Financial innovations initially involve huge profits that attract imitators until too many investors are chasing too few good opportunities. Crashes and losses ensue. Sooner or later, institutions adapt. Morris provides much evidence for his theory, from British bond investments in American railroads in the 19th century to junk bonds in the 1980's. But in the end, the theory is not completely satisfying.
Many financial crises stem from plain old excess.
Markets go to extremes. Investors and traders get caught in fits of excitement or gloom. Morris ignores episodes that don't fit his theory. Except for passing references, for instance, he doesn't discuss Japan's banking crisis. What really concerns us is the world's financial plumbing.