October 19, 2009

Manias, Panics and Crashes

After two very good books over the last two months, this one came as a disappointment relative to the ones read earlier. Written by Charles Kindleberger and Robert Z Aliber (for the latest edition), this is the fifth edition for the book.

The premise of the book revolves around examining the causes, impact and timing of past manias, panics and crashes. The book gives an exemplary analysis till World War II taking history back to 1700's to produce his point. Having first published in 1970's, the latter editions of the book looks at the Asian and Japanese crisis and to some extent on the tech crisis. Overall, the author gives a commanding and documted explanation to such events and how they tend to repeat themselves across crisis. The author has documented the crisis pretty well and has more importanly linked them impressively: expansion of credit, onset of crisis, burst, international ramifications and policy responses.

If anything, I like this one the best when he explains crisis:
"There was a dramatic increase in the flow of funds from these countries (Asian crisis countries) to the United States that contributed significantly to the increases in the prices of US securities; US residents who sold secutiries to foreign residents then used a very large part of their sales receipts to buy other securities from other US residents. The prices of these US securities increased further; in turn the sellers of these securities used most of their sales receipts to buy other securities from other US residents. The money became like the proverbial 'hot potato', passed from investor to investor at ever-increasing prices."

The book has its flaws too. 1) There is excessive repition in the book which kind of overemphasises the point and kind of gives a feeling that the author is thrusting his opinion upon you, which you have to accept. 2) Since the world has changed a lot, I kind of got lost of the relevance of many things. I do understand that crisis happens every time mostly with the same reasons but in different forms. However, the world has undergone significant change pre and post world war. 3) The book is very slow and is definitely not a page-turner. The layout of the entire book is well done but it could have been shortened much more.

Overall, this book too is Wiley's classic. Has its own merits and flaws. I dont think one would be lost by not reading this book and hence one can definitely skip it.

One should go to Landmark, Chennai. They have a fabulous offer of hardbound books at paperback prices. I picked up two books though was not keen of reading one of it in the first place "The Age of Turbulence" by Alan Greenspan. The other one is a Wiley's classic "Paths to Wealth through Common Stocks" by Phil Fischer. It has not got great reviews but need to see why is it bad.


Kumaranna said...

Mahesh, too many book readings, eh??


M B Mahesh said...

I am pleasantly surprised that you have been able to locate my blog....dont think i have told anyone that i write.

and there is a lot of free time to do a bit of reading :)