"Once-in-a-lifetime" financial crises have been a recurrent part of life in the last three decades. It is no longer possible to dismiss or ignore them as aberrations in an otherwise well-functioning system. Nor are they peculiar to recent times. Going back in history, asset price bubbles and bank-runs have been an endemic feature of the capitalist system over the last four centuries. The historical record offers a treasure trove of experience that may shed light on how and why financial crises happen and what can be done to avoid them - provided we are willing to learn from history.

This book interweaves historical accounts with competing economic crisis theories and reveals why commentaries are often contradictory. First, it presents a series of episodes from tulip mania in the 17th century to the subprime mortgage meltdown. In order to tease out their commonalities and differences, it describes political, economic, and social backgrounds, identifies the primary actors and institutions, and explores the mechanisms behind the asset price bubbles, crashes, and bank-runs. Second, it starts with basic economic concepts and builds five competing theoretical approaches to understanding financial crises. Competing theoretical standpoints offer different interpretations of the same event, and draw dissimilar policy implications.

This book analyses divergent interpretations of the historical record in relation to how markets function, the significance of market imperfections, economic decision-making process, the role of the government, and evolutionary dynamics of the capitalist system. Its diverse theoretical and historical content of this book complements economics, history and political science curriculum.

chapter 1|13 pages


chapter 2|17 pages

Tulip mania

chapter 3|23 pages

The Mississippi Bubble

chapter 4|19 pages

The South Sea Bubble

chapter 5|35 pages

Rationality, fundamentals, and prices

First principles

chapter 7|26 pages

Technological revolutions and speculation

Nineteenth-century British railways and banks

chapter 8|27 pages

The American experience I

The antebellum era

chapter 9|30 pages

The American experience II

The gilded age

chapter 10|30 pages

The crash of 1929

chapter 11|17 pages

Mighty magic of the market

chapter 12|29 pages

The conjurations of financial markets

chapter 13|35 pages

The 1980s

Financial capitalism unchained

chapter 14|34 pages

The 1990s

The triumph of financial capitalism

chapter 15|27 pages

The latest act

Subprime mortgages and derivatives

chapter 16|36 pages

The latest act

The crash of the 2000s

chapter 17|14 pages

Two legacies of the subprime sinkhole