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Minsky's work is more mathematical but still highly accessible for anyone educated in economics."Manias, Panics, and Crashes" is a great work that empirically shows that speculative finance alters the business cycle. Unfortunately, most of the pre-19th century panics lack comparable statistics.
He holds that "the a priori assumption of rational markets and consequently the impossibility of destabilizing speculation are difficult to sustain with any extensive reading of economic history". Kindleberger does an excellent job at explaining the history of Western "Manias, Panics, and Crashes".
All of his examples deal with descriptions of historical events. Kindleberger then goes on to explain why the shallow assumption of Milton Friedman and other neoclassical economists are flawed.Kindleberger takes a qualitative approach to economic history that is widely assessable.
The people who gain the most from this work will typically be non-economists. When Kindleberger does use statistics he uses them intertwined with prose.For those wishing to understand the theoretical construct behind Kindleberger's approach Hyman Minsky's 'John Maynard Keynes' and 'Stabilizing an Unstable Economy' are must reads.
Unfortunately, it fails theoretically to explain why.
Given the way that people chase performance, we can all make mistakes as a group, with large booms and busts. Sometimes we forget how bad it can be, and then we howl over minor bad times in the markets. People squeal over how bad the equity market is, but recently we haven't had anything like the 2000-2002 experience, much less the 1973-1974 or 1929-1932 experience.Two books come to mind when I think about disaster in a non-fear-mongering way: Manias, Panics, and Crashes, by Charles Kindleberger, and Devil Take the Hindmost, by Edward Chancellor. Relatively free societies give people freedom to make mistakes. In it he draws on a number of common factors: * Loose monetary policy * People chase the performance of the speculative asset * Speculators make fixed commitments buying the speculative asset * The speculative asset's price gets bid up to the point where it costs money to hold the positions * A shock hits the system, a default occurs, or monetary policy starts contracting * The system unwinds, and the price of the speculative asset falls leading to * Insolvencies with those that borrowed to finance the assets * A lender of last resort appears to end the cycleI liked them both, but I am an economic history buff, and a bit of a wonk. They take two different approaches to the topic, and those approaches complement each othe, giving a fuller picture.
He is somewhat prescient in suggesting that the leverage inherent in derivatives post-LTCM could be the next crisis. We may be past a mania in residential housing, but we have not really experienced a panic or crash yet. Much as the regulators might want to tame it, they can pretty much only affect what kind of crisis we get, and not whether we get one. Chancellor takes a historical approach, while Kindleberger deals with the structures of financial crises.From Chancellor, you will see that manias and their subsequent fallout are endemic to Western culture. Someone living a full life over the last 300+ years would see one or two big ones, and numerous small ones. This book is a better one if you like the stories, and don't want to dig into the theories.But if you like trying to place the manias, panics, and crashes on a common grid, to see their similarities, Kindleberger has written the book for you.
The benefit of both books is that they will make you more aware of how financial crises come to be, and what the qualitative signs tend to manifest during the boom and bust phases of the overall speculation cycle.
This is a very informative book, however, it is extremely boring. The writing just makes an interesting topic completely boring. Good book nonetheless and worthy of a read.
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.
I am always amazed how often history repeats itself and how quickly we forget. This book provides an amazing history of the credit markets for the last several hundred years. This should have been required reading for government officials and banks executives.
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