Test Your Knowledge of Financial Behavior

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Manias, Panics, and Crashes: Patterns of Financial Behavior

• Ponzi schemes promise high rates of return, pay initial investors with money from new investors, and eventually collapse.

• Bernie Madoff ran one of the largest Ponzi schemes, promising steady returns.

• Chain letters and pyramid schemes involve isolated segments of the economy and redistribute income from latecomers to initial participants.

• Bubbles involve the purchase of an asset in anticipation of selling it to someone else at a higher price.

• Manias involve frenzied purchases, often accompanied by an increase in prices and trading volumes.

• The appearance of a mania raises the policy issue of whether governments should moderate price increases to reduce the likelihood or severity of banking crises.

• During a crisis, government intervention may be desirable to provide stability.

• The role of a lender of last resort in coping with a crash or panic is fraught with ambiguity and dilemma.

• The monetary aspects of manias and panics are important and are examined at length in the book.

• Waves of surges in credit supply and subsequent banking crises since the mid-1970s suggest that market events have become more global.

• Every currency crisis has been associated with a banking crisis in the last 40 years.

• Currency crises are manifestations of the decline in cross-border investment inflows on the price of a country's currency and the ability of indebted borrowers to pay interest on their foreign indebtedness.The Stylized Model of Financial Crises and Speculation

• The model of speculation, credit expansion, financial distress, and crisis is presented in Chapter 2.

• The Minsky model argues that the financial system in a market economy is unstable, fragile, and prone to crisis.

• The Minsky model has explanatory power for earlier crises in the United States, Western Europe, Japan, and several other countries.

• Each crisis followed a surge in real estate prices that followed from an increase in the supplies of credit.

• Chapter 3 examines whether markets in securities and real estate are always rational or whether speculation can be destabilizing.

• The nature of the outside, exogenous shock that triggers the mania is examined in different historical settings.

• A recent shock has been financial liberalization or deregulation in several countries.

• Deregulation has led to both domestic monetary expansion and to increases in borrowing in foreign centers to finance domestic loans and speculative investment.

• Investors have speculated in commodities, agricultural land, urban building sites, railroads, new banks, discount houses, stocks, bonds (both foreign and domestic), glamour stocks, conglomerates, condominiums, shopping centers, and office buildings.

• Moderate excesses burn themselves out without significant damage to the economy although individual investors encounter large losses.

• The monetary dimensions of both manias and panics are analyzed in Chapter 4.

• The occasions when a boom or a panic has been triggered by a monetary event are noted.

Think you know about financial behavior? Test your knowledge of manias, panics, and crashes with this quiz! From Ponzi schemes to bubbles to the role of government intervention, this quiz covers the key patterns of financial behavior explored in the book. See how well you understand the Minsky model and the Stylized Model of Financial Crises and Speculation. This quiz is perfect for anyone interested in economics and financial markets.