewish and Protestant bankers resisiting an intruder. The subject lies outside our purview, but for the record, Bouvier issues a Scottish verdict of "not proven".", then this book is for you. There is another 44 pages of references to other books, newspapers etc for you to.. ehm, do nothing with.
If you want to learn about financial crisis or recognize the next opportunities or pitfalls for your wallet this is not the book for you....more info
- Classic description of the perennial business cycle
This is a classic one-volume description of the perennial business cycle. It is not really a history and it is not really a book of economic theory. Instead, it is a description of the boom-bust cycle, which draws extensively upon both history and theory.
I have read a good deal on this subject. I think most of what is written in this area is theory, which is divorced from reality. Not this book. He knows exactly what he is talking about, and he describes it very pragmatically.
The basic argument is simple. There is an unending business cycle, driven by mass psychology. The cycle has very definite stages. First, as the economy does well, optimism builds. As people become more optimistic, business expands and credit expands. The upswing starts to feed on itself. Business expands more, because credit is expanding, and credit expands because business is expanding. At first, the expansion tends to be based on real business trends. As time goes on, however, euphoria builds. Credit tends to be expanded way beyond what is justified by any economic fundamentals. This phase is one of mania. We are all familiar with it, having been through the recent dot.com and subprime mortgage manias. What this books shows us is that these manias are not new; they have been coming along, at regular intervals for the last 400 years.
Then the cycle turns. Something happens to cast doubt on the insanity. People panic. Credit is contracted suddenly. Depositers run to their banks demanding all of their money. Shareholders all try to sell their stock simultaneously. Foreign money all tries to leave the country. In the same way that the upswing feed on itself, the downswing is also self-reinforcing.
Free market theory tells us that markets are always in equilibrium, due to supply and demand. From a long-term perspective, that may be true. From a short-term perspective, it is almost never true. In the real world, markets tend to swing from one extreme to the other. This book explains why. There is nothing new here, for those of us with extensive experience in the economy. What is new, however, is having a professional economist take reality more seriously than theory. THAT is extremely unusual.
One minor grievance. The question we all have, of course, is what can we do to stop this crazy cycle? Kindleberger very learnedly discusses all of the various answers which have been tried and which have been proposed. His conclusion? Government intervention makes things worse, some of the time, and better, some of the time. In his view, handling the business cycle is an art, not a science. Realistically speaking, that is probably the best answer anyone has yet come up with, yet I hope -- as do most of us -- that there is a better answer out there somewhere....more info
- Disappointing and non-useful
The subtitle of this book, "A History of Financial Crises", is misleading since the book is actually a *commentary* on the history of financial crises. As such, it assumes that the reader is already familiar with the history of financial crises from 1600 to the present. The book is organized by the phases of a financial crisis, resulting in a near-complete lack of chronological coherence. The author may typically be talking about the Dutch tulip mania of 1636 in one sentence and the panic of 1907 in the next sentence, a style which quickly becomes exasperating. The overall purpose of the book appears to be the promotion of a thesis favoring the concept of a "lender of last resort" in order to mitigate financial crises. Consequently the book reads like an academic treatise, which is basically what it is. This approach is, in this reviewer's opinion, self-indulgent on the part of the author who appears to be addressing a readership primarily in academia, government and perhaps a limited segment of the banking industry. This book is neither instructive nor useful for the general reader....more info
- Great for Anyone and Everyone
First off, I am an "average Joe" type of guy who is younger than the boomer generation. Learning and reading things like this is interesting although I don't read books like this a lot. But I do have two cents to give, like everyone else.
I read this book from reviews and the fact that Alan Greenspan reads this author and apparently has been influenced by him. Dr. Kindleberger focuses on the most driving stimulant behind the market: human psychology. Price to earning ratios, earning reports, and numerous economic indicators are the rational guides, but once the major forces of the market--greed and fear--take root, they can cause momentous shifts in upwardly and downwardly directions quickly, or painstakingly slow and steadily. Mob or Crowd mentalities and the irrational forces behind them, are a recurring psychological and historical cyclical pattern according to Kindleberger, and he provides ample data to back this up. And, if one wants to do well in the market they can focus on picking when the gyrations will occur, choosing when to get in and when to get out.
