by Charles P. Kindleberger, Robert Aliber
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Product Description
A scholarly and entertaining account of the way that mismanagement of money and credit has led to financial explosions over the centuries. Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book has been hailed as "a true classic...both timely and timeless." The updated fifth edition expands upon each chapter, and includes two new chapters covering significant crises of the last fifteen years around the world.
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Average Customer Review:
3 of 3 people found the following review helpful:
Presents a correct analysis but should have devoted some more time to the warnings of Smith and Keynes-4 .5 stars, 2008-06-01
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.
3 of 12 people found the following review helpful:
 The Reality, 2008-03-11
The REALITY is that the small super-over-incredible-tons rich globalist groups that control the world finances are behind this "financial crisis".
They , in their plans to globalize the world need from one side to remove the middle class in order to build its socialist type (without saying that name) of world and at the same time they need to force a buy-out of banks and industries; that way the biggest ones eat the smallest ones and just a group of transnationals ( which they, of course, are the owners) will control the world economy, and wanted or not, they will impose their will all around the world, making of us modern slaves, just happy to have a car and a permanent job to pay the permanent debts while they will live in limitless richness.
That has been the human history, no matter which one label is used for the System; a group controls the majority with force or beautiful lies. We, that lived communism, we know that, but this is more "perfect" perpetrated, because they will give "bread" and a sense of "false peace".
They take us as stupid and cretins that will be part of the choir which will sing the song of the "good purpose and righteousness plan". My friends, common citizen of this world, they have no ideology, it only matters for them just power and control. Now as never before.
As soon as such a control is possible, any "circus" can be orchestrated against any opponent or opponents. Look back to over 6000 years of human history.
Alejandro.
1 of 1 people found the following review helpful:
 valuable history lessons, 2008-01-23
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.
0 of 2 people found the following review helpful:
 Overrated, 2007-12-28
Where are the "hilarious anecdotes, the elegant epigrams, and the graceful turns of phrase" promised on the back cover? There are valuable insights and ideas, but they are buried in more historical information than needed, and are somewhat disconnected and undeveloped. The material is not particularly well organized, and,like history, the author repeats himself a lot. The writing is awkward and difficult to read in places. However, I did pick up a good many insights and bits and pieces of historical information that are relevant to the current problems in the credit markets. History does repeat itself. Although I think this book is over-rated, if you are a patient reader and a serious student of financial markets, I would recommend it.
10 of 10 people found the following review helpful:
A classic book on financial bubbles from an exceptional scholar, 2007-09-30
Kindleberger was a professor of economics at MIT, and a deep scholar of the history of financial bubbles and subsequent crashes. He proves with many examples that growth in the supply of credit is a fundamental factor in bubble development, stengthening associations of this type categorized by Hyman Minsky. While Kindleberger's writing is sometimes redundant, his amazing grasp of the details of financial history, numerous examples, and deep understanding more than compensate for this minor limitation of style. This book has been through 5 editions and is an indispensable reference; it is also a fascinating read. It should not to be missed by any serious investor, nor any student of financial manias and panics.
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