Introduction to the Seventh Edition

It was my great good fortune to inherit Manias from Charles Kindleberger after he had brought out the first four editions. The first edition of Manias was published in 1978, four years before the first major post-World War II global banking crisis and more than forty years after the Great Depression of the 1930s. Kindleberger had been discussing some the ideas about the causes of these periodic banking crises in his classes at MIT for three or four years before the first edition was published. The motivation may have been the surge in loans from the major international banks to the governments and governmentowned firms in Mexico, Brazil, Argentina, and ten other developing countries; the external indebtedness of these countries was increasing by 20 percent a year, perhaps three times the increases in their GDPs. These rates of growth of indebtedness were too high to be sustainable. Kindleberger was focused on the ‘end game’ and the adjustments that were likely when the lenders concluded that they should slow the increase in their loans to these indebted borrowers. The insight that led to Manias was the instability in financial markets during the 1920s and the 1930s and the Great Depression. He was concerned that the move to a floating currency arrangement after the US Treasury closed its gold window after the historic Camp David weekend of August 1971 was likely to be a source of financial instability.