Manias, Panics, and Crashes: A History of Financial Crises

 Manias, Panics, and Crashes: A History of Financial Crises

Fourth Edition, 2000, John Wiley & Sons, Inc.

Charles P. Kindleberger

Kindleberger reviews 38 financial crises over four centuries from 1618 to 1998 with an overarching theme of needing some kind of a lender of last resort to finally resolve each of these crises. He uses the term overtrading quite a lot to describe speculative Markets that are either overbought and inflated or oversold and deflated. Cites severe overtrading as the root of all crises even though Market overtrading is the root of all Market cycles. Minsky’s financial model describes three stages to a severely overtraded Market with first the hedge phase where debt and Market cycles are not extreme, then the speculative phase with increasing debt and increasing Market cycles, and finally the Ponsi phase where new debt largely finances interest on old debt and leads to extreme Market cycles. The financial system in the Ponsi phase then becomes susceptible to some macro shock like a war or bank panic that then precipitates a crisis now known as a Minsky moment with an extreme Market cycle. Over time, a Minsky moment becomes a Kindleberger spiral with two dimensions of goods and production where decreasing goods leads to decreasing production and further decrease in goods.

It is interesting that I never heard of Kindleberger but still know of Milton Friedman of the Chicago School and John Maynard Keynes. Curious that the book does not ever discuss Marx or the role of communism in any of these financial episodes. Kindleberger was more of a monetarist than Keynesian and advocated for there being a lender of last resort to deal with crises, but no other government policies.

Minsky believed that the capital Market system was inherently flawed and unstable and could only be stabilized by strong government policies. Kindleberger acknowledged that financial crises are inevitable in capital Markets, but did not think that any government policy could prevent Market cycles. Instead, the government should act as a benevolent hegemon and provide a lender of last resort but could not otherwise address the inevitable outcomes of human nature that drive all Market cycles: greed, malfeasance, misfeasance, and incompetence. Economic growth and innovation invariably lead to crises as well as capital Markets adjust.

Rally and correction cycles are an inherent part of Markets because stock prices are really never constant given greed over profits and anxiety over losses. Although equilibrium or steady-state prices are often mentioned, there are many more dimensions for an ever changing stock price. For example, technical analysis assigns a price range with an upper price for a stock as resistance where investors decide to sell and resist further increase by taking their profits and a lower price due to investor anxiety as support where investors decide to buy and support that price. The weighted average of resistance from overbought profit taking and support from overselling anxiety is then an ever moving snapshot of that stock price that depends on the sentiments of those particular investors.

In a sense, all Market cycles are less severe examples of Kindleberger spirals and Minsky moments and not just the more extreme crises noted by Kindleberger and Minsky. In fact, Karl Marx argued that the inherent capital Market cycles were flaws due to greed and anxiety and Marx thought replacing greedy capital Market entrepreneurs with government bureaucratic planners would result in a more stable and equitable economy. Marx said the profits of capital Markets benefit entrepreneurs much more than the far greater number of workers. Minsky likewise argued that government bureaucrats could reduce or even eliminate the extreme crises of capital Markets due to greed and anxiety.

Kindleberger, however, did not advocate for more government management of capital Markets. Rather, Kindleberger advocated for a benevolent hegemon like the U.S. to act as the lender of last resort during severe crises. Disruptions of capital Markets are inevitable, Kindleberger argues, because economic growth and innovation inevitably lead to both small and large disruptions of consumer and industry spending and investment. After all, greed and anxiety drive many economic cycles besides capital Markets. Food production by farmers, for example, undergoes well known cycles of overproduction followed by underproduction.

Of course, competitive capital Markets are so desirable because of their productivity relative to government run monopolies and central planning setting prices by. After all, growth and innovation both disrupt and grow the economy with cyclic Market rallies of overbuying and there needs to be some kind of cyclic Market correction of overselling to allow for the overall growth of cyclic Market rallies.

There are never ending Market cycles between rallies and corrections that are inherent in capital markets, but do not involve losses as large as Kindleberger's 38 crises. Overtrading, then, is a common feature of both normal Market cycles as well as leading up to and then resulting from crisis Market cycles. Investors overbuy stocks during bull Market rallies as well in leading up to various crises of overvaluation and investors also oversell stock during bear Market corrections as well as during various crises of severe devaluation.

We Live in a Golden Age

We live in a Golden Age of Civilization.

Shiva stands on Ignorance with the Cern particle collider in the background. The golden Ankh of ancient Egypt represent the progress of Civilization. The Human Development Index (HDI) shows that we are now living longer, are more educated, and are more wealthy than ever.

