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A very readable and enjoyable financial history. The latest financial meltdown is nothing new, we have suffered such panics before and will again. This book gives the reader a good perspective on previous financial follies and helps for understanding the current and future panics.
However, it takes considerable effort to harvest the insights. The style is elliptical and verbose.
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. He shovels detailed historical facts right into your face, leaving you to piece them together.
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 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.
It is advisable to consult this first before diving into the mess. 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.
The book is VERY difficult to read.
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 is a review of the 2005 edition. You really (but really) need to read this one. This book, reviewed in early 2009, makes fascinating reading for those interested in what may lay ahead for all concerned. 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.
As time goes on, however, euphoria builds. Depositers run to their banks demanding all of their money. I think most of what is written in this area is theory, which is divorced from reality. The question we all have, of course, is what can we do to stop this crazy cycle. Shareholders all try to sell their stock simultaneously. Credit tends to be expanded way beyond what is justified by any economic fundamentals. Business expands more, because credit is expanding, and credit expands because business is expanding. It is not really a history and it is not really a book of economic theory.
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. First, as the economy does well, optimism builds. His conclusion. At first, the expansion tends to be based on real business trends.
The upswing starts to feed on itself. There is an unending business cycle, driven by mass psychology. What is new, however, is having a professional economist take reality more seriously than theory. Kindleberger very learnedly discusses all of the various answers which have been tried and which have been proposed. 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.
Free market theory tells us that markets are always in equilibrium, due to supply and demand. In his view, handling the business cycle is an art, not a science. This is a classic one-volume description of the perennial business cycle. Foreign money all tries to leave the country. In the real world, markets tend to swing from one extreme to the other. The cycle has very definite stages. In the same way that the upswing feed on itself, the downswing is also self-reinforcing. There is nothing new here, for those of us with extensive experience in the economy.
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. THAT is extremely unusual. Credit is contracted suddenly. This book explains why. From a long-term perspective, that may be true. Government intervention makes things worse, some of the time, and better, some of the time. People panic.
He knows exactly what he is talking about, and he describes it very pragmatically.The basic argument is simple. We are all familiar with it, having been through the recent dot.com and subprime mortgage manias. One minor grievance. Not this book. From a short-term perspective, it is almost never true. Something happens to cast doubt on the insanity. As people become more optimistic, business expands and credit expands.
This phase is one of mania.
Then sidemen figure out how things are bought and paid for and how every list bit of profit is squeezed out of the transaction. 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. I only had one semester of economics in college. 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. 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. 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.
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