Skip to main content
SpringerLink
Log in

The Critical Stage

  • Chapter
Manias, Panics and Crashes

  • 2023 Accesses

Abstract

The standard model of the sequence of events that leads to financial crises is that a shock leads to an economic expansion that then morphs into an economic boom; euphoria develops and then there is a pause in the increase in asset prices. Distress is likely to follow as asset prices begin to decline. The pattern is biological in its regularity. A panic is likely and then a crash may follow. Lord Overstone, the leading British banker of the middle of the nineteenth century, saw a similar pattern and was quoted with approval by Walter Bagehot: ‘quiescence, improvement, confidence, prosperity, excitement, overtrading, CONVULSION [sic], pressure, stagnation, ending again in quiescence’.1 Overstone identified five stages of euphoria before the financial crisis, or, in his words, the convulsion.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 69.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

The Critical Stage

  1. Milton Friedman, ‘In Defense of Destabilizing Speculation’, in The Optimum Quantity of Money and Other Essays (Chicago: Aldine, 1969), p. 288.

    Google Scholar 

  2. John Carswell, The South Sea Bubble (London: Cresset Press, 1960), p. 139.

    Google Scholar 

  3. W.R. Brock, Lord Liverpool and Liberal Toryism, 1820–1827 (Cambridge: Cambridge University Press, 1941), p. 209.

    Google Scholar 

  4. R.C.O. Matthews, A Study of Trade-cycle History: Economic Fluctuations in Great Britain, 1832–1842 (Cambridge: Cambridge University Press, 1954), p. 162.

    Google Scholar 

  5. Maurice Lévy-Leboyer, Les banques européennes et l’industrialisation internationale dans la première moitié du XIX e siècle (Paris: Presses universitaires de France, 1964), pp. 618–20.

    Google Scholar 

  6. Wladimir D’Ormesson, La grande crise mondiale de 1857: L’histoire recommence, les causes, les remèdes (Paris-Suresnes: Maurice d’Hartoy, 1933), pp. 110ff.

    Google Scholar 

  7. Hans Rosenberg, Die Weltwirtschaftskrise von 1857–59 (Stuttgart: Verlag von W. Kohlhammer, 1934), p. 210.

    Google Scholar 

  8. Max Wirth, Geschichte der Handelskrisen, 4th edn (1890; reprint edn, New York: Burt Franklin, 1968), p. 463.

    Google Scholar 

  9. Fritz Stern, Gold and Iron: Bismarck, Bleichräder, and the Building of the German Empire (London: Allen & Unwin, 1977), p. 242.

    Google Scholar 

  10. M.J. Gordon, ‘Toward a Theory of Financial Distress’, Journal of Finance, vol. 26 (May 1971), p. 348.

    Article  Google Scholar 

  11. Sir John Clapham, The Bank of England: a History (Cambridge: Cambridge University Press, 1945), vol. 2, p. 257.

    Google Scholar 

  12. Edouard Rosenbaum and A.J. Sherman, M.M. Warburg & Co., 1758–1938: Merchant Bankers of Hamburg (New York: Holmes & Meier, 1979), p. 129.

    Google Scholar 

  13. D.P. O’Brien, ed., The Correspondence of Lord Overstone (Cambridge: Cambridge University Press, 1971), vol. 1, p. 368.

    Google Scholar 

  14. Michel Chevalier, Lettres sur l’Amérique du Nord, 3rd edn (Brussels: Société belge du librairie, 1838), vol. 1, p. 37.

    Google Scholar 

  15. Jean Bouvier, Le krach de l’Union Générale (Paris: Presses universitaires de France, 1960), pp. 129, 133, 137.

    Google Scholar 

  16. D. Morier Evans, The History of the Commercial Crisis, 1857–1858, and the Stock Exchange Panic of 1859 (1859; reprint edn, New York: Augustus M. Kelley, 1969), p. 203.

    Google Scholar 

  17. Stephen A. Schuker, The End of French Predominance in Europe, the Financial Crisis of 1924 and the Adoption of the Dawes Plan (Chapel Hill: University of North Carolina Press, 1976), pp. 87, 104.

