Charles Kindleberger

Manias, Panics, and Crashes

1. IDEA 1

   Financial crises follow a pattern

   Kindleberger studies centuries of financial crises and argues they share a common shape. Drawing on the economist Hyman Minsky, he shows how booms build on rising credit and then turn into panics.

2. IDEA 2

   Booms begin with a shock

   Kindleberger says a crisis often starts with a displacement, some new event such as an invention, a war ending or a policy change. It creates profit chances that draw in investors and spark the boom.

3. IDEA 3

   Easy credit feeds the boom

   In Kindleberger's account, banks and lenders expand credit as optimism grows. Borrowed money pushes prices higher, which makes lending seem even safer, so the boom feeds on itself. He sees this loop between credit and prices as the engine of most booms.

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