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Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics)
Books: Text Books: Financial: Item 6
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Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics)by Charles P. Kindleberger, Robert Aliber, and Robert Solow
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0 of 22 people found the following review helpful: How money supply is expanded, December 8, 2005 Reviewer:D. Nishimoto "Golden Lion - Listen Software Solutions" (North Ogden, Ut United States) - The Monetarist need a central bank. Without a central bank availablity of money necessary too cover checks written was impossible to balance. Human behavior is impossible to predict. For example, maybe the consumer will leave his money in the bank or maybe, he would withdraw it. The fluctuation of money inventory can not be predicted: too much inventory is unprofitable and not enough inventory ondemand causes default on surrender issues. So, maintaining the sufficient level of funds available would be impossible because demand was impossible to predict. Monetary economics had two schools of thought "currency school" and "banking school". Currency school focused on profits from high interest yields. Banking school focused on a central bank. The banking school prevailed. The monetarist needed a way to manipulate the money supply. A private central bank called the Federal Reserve was formed in 1844 for the purposes of providing an unlimit source of credit. The Fed controls the money supply. Congress gave the Fed power to expand or contract the money supply. If the Fed wants to increase the amount of money in circulation, the Fed can simply print it. Printed bills are a small portion of the money supply. Today, there are at least nine forms of money. The most influencial way for the fed to increase the money supply is too buy government fixed-income securities. How does the Fed pay for these securities? They print money and buy the security. This is called inflation. Banks recognize this fact of inflation and raise interest rates. The Fed realizes the money supply has diluted and raises the overnight borrowing rate. Individuals and business recognize the money supply has become diluted, as prices increase and the dollar buys less. When the Fed buy the government securities,it puts money in the hands of the public banks; these banks turn around and fractionalize a portion of the money, as reserves, and loan out an 10 fold increase in loan money. The expansion of credit heats up the economy, growth surges, and job increase. To contract the money supply, the Fed does the opposite, it sells the government securities. The affect is too soak up liquidity, dry up credit, and contract the money supply. As money become tighter, interest rates rise matching demand for the scarce money, operation budgets tighten, and jobs decrease. The third function of a central bank was to ensure sufficient funds existed for customer requesting a surrender of funds the bank maintained. Fractional reserves needs a guarantee and the fed provided that guarantee against a money panic with its unlimited ability to print money.
Book Description
"Underneath the hilarious anecdotes, the elegant epigrams,s and the graceful turns of phrase, Kindleberger is deadly serious. The manner in which human beings earn their livings is no laughing matter to him, especially when they attempt to do so at the expense of one another. As he so effectively demonstrates, manias, panics, and crashes are the consequence of an economic environment that cultivates cupidity, chicanery, and rapaciousness rather than a devout belief in the Golden Rule." - From the Foreword to the Fourth Edition by Peter L. Bernstein, author Against the Gods and The Power of Gold
Praise for previous editions of Manias, Panics, and Crashes
"Classic.Manias, Panics, and Crashes is a durable guide to meditation: wise, witty, and practical. It is a template against which to measure the latest financial crisis-whatever and whenever that happens to be." - David Warsh, the Boston Globe
"Definitive." - Floyd Norris, The New York Times
[Manias, Panics, and Crashes] is a scholarly account of the way that mismanagement of money and credit has led to financial explosions over the centuries." - Richard Lambert, Financial Times
"What long has been the best history of financial pathologies is now even better. The reader who absorbs Kindleberger's lessons will be prepared to foresee and navigate the financial crises that surely lie ahead. Like a true classic, Manias, Panics, and Crashes is both timely and timeless." - Richard Sylla, Kaufman Professor of Financial History, Stern School of Business, New York University
Back Cover Copy
"Underneath the hilarious anecdotes, the elegant epigrams,s and the graceful turns of phrase, Kindleberger is deadly serious. The manner in which human beings earn their livings is no laughing matter to him, especially when they attempt to do so at the expense of one another. As he so effectively demonstrates, manias, panics, and crashes are the consequence of an economic environment that cultivates cupidity, chicanery, and rapaciousness rather than a devout belief in the Golden Rule." - From the Foreword to the Fourth Edition by Peter L. Bernstein, author Against the Gods and The Power of Gold
Praise for previous editions of Manias, Panics, and Crashes
"Classic.Manias, Panics, and Crashes is a durable guide to meditation: wise, witty, and practical. It is a template against which to measure the latest financial crisis-whatever and whenever that happens to be." - David Warsh, the Boston Globe
"Definitive." - Floyd Norris, The New York Times
[Manias, Panics, and Crashes] is a scholarly account of the way that mismanagement of money and credit has led to financial explosions over the centuries." - Richard Lambert, Financial Times
"What long has been the best history of financial pathologies is now even better. The reader who absorbs Kindleberger's lessons will be prepared to foresee and navigate the financial crises that surely lie ahead. Like a true classic, Manias, Panics, and Crashes is both timely and timeless." - Richard Sylla, Kaufman Professor of Financial History, Stern School of Business, New York University
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