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Historic Turbulence?

Last week in The Washington Post George Will identified multiple government programs that have contributed to the current economic turbulence.  His comments are worth reading, as the markets are reacting to interventions that have been years in the making and cannot be undone in a short time, if they can be undone at all.  The markets will recover, but not because of the intervention, rather in spite of it.  We are not in a unique period, but rather one more of those recurrent crises that have reoccurred from time to time.   A classic study of this can be found in Charles Kindleberger's Manias, Panics and Crashes where he observes:

"Speculative excess, referred to concisely as a mania, and revulsion from such excess in the form of a crisis, crash, or panic can be shown to be, if not inevitable, at least historically common."(p. 4). 

While I do not agree with all of Kindleberger's conclusions, his book is worth studying.  Unfortunately, I doubt that anyone in Congress will take time from their fantasies to read this study of historical reality.

Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger.  Basic Books, New York.  1978.


( 2 comments — Leave a comment )
Oct. 11th, 2008 03:12 pm (UTC)
The Future of the Markets
It appears to me that the main problem facing future stock market gains is the fact that the baby boomers will look at this and say the following: Sure markets go up and down and this is just a panic and we will recover, however, I have enough money (and this is figuring inflation into the mix) to live on the rest of my life. I'm out of here. Since they have fueled the market for the last 20
years, I question that the gains of the past will be repeated. I feel it will be a long and slow decline.
Oct. 11th, 2008 03:35 pm (UTC)
Re: The Future of the Markets
Historically the market has been up over the long term. You are right to question how long the recovery will take.
( 2 comments — Leave a comment )

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