Manias, Panics, and Crashes (Charles P. Kindleberger)

Trader's Library #78 · Market history, crises and scandals. The standard history of financial crises and their recurring pattern.

Author: Charles P. Kindleberger · Original: Manias, Panics, and Crashes · Year: 1978 · Usefulness for traders: ★★★★☆

What it's about

An academic history of financial crises since the 17th century. Using Hyman Minsky's model, Kindleberger shows the common pattern: displacement, a credit-fuelled boom, euphoria, distress, panic and crash.

What it gives a trader

For a trader it's a map of the phases of big moves. Once you know what euphoria fuelled by credit and leverage looks like, it's easier to recognise it in the market and not get swept along. An important thread: in a panic liquidity disappears and prices fall faster than anyone expects.

Lessons for traders

• crises repeat the same pattern: displacement, credit, euphoria, panic
• leverage speeds up both the boom and the crash
• in a panic liquidity disappears overnight

What to watch out for

An academic style and a lot of economic history. Newer editions add the 21st-century crises.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #077 Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay) · Library index · #079 Liar's Poker (Michael Lewis) →

Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.