Charles Kindleberger of MIT wrote the first edition, which appeared in 1978, and followed it with three more editions. Robert Aliber of the Booth School of Business at the University of Chicago took over the editing and rewriting of the fifth edition, which came out in 2005. As there are regularities in the financial crises the reading gets a bit monotonous at times.

What is certain is that he would have expressed it with clarity and wit. Perhaps more interesting has been the reaction of those most loth to abandon rational Homo economicus.

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Only a few old believers cling to the idea that the rise in dotcom share prices genuinely reflected likely profits, and that their sudden plunge was caused by regulatory activity. Most prefer to ask why informed, rational investors failed to arbitrage away the absurdly high prices caused by irrational buying, as efficient-markets theory predicts. In a 1997 paper, “The Limits of Arbitrage”, Andrei Shleifer and Rob Vishny noted that the cost of shorting—selling borrowed securities in the hope of a fall in price—tends to increase, the further above true value that prices rise. This may discourage arbitrage that would bring the market back to its senses. His book first appeared in 1978, when most economists who studied finance were in thrall to efficient-markets theory, which in its purest form rules out the possibility of bubbles. In so far as it acknowledged past bubbles, the theory blamed them on immature, fraud-prone markets and argued that they were unlikely to occur in sophisticated, well-regulated, modern settings.

The 2000 edition reads like a playbook for the collapse and bailout of of 2008. I think it would have been a lot more fun to sit down and talk with Kindleberger about his theories than to read this book.

Sure enough, there was no value, as the subsequent crash cements. Prices collapsed, and the bulbs as well as the contracts were completely Manias Panics and Crashes worthless. As speculators pile in, the price of the asset grows higher than can be justified based on future cash flows.

The book centers on the Minsky model, which is what I’ll focus on in this book summary. They know in principle that bubbles exist, and they know that the financial crashes that result from them are capable of destroying individuals’ wealth and entire economies. Yet whenever and wherever a bubble begins to form, we’re told that this time things are different, that there are sound reasons to continue to invest and to presume that prices different types of brokers will continue to rise steadily forever. This is not the easiest book to read without some prior knowledge of economic history. That said it is probably the most complete book on the history and causes of economic upheavals from the 17th century to 2010 available to the non-economist. As a work of financial history, the book often found it necessary to deal with the theories and ideas of non-historians, particularly economists.

For those interested in the generic anatomy of crises, I think it’s better to read Minsky himself, who is pretty accessible. For those looking for detailed descriptions of specific crises, something like Bagehot’s “Lombard Street” is more entertaining. There was not a linear/cohesive presentation of any of the historical bubbles. I read the book based on its reputation as the definitive work on extreme economic valuations. While other worthy tomes, such as “History of Financial Disasters in 3 Volumes” cover much of the same material, the original organization of Kindleberger’s work is what commends it. He disentangles the narrative of many financial disasters into their component parts, then works to educate the reader how to identify which phase of the financial cycle the reader finds himself.

Let’s take a journey through an archetypical cyclical, starting from the bottom. We’ve just experienced a market top and the subsequent recession, what now? An appreciation in asset prices, which can’t be justified by an increase in underlying fundamental/intrinsic values, is a bubble. Now nearing its 60th printing in English and translated into 19 languages, Michael E. Porter’s Competitive Strategy has transformed the theory, practice, and teaching of business strategy throughout the world. Electrifying in its simplicity – like all great breakthroughs – Porter’s analysis of industries captures the complexity of industry competition in five underlying forces. Have never read a book that galvanizes its title to your soul as much as this has.

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These issues often arise when the banks are no longer willing to lend the businesses the capital they need to stay afloat. “A LOT more economists than you might think can write well,” says Peter Dougherty, Princeton University Press’s economics editor, who is compiling an anthology to be called “The Elegant Economist”. A slim volume, you might imagine, but Mr forex platform trading Dougherty reels off a long list of those who have put aside equations and supplied a well-turned phrase to explain the dismal science. Adam Smith wrote memorably sometimes, but he is a harder read than John Maynard Keynes or Milton Friedman, let alone John Kenneth Galbraith, so stylish a writer that he was once asked to join the English faculty at Berkeley.

Lenders/creditors recognize the profit opportunities in said narrative. They regain the courage to issue loans to both private and corporate borrowers. Businesses take on loans/credit to boost their operations as well as invest in financial markets or other businesses. Private people borrow to pay for cars, securities, consumption or real estate. Businesses naturally wish to accommodate the increased demand for goods and services, so they extend their credit line to expand production facilities. Banks obviously have a desire to capitalize on this flourishing optimism, so they lend out even more money. In “Manias, Panics and Crashes”, Mr Kindleberger provided a comprehensive history of financial crises, stretching back to before the South Sea bubble.