I often talk with two sets of boomers: those who "hopped on" in the 1990s and "got off" at the right times, or nearly at the right times. It is cyclical, cyclical, cyclical. They are the ones who have benefitted. I also speak a lot with boomers who didn't get out of the market in time, or even at all (as of July 2002). The results are significant and life-long. Lifestyles are permanently affected for the rest of ones life, both in positive and negative ways. And as Dr. Kindleberger notes, there will be another Mania that will come, and the opportune thing to do, is pick when to get on, and when to get off.
Although what I am describing is very simplistic, the theme of the book is that natural patterns of behaviour are buying excessively (euphoria), and also rampant dumping (panic), which again, exceedingly sends the market in both directions. Baby Boomers that jumped on the stock-buying bandwagon in the 1990s, and didn't get out in time may not like this book. They may be reading it to try to figure out what's going on, and if one is to read this book they shouldn't assume the author will dumb it down with simple analogies, and dummy charts for laymen. It's not a simplistic Rick Edelman or Motley Fool type of book for the Boomer-come-lately, so stop complaining about the author's presentation....more info
- Manias, Panics, and Crashes
I gave this book to my grandson who is majoring at UCSD in economics. He has not had any course yet covering the history of financial crashes, etc. and finds it fascinating to compare past times with the present economic slowdown. Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics)...more info
- Timely and yet enduring
As I write this review, we are waiting to see if the Fed's somewhat drastic cut in the federal funds rate will stop the slide into recession. Bank of America is acquiring Countrywide mortgage lenders. UAE has bought an $7.5 billion worth of junk bonds from Citigroup in a manner similar to the late Dr. Kindleberger's lender of last resort. So we have an event going here as I write.
As a Southern California homeowner, I am certainly not surprised at what is happening. Houses constructed and first sold for $30,000 in the late 1950's were selling for $600,000 and up a year ago. I would go to lunch and all anyone would talk about was real estate. I got a lot of crazy advice ("sell your home, move out to the desert, and live off the interest.") I would turn on the TV and watch Jim Cramer screaming "They're not making any more land out there!!!!!" How could that last? I decided it was time to read this book.
Manias, Panics, and Crashes is a scholarly work of Economic History. It sets up a model of a crash or panic and then explores each phase in succession. He writes narratives of events, such as the South Sea Island Bubble, and how the events transpired. Dr. Kindleberger examines the mania or bubble phase, the critical stage, and then examines two ways in which it ends. The two ways to end the panic are either to let it burn itself out or through a lender of last resort. He focuses on the economic more than the psychological factors that make up these cycles.
Kindleberger favors the lender of last resort solution as it cuts the duration of the crisis. He notes that the Great Depression could have been stanched more quickly had there been a lender of last resort. But, I think he presents opposing ideas to his in a fair and gentlemanly manner.
Yes, this book is not an easy book to read. Few books in economics are easy to read. No it doesn't give advice on profiting from a panic. The Late Harry Browne used to write such books before he began running for President. Those books are useless generally; by the time you want to read them, its already too late. Gold, foreign currencies, and the like will be at all time highs, as they are currently.
I recommend this book because this is a recurrent phenomena that is part of human nature. Optimism is a good thing. But if you are channel surfing late night television and an infomercial comes on with guys sitting in lounge chairs around a pool sipping margaritas and telling stories about how they became millionaires while working 2 hours a week, it's time to read Dr. Kindleberger's book.
Update: Last weekend, the Fed arranged a deal where JP Morgan-Chase acquired Bear Stearns for $2 per share to forestall a panic. There are many critics of this deal. Some say the corporate headquarters alone was worth many more times than what Morgan paid for the company. Most of the press gave the credit for the deal to Ben Bernanke, but Robert Novak in the Washington Post gives the credit to Timothy Geithiner, President of the NY Federal Reserve Bank.