    Google Scholar 

  18. Arthur D. Gayer, W.W. Rostow, and Anna J. Schwartz, The Growth and Fluctuation of the British Economy, 1790–1850 (Oxford: Oxford University Press, Clarendon Press, 1953), vol. 1, p. 190.

    Google Scholar 

  19. James G. Gibbons, The Banks of New York, their Dealers, the Clearing House, and the Panic of 1857 (New York: D. Appleton, 1859), p. 94.

    Google Scholar 

  20. Clément Juglar, Des crises commerciales et leur retour périodique en France, en Angleterre et aux Etats-Unis, 2nd edn (1889; reprint edn, New York: Augustus M. Kelley, 1967), p. 427.

    Google Scholar 

  21. W.T.C. King, History of the London Discount Market (London: George Routledge & Sons, 1936), p. 232.

    Google Scholar 

  22. O.M.W. Sprague, History of Crises under the National Banking System (1910; reprint edn, New York: Augustus M. Kelley, 1968), p. 127.

    Google Scholar 

  23. W. Jett Lauck, The Causes of the Panic of 1893 (Boston: Houghton Mifflin, 1907), pp. 59–60.

    Google Scholar 

  24. Oskar Morgenstern, International Financial Transactions and Business Cycles (Princeton, NJ: Princeton University Press, 1959), p. 523.

    Google Scholar 

  25. Johan Âkerman, Structure et cycles économiques (Paris: Presses universitaires de France, 1955–57), vol. 2, p. 292.

    Google Scholar 

  26. E. Ray McCartney, Crisis of 1873 (Minneapolis: Burgess Publishing Co., 1935), pp. 58, 71.

    Google Scholar 

  27. George W. Van Vleck, The Panic of 1857: an Analytical Study (New York: Columbia University Press, 1943), p. 68.

    Google Scholar 

  28. E. Victor Morgan, The Theory and Practice of Central Banking, 1797–1913 (Cambridge: Cambridge University Press, 1943), p. 109.

    Google Scholar 

  29. Elmer Wood, English Theories of Central Banking Control, 1819–1858 (Cambridge, Mass.: Harvard University Press, 1939), p. 183.

    Google Scholar 

  30. R.G. Hawtrey, Currency and Credit, 3rd edn (New York: Longmans, Green, 1927), p. 28.

    Google Scholar 

  31. Leone Levi, History of British Commerce (London: John Murray, 1872), p. 233.

    Google Scholar 

  32. Joan Edelman Spero, The Failure of the Franklin National Bank: Challenge to the International Banking System (New York: Columbia University Press, 1980), pp. 66, 71, 85, 91.

    Google Scholar 

  33. Milton Friedman and Anna J. Schwartz, A Monetary History of the United States, 1867–1960 (Princeton: Princeton University Press, 1963), p. 339.

    Google Scholar 

  34. Thomas Joplin, Case for Parliamentary Inquiry into the Circumstances of the Panic, in a Letter to Thomas Gisbourne, Esq. M.P. (London: F. Ridgeway & Sons, n.d. [after 1832]), pp. 14–15.

    Google Scholar 

  35. Robert Baxter, The Panic of 1866, with its Lessons on the Currency Act (1866; reprint edn., New York: Burt Franklin, 1969), pp. 4, 26.

    Google Scholar 

  36. 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.

    Google Scholar 

  37. H.S. Foxwell, ‘The American Crisis of 1907’, in Papers in Current Finance (London: Macmillan, 1919), pp. 202–3.

    Google Scholar 

Download references

Authors
  1. Charles P. Kindleberger
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Robert Z. Aliber
    View author publications

    You can also search for this author in PubMed Google Scholar

Copyright information

© 2005 Palgrave Macmillan, a division of Macmillan Publishers Limited

About this chapter

Cite this chapter

Kindleberger, C.P., Aliber, R.Z. (2005). The Critical Stage. In: Manias, Panics and Crashes. Palgrave Macmillan, London. https://doi.org/10.1057/9780230628045_5

Download citation

Publish with us

Policies and ethics

Search

Navigation