I mention events of the past 10 years because Kindleberger could not have foreseen the changes in the financial practices that lead to what has happened, but it has clearly followed his model as if he had been writing today. One of the most dense and therefore challenging books I’ve read. I think the book would be better if it had a few graphs and ignored corruption. There’s plenty to digest here without getting into Ponzi, Madoff, or Enron. I also think some more perspective on why credit bubbles get inflated would have been helpful. If there was only one book I could recommend on how to understand and navigate financial crises, it would be this book.

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It was read back then as a means to achieving a passing grade on a section test in the economics class. I recently had cause to re-read this book, and was surprised to be able to observe the connections between historical financial crises and economic events in our current economy. With all of the talk about stock market manipulation, derivative fraud, and the imminent collapse of the global economic system, this book rings with the reverberation of truth understood over the long-term. This seventh edition of an investment classic has been thoroughly revised and expanded following the latest crises to hit international markets. Renowned economist Robert Z. Aliber introduces the concept that global financial crises in recent years are not independent events, but symptomatic of an inherent instability in the international system.

He argued, not wholly originally, that several common threads linked these different disasters over the centuries in almost all corners of the financial world. Manias, or bubbles, have typically occurred in the markets following unexpected good news, and so reflect progress of sorts. “New opportunities for profit are seized, and overdone.” When this eventually dawns on investors, the financial system may experience distress and often panic. The seventh edition ofManias, Panics, and Crasheshas recently been published by Palgrave Macmillan.

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As the book develops he uses a historical shorthand, reaching across cases to develop his themes. For someone like me not familiar with all the cases in-depth, this became a dizzying affair. This chart is useful, but it would soft forex have been better if the author had established a clear narrative without haphazard jumping between cases. It’s a pain to have to jump to an appendix to figure out where and what is going on with a particular example.

• It’s also a great start for those who want to dig into a specific event.
• He argued that these periods have a number of characteristics in common.
• This is a book review of the famous book on financial crises drafted by Kindleberger and Aliber.
• In a 1997 paper, “The Limits of Arbitrage”, Andrei Shleifer and Rob Vishny noted that the cost of shorting—selling borrowed securities in the hope of a fall in price—tends to increase, the further above true value that prices rise.
• Here is a vivid and entertaining account of how reckless decisions and a poor handling of money have led to financial explosions over the centuries.
• The book is written for both a professional-economist and lay readership.

I think that’s the reason the book has become such a classic– it’s probably assigned in economics classes all over the world. This is the classic account of the life cycle of financial crises, how they happen, but more importantly, how they build, spread and take on lives of their own. Kindleberger’s book carries the message that, while policies may change and economic circumstances may vary, human psychology and oscillation between fear and greed will always be with us. The book is not written for a general audience and some of the econ jargon gave me trouble as a non-specialist but it’s not insurmountable. It is a historical and non-quantitative book so it’s still a very interesting overview of the many global financial crises since ~1600.

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He clearly knew a lot on the subject, and I generally agreed with his ideas, but I found the way the book was organized hard to follow. This copy as gifted to me by my alma mater at an event where Professor Aliber, the co-author of this edition, spoke. When I first read the book, I found this argument to be reasonable and well-argued. But having read this argument, I was looking for more the second time around. Some tidbit that would make me rethink the elements of this book.

The solutions of the past crisis often sow the seeds of the next… Kindlebergers analytical approach is a welcome addition to an Austrian Economist but its supplemental. He implicitly places the responsibility for these cycles at the hands of central banks, banks and policymakers without explicitly obligating them to act more responsibly, which I see as a necessity. Perhaps I just didn’t click with his writing style, even though I could display subtle comical undertones from time to time. Jagdish BhagwatiCharles Poor “Charlie” Kindleberger (October 12, 1910 – July 7, 2003) was an American economic historian and author of over 30 books. His 1978 book Manias, Panics, and Crashes, about speculative stock market bubbles, was reprinted in 2000 after the dot-com bubble. He is well known for his role in developing what would become hegemonic stability theory, arguing that a hegemonic power was needed to maintain a stable international monetary system.

I gave him 4 stars because some of the historical stuff got into plain list mode, without enough explanation, as if he felt he was part of a larger discussion the reader was not privy too. Kindleberger’s “Manias, Panics https://forexarticles.net/ and Crashes” is a must read for anyone active in the markets. If you want to learn how to identify downcycles early, and to understand their progression and eventual end, look no further than Kindleberger’s work.

Also, I felt it was difficult to get a flow in the reading but that can probably be explained by it being a book written by academics for academics. The book is still a great source for investors who want to learn history in order to be able to be on alert for future occurrences. It’s also a great start for those who want to dig into a specific event. The late Charles P. Kindleberger was the Ford Professor of Economics at MIT for 33 years and author of over 30 books. He was best known as a financial historian, whom the Economist referred to as ‘the master of the genre’ on financial crisis.