Manias, Panics and Crashes: A History of Financial Crisis (Wiley Investment Classics) [Paperback]

Charles P. Kindleberger (Author)

Book Description

Publication Date: December 2, 1996 | Series: Wiley Investment Classics (Book 10)

Manias, Panics, and Crashes

The best known and most highly regarded book on market crisis, Manias, Panics, and Crashes is entertaining, exhaustive, and thoroughly engaging. Since its introduction in 1978, it has charted a new landscape in the volatile world of financial markets. Charles Kindleberger's brilliant, panoramic history revealed how financial crises follow a nature-like rhythm: they peak and purge, swell and storm. Now in a newly revised and expanded third edition, Manias, Panics, and Crashes probes the most recent "natural disasters" of the markets-from Black Monday to the Japanese boom and bust, from the Sterling crisis and Peso devaluation to the potential "bubble" of today's technology stocks.

Kindleberger's writing is both captivating and colorful, leading the reader through a myriad of financial free falls. From the currency devaluation in the Holy Roman Empire in 1618, through the California gold rush of the 1840s and '50s, all the way up to the crash of 1987 and last year's Peso devaluation, his sharply drawn history confronts a host of key questions: In the ups and downs of market behavior, where is the line between rational and irrational? Are the markets a fool's paradise in an explosive world? When the storm expands to dangerous proportions, who will calm the panic amid the thundering squall? Should a "lender of last resort" intervene to repair the wreckage and bury the carnage?

Along with scores of casualties and criminals, a revealing common thread emerges from this rich history of manias, panics, and crashes: market crises are associated with greed and avarice. Just as money evolved from coins to include bank notes, bills of exchange, bank deposits, and checks, greed likewise took on many different forms. Lightning will strike an economic environment in strife, and Kindleberger explores what happens to the markets when conflicting interests arise.

Manias, Panics, and Crashes can be regarded as a warning or a proposition, reminding readers, in many ways, that what goes around comes around. Like all true classics, Kindleberger's book remains timely-for better or for worse.

"One never picks up a work by Charles Kindleberger without anticipating a feast of entertainment. But underneath the hilarious anecdotes, the elegant epigrams, and the graceful turns of phrase, Kindleberger is deadly serious." -from the Foreword by Peter L. Bernstein, author of Capital Ideas: The Improbable Origins of Modern Wall Street

Originally written in 1978, Manias, Panics, and Crashes is still the best known and most highly regarded book on financial crises. From the currency devaluation in the Holy Roman Empire in 1618, through the California gold rush of the 1840s and '50s, all the way up to the crash of 1987 and last year's Peso devaluation, Manias, Panics, and Crashes reminds us that with regard to excess, greed, crisis, and money-what goes around still comes around.

Acclaim for Manias, Panics, and Crashes

"[Manias, Panics, and Crashes] is a scholarly account of the way that mismanagement of money and credit has led to financial explosions over the centuries." -Richard Lambert, Financial Times

"Manias, Panics, and Crashes is a durable guide to meditation: wise, witty, and practical. It is a template against which to measure the latest financial crisis-whatever and whenever that happens to be." -David Warsh, The Boston Globe

"Manias, Panics, and Crashes glistens among the classic books on economics and finance." -S. Jay Levy, Chairman,

The Jerome Levy Economics Institute of Bard College

"This book sparkles with the best of Kindleberger's wit, insight, and passion for financial history. A real delight." -Robert Z. Aliber, Professor of International Economics and Finance, University of Chicago, Graduate School of Business

Editorial Reviews

From the Back Cover

"One never picks up a work by Charles Kindleberger without anticipating a feast of entertainment. But underneath the hilarious anecdotes, the elegant epigrams, and the graceful turns of phrase, Kindleberger is deadly serious." - from the Foreword by Peter L. Bernstein author of Capital Ideas: The Improbable Origins of Modern Wall Street Originally written in 1978, Manias, Panics, and Crashes is still the best known and most highly regarded book on financial crises. From the currency devaluation in the Holy Roman Empire in 1618, through the California gold rush of the 1840s and '50s, all the way up to the crash of 1987 and last year's Peso devaluation, Manias, Panics, and Crashes reminds us that with regard to excess, greed, crisis, and money-what goes around still comes around.

Acclaim for Manias, Panics, and Crashes

"[Manias, Panics, and Crashes] is a scholarly account of the way that mismanagement of money and credit has led to financial explosions over the centuries." -Richard Lambert, Financial Times

"Manias, Panics, and Crashes is a durable guide to meditation: wise, witty, and practical. It is a template against which to measure the latest financial crisis-whatever and whenever that happens to be." -David Warsh, The Boston Globe

"Manias, Panics, and Crashes glistens among the classic books on economics and finance." -S. Jay Levy, Chairman, The Jerome Levy Economics Institute of Bard College

"This book sparkles with the best of Kindleberger's wit, insight, and passion for financial history. A real delight." -Robert Z. Aliber, Professor of International Economics and Finance, University of Chicago, Graduate School of Business

About the Author

Charles P. Kindleberger was the Ford Professor of Economics at MIT for 33 years. He is a financial historian and prolific writer who has published over 24 books. Manias, Panics, and Crashes is his most popular book.

Product Details

• Paperback: 288 pages
• Publisher: Wiley; 3 edition (December 2, 1996)
• Language: English
• ISBN-10: 0471161713
• ISBN-13: 978-0471161714
• Product Dimensions: 8.3 x 5.5 x 0.9 inches
• Shipping Weight: 12.8 ounces
• Average Customer Review: 3.0 out of 5 stars  See all reviews (8 customer reviews)
• Amazon Best Sellers Rank: #709,031 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

54 of 56 people found the following review helpful:

5.0 out of 5 stars Excellent book, but not a good financial history, November 12, 1999

By 

H. Abboud "hashoumti" (San Pedro, CA USA) - See all my reviews
(REAL NAME)   

This review is from: Manias, Panics and Crashes: A History of Financial Crisis (Wiley Investment Classics) (Paperback)

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.

38 of 42 people found the following review helpful:

4.0 out of 5 stars Essential read for people concerned about their investments., December 31, 1998

By A Customer

This review is from: Manias, Panics and Crashes: A History of Financial Crisis (Wiley Investment Classics) (Paperback)

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.

15 of 20 people found the following review helpful:

2.0 out of 5 stars Relevant to today, February 12, 1999

By A Customer

This review is from: Manias, Panics and Crashes: A History of Financial Crisis (Wiley Investment Classics) (Paperback)

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 ...???