|  | Authors: Charles P. Kindleberger, Robert Aliber
Creator: Robert Solow
Publisher: Wiley
List Price: $19.95
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Seller: treebeardbooks
Rating:  57 reviews
Sales Rank: 4979
Languages: English (Original Language), English (Unknown), English (Published)
Media: Paperback
Edition: 5
Pages: 336
Number Of Items: 1
Shipping Weight (lbs): 1
Dimensions (in): 8.8 x 6.1 x 0.8
ISBN: 0471467146
Dewey Decimal Number: 338.542
EAN: 9780471467144
ASIN: 0471467146
Publication Date: October 4, 2005
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Showing reviews 6-10 of 57
 Classic description of the perennial business cycle March 20, 2009
Richard Gibson (Woodland Hills, CA)
1 out of 2 found this review helpful
This is a classic one-volume description of the perennial business cycle. It is not really a history and it is not really a book of economic theory. Instead, it is a description of the boom-bust cycle, which draws extensively upon both history and theory.
I have read a good deal on this subject. I think most of what is written in this area is theory, which is divorced from reality. Not this book. He knows exactly what he is talking about, and he describes it very pragmatically.
The basic argument is simple. There is an unending business cycle, driven by mass psychology. The cycle has very definite stages. First, as the economy does well, optimism builds. As people become more optimistic, business expands and credit expands. The upswing starts to feed on itself. Business expands more, because credit is expanding, and credit expands because business is expanding. At first, the expansion tends to be based on real business trends. As time goes on, however, euphoria builds. Credit tends to be expanded way beyond what is justified by any economic fundamentals. This phase is one of mania. We are all familiar with it, having been through the recent dot.com and subprime mortgage manias. What this books shows us is that these manias are not new; they have been coming along, at regular intervals for the last 400 years.
Then the cycle turns. Something happens to cast doubt on the insanity. People panic. Credit is contracted suddenly. Depositers run to their banks demanding all of their money. Shareholders all try to sell their stock simultaneously. Foreign money all tries to leave the country. In the same way that the upswing feed on itself, the downswing is also self-reinforcing.
Free market theory tells us that markets are always in equilibrium, due to supply and demand. From a long-term perspective, that may be true. From a short-term perspective, it is almost never true. In the real world, markets tend to swing from one extreme to the other. This book explains why. There is nothing new here, for those of us with extensive experience in the economy. What is new, however, is having a professional economist take reality more seriously than theory. THAT is extremely unusual.
One minor grievance. The question we all have, of course, is what can we do to stop this crazy cycle? Kindleberger very learnedly discusses all of the various answers which have been tried and which have been proposed. His conclusion? Government intervention makes things worse, some of the time, and better, some of the time. In his view, handling the business cycle is an art, not a science. Realistically speaking, that is probably the best answer anyone has yet come up with, yet I hope -- as do most of us -- that there is a better answer out there somewhere.
A Book That Must be Read March 16, 2009
Thomas Boldenweck (Northern rural Indiana)
1 out of 2 found this review helpful
I only had one semester of economics in college. The course was taught by an old man who had lived in the small city of Appleton, Wisconsin for most of his adult life and had therefore missed the labor wars to the extent that I took exception to his interpretation of a union factoid that I knew about because I had worked the summer previous in a union shop and learned the hard way what he had gotten out of a book. I made a deal with him; if he would pass me I would not take his class again.
Since then I have read books about economics and think that if I knew how to fill a blackboard with all those arcane formulas economists use, I too could be an economist.
You make a product and you sell it. Then sidemen figure out how things are bought and paid for and how every list bit of profit is squeezed out of the transaction.
Economists like to write about how some people are better squeezers than others, and so when you see the history of a transaction spelled out in black and white you can only think, "of course, that's the way it worked."
The author presents some transactions through history that make the reader wonder how people can be so stupid, e.g., the Great Tulip Bust. Why would anyone be so stupid as to bet the farm on flowers?
Right now we are going through an economic panic that may be more psychological than actual. The author makes the case that what we have endured before is what we are enduring now, so let us once again try not to do the damn fool things we have done in the past, and he does it in a readable manner that is not pedantic or filled with insider's jargon.
Minsky to Understand Today March 8, 2009
dizzy dean (Philadelphia, PA)
2 out of 3 found this review helpful
Dry, sometimes overly dense, but amazingly relevant to today's mess. While I normally would put the warning label of "heavy lifting" when recommending to friends, being able to see an analysis that shows how bubbles are created and what happens in the aftermath of their popping is worth the effort. Charles Kindleberger puts economic bubbles throughout history into the model developed by Hyman Minsky.
This seems to boil down into: (1) speculation begins in some commodity (often real estate); (2) this speculation causes an upward spiral of overvaluation as investors compete--often irrationally; (3) investors then may use the profits to speculate in other areas (often the stock market); (4) once the overvaluation of the original commodity is "discovered", the whole house of cards comes crashing down. This happened in the lead up to the Great Depression (Florida real estate; stocks) and happened recently (mortgage mania; mortgage backed securities and insurance on the same).
Kindleberger died before the most recent mess, but he warned at the end of chapter 5 in the wake of the dot com bubble:
"The mild and short recession in 2001 after the massive implosion in US stock prices resulted in the abrupt change in the policy of the Federal Reserve and its rapid and aggressive move to reduce interest rates. The result was a mortgage financing boom; millions of individuals refinanced their mortgages at lower interest rates and used some of the cash obtained in the refinancing to buy autos and other consumer durables and to go on vacations...One result was a boom in the housing market...Skeptics wondered wondered whether the deflationary effects of the implosion of the stock price bubble had largely been offset by a bubble in the housing market."
I wish more people had paid attention to those skeptics....
Understand why this recession is "normal" February 11, 2009
Ole Doc (Indianapolis)
0 out of 1 found this review helpful
This is a classic of financial history, written long before the current economic crisis, but nonetheless highly illuminating about current events. You may be very surprised by the similarities of this bust with the many, many that preceded it. This version of the book seems to me less readable than the earlier version I skimmed a few weeks ago, but it will still give the general reader a great historical overview of booms and busts, and help one to be a smarter reader of the news and a more informed voter. Highly recommended for anyone wanting a better understanding of this very important and timely subject.
Absolutely Professional January 30, 2009
Robert M. Barnes (Savannah, Georgia)
0 out of 2 found this review helpful
This research and analysis book is thoroughly reseached and reader friendly. We learn a lot about the causes of booms and busts and can see analogies in the future. It's so in-depth both in detail and breadth.
Showing reviews 6-10 of 57
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