History, Politics and Economics
Edited by Joëlle Leclaire, Tae-Hee Jo and Jane Knodell
Chapter 4: Panics and Depressions: A Historical Analysis of 1907, 1929 and 2008
William T. Ganley INTRODUCTION In his book, Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay noted: In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that while communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention [is] caught by some new folly more captivating than the first. . . . Money, again, has often been a cause of a delusion of the multitudes. Sober nations have all at once become desperate gamblers, and risked their existence upon the turn of a piece of paper. . . . Men . . . think in herds; it will be seen that they go mad in herds, while they recover their senses slowly, and one by one. (Mackay 1852, pp. xix–xx) Over a century and a half later, Mackay’s words ring true about the Financial Panic of 2008, and the Great Recession of 2007–09. It would appear the financial markets in the early twenty-first century created a madness that moved from the back offices of financial houses to the highest levels of financial and political power. The madness is not yet gone, despite the indications that the Great Recession of the first decade of the twenty-first century may slowly be coming to an end. The nature of the recession is only being...
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