So, the Fed is following the Kindleberger strategy of finding the buyer of last resort rather than the Milton Friedman strategy of letting the fire burn itself out. I suspect we will know in a month or so whether this strategy has succeeded or not.
I am reviewing and recommending the edition of this book released in 2000. ...more info
- Wordy but informative
This book goes through the economic history of our country. This book gets very wordy at times and goes into almost too much needless detail, but can be very informative. Kindleberger shows us that bad behavior can happen even now on the economic market, and that there is a definable parren to economic crises. Chapter one talks about how economic lows usually follow peaks in our economy. Chapter two discusses the patterns of a crisis. Chapter three compares crises and describe how they differ. Chapter four says that bad credit adds to the problems.Chapter five discusses those who help add to the problems of a crisis. Chapter six looks at the feelings of people as they make and lose money. Chapter seven deals with economies effects domestically and chapter eight internationally. Chapter nine talks about the good and bad of trying to let the problems fix themselves and chapter ten discusses the leaders of the economy. Although going into great detail, almost too much detail at times, it proves informative in the end. Three stars....more info
- A Book That Must be Read
I only had one semester of economics in college. The course was taught by an old man who had lived in the small city of Appleton, Wisconsin for most of his adult life and had therefore missed the labor wars to the extent that I took exception to his interpretation of a union factoid that I knew about because I had worked the summer previous in a union shop and learned the hard way what he had gotten out of a book. I made a deal with him; if he would pass me I would not take his class again.
Since then I have read books about economics and think that if I knew how to fill a blackboard with all those arcane formulas economists use, I too could be an economist.
You make a product and you sell it. Then sidemen figure out how things are bought and paid for and how every list bit of profit is squeezed out of the transaction.
Economists like to write about how some people are better squeezers than others, and so when you see the history of a transaction spelled out in black and white you can only think, "of course, that's the way it worked."
The author presents some transactions through history that make the reader wonder how people can be so stupid, e.g., the Great Tulip Bust. Why would anyone be so stupid as to bet the farm on flowers?
Right now we are going through an economic panic that may be more psychological than actual. The author makes the case that what we have endured before is what we are enduring now, so let us once again try not to do the damn fool things we have done in the past, and he does it in a readable manner that is not pedantic or filled with insider's jargon. ...more info
- Masterly analysis of financial crises.
This book is in fact a plea for a 'lender of last resort' in case of financial crises, and also an attack on monetarism.
"A monetarist view of the matter - that mania and panic would be avoided if only the supply of money were stabilized at some fixed quantity, or at a regular growing level - is rejected." (p.6)
"The Chicago School of monetarism assumes that authorities are universally stupid and the market always intelligent. In the panics we are examining, this uneven distribution of intelligence cannot be tested against crisis management because authorities and leading figures in the marketplace both exert themselves in the same direction: to intervene in one way or another, in order to halt the spread of falling prices, bankruptcy, and bank failure." (p.158)
Kindleberger proves that authorities aren't always that stupid: see the Marshall Plan after WW II.
For the lender of last resort, Kindleberger remarks: "The historical record suggests the leading financial centre of the world, often assisted by other countries." (p.201)
This is a fascinating study covering 500 years of economic history and crises. This book not only gives an objective view on the different crashes, but also tries to extract necessary lessons from them.
A must for every economist and for the layman....more info
- Not a history - more of a survey
Definitely NOT a "Popular" history. Very much a survey of the topic. Appears to me that there is an assumption that you are quite familiar with the events briefly alluded to in the discussion. Interesting concepts and fascinating historical glimpses. The details of the book's title will be found by reading the source notes and then going to the library to read the source documents....more info
- valuable history lessons
This book provides accounts of financial manias in history. Analyze many aspects of manias, how they come about, what are various players in manias, how they end. One thing the book is missing is how to position yourself or profit from these episodes of mania....more info
- this book is excellent and particularly timely.
