Abstract
For historians each event is unique. Economics, however, maintains that forces in society and nature behave in repetitive ways. History is particular; economics is general. In the chapters that follow, we shall set out various phases of speculative manias leading to crisis and collapse, with a wealth of historical explanation. In this chapter we are interested in the underlying economic model of a general financial crisis.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Notes
2. Anatomy of a Typical Crisis
Joseph A. Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process (New York: McGraw-Hill, 1939), vol. 1, chap. 4, esp. pp. 16lff.
Hyman P. Minsky, John Maynard Keynes(New York: Columbia University Press, 1975);
and idem, “The Financial Instability Hypothesis: Capitalistic Processes and the Behavior of the Economy,” in C. P. Kindle berger and J.-P. Laffargue, eds., Financial Crises: Theory, History and Policy (Cambridge: Cambridge University Press, 1982), pp. 13–29.
For a view of the work of Hyman Minsky in historical context, see Perry Mehrling, “The Vision of Hyman P. Minsky,” in Journal of Economic Behavior & Organization, vol. 39, (1999), pp. 125–58.
Robert D. Flood and Peter M. Garber, Speculative Bubbles, Speculative Attacks, and Policy Switching (Cambridge, Mass.: MIT Press, 1994).
See R. C. O. Matthews, “Public Policy and Monetary Expenditure,” in Thomas Wilson and Andrew S. Skinner, eds., The Market and the State: Essays in Honour of Adam Smith (Oxford: Oxford University Press, Clarendon Press, 1976), p. 336.
See James B. Stewart, Den of Thieves (New York: Touchstone Books [Simon & Schuster], 1991, 1992), p. 97: “What really fueled the takeover boom [in the 1980s] was the sight of other people making money, big money, by buying and selling companies.”
Robert Z. Aliber writes that a “bubble occurs when investors’ forecasts of the price of an asset—stocks or real estate or tulip bulbs—on Friday are based on the increases in its price from Monday to Tuesday and from Tuesday to Wednesday” (Personal communication).
M. J. Gordon, “Toward a Theory of Financial Distress,” Journal of Finance, vol. 26 (May 1971), pp. 347–56.
See Flood and Garber, Speculative Bubbles, pp. 73–74, 85, 96, 98, etc.
See C. P. Kindleberger, The World in Depression, 1929–1939, 2nd ed. (Berkeley: University of California Press, 1986), pp. 1–3.
Alvin Hansen, Business Cycles and National Income (New York: W. W. Norton, 1957), p. 226.
Newspaper accounts state that George Soros’s Quantum Fund made a profit of $1 billion going short of the British pound and the Italian lira in 1992–93 and lost $600 million shorting the yen in the spring of 1994.
See Stephen Goodman, ed., Financing and Risk in Developing Countries (New York: Praeger, 1978).
Copyright information
© 2000 Palgrave Macmillan, a division of Macmillan Publishers Limited
About this chapter
Cite this chapter
Kindleberger, C.P., Bernstein, P.L. (2000). Anatomy of a Typical Crisis. In: Manias, Panics and Crashes. Palgrave Macmillan, London. https://doi.org/10.1057/9780230536753_2
Download citation
DOI: https://doi.org/10.1057/9780230536753_2
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-97029-4
Online ISBN: 978-0-230-53675-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)