Track 05Module 5 of 67 sources
Cycles, debt and manias
Recognise the stages of a credit cycle and the anatomy of a bubble while they are happening.
Key ideas
- Cycles are driven by credit. Lenders compete, standards fall, debt builds, and a small shock exposes the weakest borrowers.
- Bubbles follow a pattern: a real innovation, easy credit, euphoria, insider selling, then a rush for the exit.
- High starting valuations lower long-run returns and say little about the next year.
- Trade imbalances are the mirror of savings imbalances. One country's surplus needs another's deficit.
Start hereWatch or read these first. They carry the core idea.
Book
Manias, Panics, and Crashes
Charles Poor Kindleberger, Robert Aliber, R. Aliber
The classic history of financial crises. Read the chapter on the anatomy of a typical crisis.
CoreThe standard references. Work through them once the idea is clear.
Book
Book
Principles for Navigating Big Debt Crises
Ray Dalio
The mechanics of debt crises with dozens of cases.
Report
Report
Book
Trade Wars Are Class Wars
Matthew C. Klein, Michael Pettis
How domestic inequality drives trade imbalances.
Go deeperResearch, primary sources and data for when you want the detail.
Newsletter
China Financial Markets (Michael Pettis)
Carnegie Endowment
Detailed essays on China's growth model and global imbalances.
Practice
List three signs of late-cycle behaviour you can observe today, such as tight credit spreads or heavy new issuance. Find where each stands on the Macro page.
See it live
Where this leads
08.3 · Risk, Losses and ProcessLeverage, crowding and blow-upsRecognise the conditions that turn a good trade into a disaster: leverage, crowding and liquidity that vanishes.04.6 · Investing and ValuationLearning from the best: letters, memos and cyclesAbsorb how proven investors think about risk, cycles and position size.