Abstract
In our model, displacement, euphoria, and distress are perhaps followed by panic, which is perhaps followed by crash. This is not very different from the pattern seen by Lord Overstone, the leading British banker of the middle of the nineteenth century, quoted with approval by Walter Bagehot: “quiescence, improvement, confidence, prosperity, excitement, overtrading, CONVULSION [sic], pressure, stagnation, ending again in quiescence.”1 The formula stretches euphoria into five stages that are difficult to sort out and puts pressure after, instead of before, the financial crisis itself (convulsion). If the order is altered, however, distress and pressure consist in a period in which the rosy expectations of boom are gradually or quickly undermined and give way to gloom.
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Notes
6. The Critical Stage
The Collected Works of Walter Bagehot, ed. Norman St. John-Stevas (London: The Economist, 1978), vol. 9, p. 273.
Milton Friedman, “In Defense of Destabilizing Speculation,” in The Optimum Quantity of Money and Other Essays (Chicago: Aldine, 1969), p. 288.
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John Carswell, The South Sea Bubble (London: Cresset Press, 1960), p. 139.
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q, A Study of Trade-Cycle History: Economic Fluctuations in Great Britain, 1832–1842 (Cambridge: Cambridge University Press, 1954), p. 162.
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See Clément Juglar, Des crises commerciales et leur retour périodique en France, en Angleterre et aux Etats-Unis, 2nd ed. (1889; reprinted., New York: Augustus M. Kelley, 1967),p. 427.
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O. M. W. Sprague, History of Crises Under the National Banking System (1910; reprinted., New York: Augustus M. Kelley, 1968), p. 127.
Ibid., p. 33.
Ibid., p. 36.
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See C. P. Kindleberger, “Asset Inflation and Monetary Policy,” Banca Nazionale del Lavoro Quarterly Review, no. 192 (March 1995), pp. 17–35.
Carswell, South Sea Bubble, pp. 136–37, 158.
Evans, Commercial Crisis, p. 13.
Gayer, Rostow, and Schwartz, Growth and Fluctuation, p. 307.
W. Jett Lauck, The Causes of the Panic of 1893 (Boston: Houghton, Mifflin, 1907), pp. 59–60.
Oskar Morgenstern, International Financial Transactions and Business Cycles (Princeton, N.J.: Princeton University Press, 1959), p. 523.
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E. Ray McCartney, Crisis of 1873 (Minneapolis: Burgess Publishing Co., 1935), pp. 58, 71.
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George W. Van Vleck, The Panic of 1857: An Analytical Study (New York: Columbia University Press, 1943), p. 68.
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Robert Baxter, The Panic of 1866, with Its Lessons on the Currency Act (1866; reprinted., New York: Burt Franklin, 1969), pp. 4, 26.
Clapham, Bank of England, vol. 2, p. 101.
Ibid., p. 100.
Rosenberg, Weltwirtschaftskrise, p. 118.
Van Vleck, Panic of 1857, p. 74.
Rosenberg, Weltwirtschaftskrise, p. 121.
Sprague, History of Crises, p. ll3.
Alvin H. Hansen, Cycles of Prosperity and Depression in the United States, Great Britain and Germany: A Study of Monthly Data, 1902–1908 (Madison: University of Wisconsin, 1921), p. 13.
H. S. Foxwell, “The American Crisis of 1907,” in Papers in Current Finance (London: Macmillan, 1919), pp. 202–3.
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Kindleberger, C.P., Bernstein, P.L. (2000). The Critical Stage. In: Manias, Panics and Crashes. Palgrave Macmillan, London. https://doi.org/10.1057/9780230536753_6
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