Customer Reviews

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

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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.

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.

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 ...???

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.

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.

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.

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.

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.