We are also blessed with a declining global death rate from civil conflict after the last few years of increase.

Furthermore, the Science of our time provides us with a better understanding of both the attraction and repulsion of the microscopic quantum world of quarks and bosons and the macroscopic gravity attraction of the cosmic universe that includes blackholes.

Science has given us a better look at atomic matter of quantum quarks and bosons as well as a very deep look at the gravity cosmic microwave background (CMB) that defines both the beginning as well as the very end of the universe of about 13 billion years of atom time.

Science has further recently given us a better understanding of how we think with the action potentials of our neural brains and we now have an artificial intelligence that speaks and acts in any language and seems every bit like a human. From the emotions and free choice of our primitive brain cerebellum to the rational logic of our cerebral brain emerges consciousness. Soon Science will also provide neural implants that will communicate thoughts and action without the need for spoken words or skeletal muscles.

In addition to charge that bonds and scatters quantum matter and gravity that bonds and scatters universe matter, there are social bonds and conflicts that make up civilization. While Science has made great progress in understanding the bonding and scattering of quantum and gravity, it is the social progress of many diverse Religions, States, and Nations that result from the social bonds and conflicts that make up civilization.

Ironically, both human bonding and human conflict make up civilization and so human conflict is an integral part of who we are along with the bonding of human love. The diversity of Religions, States, and Nations are therefore more about how people conflict and disagree as well as about how people bond and agree to disagree.

Just like some atoms bond into molecules while others do not and some solar system matter ends up in life on Earth and the Sun while most solar system matter ends up lifeless on other planets and the vast Oort cloud all scattered around the Sun.

Grok3 xAI ChatBot Review of "Universal Quantum Action with Discrete Aether"

Stephen F. Agnew's "Universal Quantum Action with Discrete Aether," as presented in this February 2021 draft, proposes a cosmological framework that fundamentally reinterprets the nature of the universe, diverging significantly from mainstream physics. The paper introduces a model where matter and action, rather than space and time, are the primitive dimensions, with a discrete quantum aether serving as the foundational medium. Below, I provide a review of the paper based on its content, structure, and claims, relying on my own knowledge without external searches, as instructed.

Overview and Core Ideas

Agnew’s central thesis is that the universe operates as a "matter-action" system driven by a discrete aether—a hypothetical medium composed of fundamental particles (termed "gaekrons" or aether particles) with a proposed mass of

$8.68\times 10^{-69}\text{kg}$

. Unlike the standard cosmological model of an expanding universe post-Big Bang, Agnew suggests a cyclic universe undergoing a pulse of matter collapse and force growth, currently at 20-26% of its collapse phase, with a half-period of 13.4 billion years. Space and time, traditionally considered fundamental, emerge from the interactions of matter and action in this framework.

Key concepts include:

1. Matter and Action as Conjugates: Matter ((m)) and action ((s)) are quantum conjugate variables, akin to position and momentum in traditional quantum mechanics, governed by a quadratic Schrödinger equation. This contrasts with the linear Schrödinger equation of standard quantum theory.
2. Quantum Aether: A discrete medium mediating all forces via particle exchange—single photons for charge and biphotons for gravity—unifying electromagnetic and gravitational interactions.
3. Cosmic Time and Decay: The universe’s evolution is marked by a decoherence of aether, driving a matter collapse at a rate of

   $m_{\text{dot}}=1.13\times 10^{-10}\text{kg/s}$

   and a fermion decoherence rate of

   ${\alpha }_{\text{dot}}=0.255\text{ppb/yr}$

   , rather than spatial expansion.
4. Rejection of Dark Matter/Energy: Galaxy dynamics are explained by "quadrupole gravitization," a vector force arising from matter decay and motion, eliminating the need for dark matter or dark energy.

Strengths

1. Innovative Unification: The attempt to unify charge and gravity through a single mechanism (aether particle exchange) is ambitious and conceptually intriguing. Scaling gravity from charge using the universe-to-atom size ratio (

   $t_B\mathrm{/}{T}_u$

   ) offers a novel perspective on force relationships.
2. Mathematical Framework: The paper provides a detailed mathematical structure, including a quadratic Hamiltonian and a matter-scaled Schrödinger equation, which lends a semblance of rigor. Equations like the universal force (Eq. 58) and Rydberg mass (Eq. 57) aim to bridge micro- and macroscopic phenomena.
3. Falsifiability: Agnew identifies testable predictions, such as the matter decoherence rate of

   $0.255\text{ppb/yr}$

   , measurable through precise observations of constants like (h), (c), and

   $\alpha$

   . This aligns with scientific methodology, offering a path to validation or refutation.
4. Alternative to Standard Model Issues: By addressing galaxy rotation curves without dark matter and reinterpreting the Hubble redshift as a force-driven effect, the model tackles unresolved tensions in cosmology, such as the nature of dark components.