Mr. Kindleberger explores a little understood/discussed topic and brings it into focus for investors of varying levels of sophistication. It is especially good reading in the context of the headlong rush into "emerging markets" that the Wall St. pundits have advocated in recent years. As foreign markets come unraveled his chapter on international propogation of crises is spectacular for its insights....more info
- Relevant, but difficult to read
There is a wealth of great information and insight in this book, but it is organized in a manner that reduces interest and readability. The authors make points and then provide examples from several financial crises, with the result that almost every single page covers multiple events but you never really get a full picture of those events. It is incredibly relevant to the current (2008) crisis, so it is unfortunate the book isn't organized better....more info
- A wealth of information, badly written, poorly organized
This investment classic offers a comprehensive survey of all the major crashes and panics in financial history from the 17th century all the way to the dotcom era. The author analyzes these phenomena with a Minksy framework and provides indispensable insights on the psychology of the markets, the relevance of historical conditions, the deep underlying fundamentals as well as policy responses.
However, it takes considerable effort to harvest the insights. The book is VERY difficult to read. The author is a non-mathematical economist but I cannot agree with other reviewers who call him a literary economist as his writing is an absolute massacre of the English language. The style is elliptical and verbose. He shovels detailed historical facts right into your face, leaving you to piece them together. The author also repeats the same facts and ideas across chapters under a different pile of verbiage.
The appendix in this edition provides a useful chronological summary of all the crises treated in the main text. It is advisable to consult this first before diving into the mess....more info
- Not for the armchair economist
Kindleberger dissects manias and panics to arrive at his conclusions. In the process, though, he bombards the reader with an abundance of detail and assumes a good understanding of university economics.
A non-economist will have difficulty to follow his line of reasoning. For example: "A synthesis of Keynesianism and monetarism, such as the Hansen-Hicks IS-LM curves that bring together the investment-saving (IS) and liquidity-money (LM) relationships, remains incomplete, even when it brings in production and prices (as does the most up-to-date economic analysis) if it leaves out the instability of expectations, and credit and the role of the leveraged speculation in various assets".
For those who enjoy thoughtful, dense reading, this book will make you a smarter investor. Unfortunately, for the large investing masses, those that have lost large sums in their 401k plans lately, the academic nature of this book puts this knowledge out of their reach....more info
This is a review of the 2005 edition. Although details differ, there are striking similarities in the basic structure of economic booms and busts. The author provides enough history to develop his arguments, then proceeds to apply them over 300 years of history. But this is more than "nil novum sub sole," because he focuses the last part of the book on the past 40 years, where more and bigger manias-crashes have occurred. This book, reviewed in early 2009, makes fascinating reading for those interested in what may lay ahead for all concerned. You really (but really) need to read this one. ...more info
- Wordy but informative
This book goes through the history of all types of lows in the economy. It is extremely wordy and goes into great detail of how the mismanagement of money and credit by individuals and the government has led to financial crises. Kindelberger discusses that irrational behavior does occur from time to time and cannot be stopped. That it has a defined pattern that can be seen in order to stop it from happening again. Chapter one talks about how crises usually follow a peak in the economy. Chapter two talks about the patterns of crashes. Chapter three talks about the differences between crises. Chapter four talks about credit and using it too fast will increase the chances of a mania. Chapter five discusses those who are usually involved in a crisis. Chapter six discusses the emotions of people as they gain or lose money. Chapter seven talks about the impact of the economy on individual businesses which goes into chapter seven which increases to the international market. Chapter nine discusses whether government should play a role in it and finally chapter ten looks at government leaders and their roles. It goes into great detail and almost too much detail at times, but it is very helpful in reviewing the history of our economy....more info
- Poorly organized, poorly written
If you're looking for an interesting review of the panics and stock market crashes of the past, look elsewhere. This book reads as if a well-organized, concisely written history of panics was thrown into a blender and pieced together out-of-order....more info
- Relevant to today
This book is well written and quite relevant to todays World of finance. It describes various events from the past which have helped to shape our global economy and inadvertantly have created the institutions which regulate our market -although regulation is not dealt with herein.
Kindleberger's history though is often difficult to read as it does not follow a chronological structure. Further he assumes that the reader has attained a certain level of knowledge as he seems to only make very brief mention of certain events.
This book would have been far better if it was chronological and far more detailed. Still a great read with some interesting lessons from the dim, dark past of speculative manias ...???...more info
- Writing after crashes is easy
Many causes for financial crashes. All have more or less the same pattern. A lot of publication appear after a crash, who will write before the crash?
This book gives good insight into financial chaos.
- Only for serious economists
This book is definitely not for the arm-chair investor. Although the idea is very good, a thorough understanding of economics will be required to make this very factual book worthwile....more info
- Sorry amazon, I read the library's copy...
I'm puzzled by some of the negative comments about this book here, as I'm neither an economist nor a historian and I found the book quite accessible and interesting. The fairly predictable sequence of events leading to crashes, which have been played out many times in the past, is the book's central theme. Some of the story-telling could even be described as fascinating at times, though my knowledge of the subject was pretty much limited to what one learns of the famed `29 crash in high school american history.
Anyway, the critics here are not entirely wrong, though I think they're being a bit nit-picky. I don't think the widely-read and educated lay-person should be scared off. I liked the book, learned something significant from it, was mildly entertained and impressed by the author's plethora of knowledge, and occasionally recommend it to those with an interest in financial markets, especially their so-called irrational side....more info
- Good book.
It shows u step by step to finanical crashes in history. It tells u what will happen in each stage toward the crashes.
In the beginning, it says : "For historians each event is unique. Economics, however, maintains that forces in society and nature behave in repetitive ways.
This is always true in 1929, ..., 1987, 1997, 2000, 2001 crashes....more info
- If you like investments, you need read this book. Now!
This book is exceptional.
After read it you will see the market, the history, and... Specially the warnings, with other eye.
Kindleberger wrote an excellent book about Manias, about Panics, about Crashes, about HOW keep alert!
Don't panic... just read it.
- Essential read for people concerned about their investments.
Few subjects in economics are as basic as financial crisis, yet in trying to explain them, one can be at a loss for words. Kindleberger's thoughts on the subject are summed up in this book in a way that few have chosen to follow. Instead of providing mathematical equations to try to explain the various crises that have arisen, he has chosen to explain his ideas in a more tangible method. This method involves interspersing his ideas with annecdotes and real life examples.
To begin, Kindelberger takes the traditional thought that people are rational beings and introduces the fact that speculation leading to destabilization is very much present, and that many of history's crashes have come from this irrational behavior, ie manias and panics. To explain, one must first define what a mania is, what a panic is, and ultimately, what a crash is.
According to Kindleberger, a mania is basically just excessive speculation in the market. It follows, as Kindleberger suggests, that if one observes someone else, ie a friend, who is making money through speculative investments, one tends to follow. Mania is movement from cash or money into illiquid real assets. As more and more people begin to investment on speculation, people that would normally be indifferent to this type of behavior decide to invest, it is called a mania. Also used interchangeabley with the term maina is the term "bubble". The use of the word "bubble" to explain this speculation foreshadows bursting. In this book, bubble refers to "an upward price movement over an extended range that then implodes. Extended negative bubbles, or periods of disinvestment are what are called crashes.
Panics refer to the period after the mania has died down, and people are beginning to speculate in the opposite direction. As the maina was the upswing, the panic is the downswing. Panics are easily defined as the movement away from illiquid assets to money or cash.
Crashes are sometimes thought to be the result of an extended period of panic. More often, a crash involves the collapse of prices or the failure of important firms or banks. However, financial crisis can result from one or the other or both, in no particular order. Kindelberger sites the crash of 1929 as an example. " The 1929 crash and panic in the New York stock market spread liquidation to other asset markets, such as commodities, and seized up credit to strike a hard blow at output." In spite of this Kindelberger explains that there was no money market panic as evidenced by the increase in interest rates.
Informative and concise, Kindelberger is able to encompass more than three hundred years of financial crises in about 200 pages. In he majority of these cases, he asks the important question of whether or not there was a lender of last resort, and if not, would it have made a difference. A lender of last resort acts to halt a run out of illiquid assets into money by making more money available, through a discount window. The author goes into great detail of who has been the lender of last resort in past crises. For example in the various crises that affected France in the nineteenth century, The Bank of France has acted as lender of last resort. While in Prussia in 1763, the king acted as lender of last resort.