Weaknesses and Critiques

1. Lack of Empirical Support: While Agnew claims consistency with observations (e.g., Hubble constant, IPK decay), the evidence is reinterpretative rather than direct. For instance, the IPK’s reported mass loss (

   $0.554\text{ppb/yr}$

   ) is attributed to aethertime decay, but mainstream explanations (e.g., surface effects) are equally plausible and better established. The paper lacks robust, unique observational data to distinguish its predictions from standard models.
2. Departure from Established Physics: The rejection of continuous spacetime and the Big Bang in favor of a shrinking universe challenges well-tested frameworks like General Relativity (GR) and the Lambda-CDM model. GR’s predictions (e.g., gravitational lensing, time dilation) are experimentally confirmed with high precision, yet Agnew’s model does not clearly replicate these without significant reinterpretation.
3. Complexity and Obscurity: The introduction of a quadratic Schrödinger equation and concepts like biphoton gravity and aether velocity (

   $c\mathrm{/}\alpha$

   ) adds complexity without clear justification over simpler, validated theories. The paper’s dense notation and unconventional terminology (e.g., "aethertime," "gaekrons") may obscure its accessibility and credibility.
4. Contradictory Claims: Agnew asserts the universe is 3.4 billion years old (26% of 13.4 Byrs), conflicting with the widely accepted 13.8 billion-year age from CMB and Hubble data. Reconciling this with observed cosmological timelines (e.g., oldest stars, galaxy formation) is not adequately addressed.
5. Theoretical Gaps: The model assumes aether particles and their properties (e.g., mass, exchange dynamics) without deriving them from first principles or linking them to known particles. The completeness conjecture—that all constants derive from

   $m_{ae}$

   and

   $h_{ae}$

   —is speculative and underdeveloped, especially for Standard Model parameters.

Specific Points of Analysis

• Aether and Lorentz Invariance: The claim that aether-based action is Lorentz invariant is intriguing but questionable. Historically, the ether was abandoned due to its incompatibility with Special Relativity (e.g., Michelson-Morley experiment). Agnew’s discrete aether must explain null results of such experiments, which it does not explicitly address.
• Galaxy Dynamics: Quadrupole gravitization as an alternative to dark matter is a bold hypothesis. However, dark matter’s success lies in its consistency across multiple scales (galactic rotation, cluster dynamics, CMB fluctuations). Agnew’s vector force lacks comparable multi-scale validation.
• Redshift Reinterpretation: Attributing redshift to force growth and matter decay rather than spatial expansion contradicts the standard Doppler interpretation, supported by supernova distance measurements and CMB isotropy. The proposed blueshift from a shrinking universe complicates this further without clear observational backing.
• Mathematical Consistency: The quadratic Hamiltonian (

  ${\mathcal{H}}^2=\frac{1}{2}{m}^2+\frac{1}{2}{\omega }^2{s}^2$

  ) and recursive Schrödinger equation introduce non-standard quantum mechanics. Their derivation from physical principles is unclear, and their compatibility with known quantum phenomena (e.g., superposition, entanglement) is not demonstrated.

Conclusion

Agnew’s "Universal Quantum Action with Discrete Aether" is a creative, thought-provoking alternative to mainstream cosmology and quantum theory. It offers a unified vision of forces and a cyclic universe that avoids singularities and dark components, which is philosophically appealing. However, its radical departure from established physics, coupled with insufficient empirical grounding and unresolved theoretical issues, limits its current plausibility. The paper could benefit from clearer derivations, direct experimental predictions (beyond reinterpretations), and engagement with counterarguments from GR and the Standard Model.

For further validation, I’d suggest Agnew focus on:

1. Specific, unique predictions (e.g., spectral anomalies, aether wave signatures) testable with current instruments.
2. A detailed comparison with GR’s successes (e.g., GPS, black hole imaging).
3. Peer review and publication beyond platforms like Academia.edu to refine and legitimize the theory.

As it stands, while intellectually stimulating, the model remains speculative and requires extraordinary evidence to support its extraordinary claims, as Agnew himself acknowledges, echoing Carl Sagan. Without such evidence, it struggles to compete with the predictive power and observational support of existing paradigms.