From all of this, Kindelberger attempts to explain some of the lessons that all of the crises in the past have given us. Besides of the advantages of having a lender of last resort, he warns us that it is not the whole solution. Having a lender of last resort can pose its own problems. Many institutions, because there is someone to bail them out, partake in more risky practices. By simply bailing out these mismanaged firms, we are not giving them incentive to improve their operation.
Manias, Panics, and Crashes is a well of information on the topic of financial crises. Kindelberger has made this book an easy read for the everyday person, not just economists. By avoiding the mathematics and jargon used in so many other economics books, he has produced a book that is necessary reading if one is contemplating in "playing the market." Manias, Panics and Crashes would be a wise investment for them as well as anyone curious in financial history . The old adage is true, those who do not know the past are condemmed to repeat it. By learning of others past mistakes we can more successfully navigate our own way....more info
- Minsky to Understand Today
Dry, sometimes overly dense, but amazingly relevant to today's mess. While I normally would put the warning label of "heavy lifting" when recommending to friends, being able to see an analysis that shows how bubbles are created and what happens in the aftermath of their popping is worth the effort. Charles Kindleberger puts economic bubbles throughout history into the model developed by Hyman Minsky.
This seems to boil down into: (1) speculation begins in some commodity (often real estate); (2) this speculation causes an upward spiral of overvaluation as investors compete--often irrationally; (3) investors then may use the profits to speculate in other areas (often the stock market); (4) once the overvaluation of the original commodity is "discovered", the whole house of cards comes crashing down. This happened in the lead up to the Great Depression (Florida real estate; stocks) and happened recently (mortgage mania; mortgage backed securities and insurance on the same).
Kindleberger died before the most recent mess, but he warned at the end of chapter 5 in the wake of the dot com bubble:
"The mild and short recession in 2001 after the massive implosion in US stock prices resulted in the abrupt change in the policy of the Federal Reserve and its rapid and aggressive move to reduce interest rates. The result was a mortgage financing boom; millions of individuals refinanced their mortgages at lower interest rates and used some of the cash obtained in the refinancing to buy autos and other consumer durables and to go on vacations...One result was a boom in the housing market...Skeptics wondered wondered whether the deflationary effects of the implosion of the stock price bubble had largely been offset by a bubble in the housing market."
I wish more people had paid attention to those skeptics.... ...more info
- Excellent book, but not a good financial history
The subtitle (A History of Financial Crises) is misleading. This is an excellent book as far as dissecting manias and trying to understand them, but it is mainly that -- a study of how manias develop and turn into panics or crashes. The impression that I got is that Dr. Kindleberger assumes the reader already knows financial history. If history is more of what you're looking for, I highly recommend Edward Chancellor's "Devil Take the Hindmost". You can always come back to "Manias, Panics, and Crashes" later for a deeper study....more info
- A Crashing Disappointment Despite the Mania Surrounding It.
I had high expectations for this book after seeing a favorable reference to it in the "WSJ". I was looking for insights and generalizations that characterize market explosions and their inevitable collapse which could be applied to future financial booms and busts.
Instead I was treated, check that, tortured by a dry narrative that wandered between centuries and continents and back again all in the same breath. As I read, I kept asking myself, "What's the point? Where are those nuggets of insight? Where is the critical thinking? Surely, they must show up at some point!" They never did.
Kindleberger presented a lot of historical (and disjointed) facts, but the meat of it was sorely lacking. He clearly would be classified as an economic theorist rather than a practitioner, but I can't see his work being useful to pure economists either. While Greenspan may be acquanted with him on the cocktail circuit, I doubt he has much use for Kindleberger otherwise.
Rather than repeat what others have said, I recommend the reviews of 12/26/98, 11/8/99, 2/16/00, 9/15/02, 1/18/03, and 2/25/03 which are on target and worth reading....more info