- Paperback: 512 pages
- Publisher: Princeton University Press; 1 edition (15 August 2011)
- Language: English
- ISBN-10: 0691152640
- ISBN-13: 978-0691152646
- Product Dimensions: 14 x 3.8 x 21.6 cm
- Boxed-product Weight: 499 g
- Customer Reviews:
- Amazon Bestsellers Rank: 14,790 in Books (See Top 100 in Books)
This Time Is Different: Eight Centuries of Financial Folly Paperback – 15 Aug 2011
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""A classic.""'Nouriel Roubini
From the Back Cover
"This Time Is Different is a tremendously exciting, topical, and controversial book on the history of debt and default. This one belongs on everyone's shelf."--Barry Eichengreen, author of The European Economy since 1945
"This is quite simply the best empirical investigation of financial crises ever published. Covering hundreds of years and bringing together a dizzying array of data, Reinhart and Rogoff have made a truly heroic contribution to financial history. This single marvelous volume is worth a thousand mathematical models."--Niall Ferguson, author of The Ascent of Money: A Financial History of the World
"This Time is Different is terrific, for it gives just the perspective we need on the current world economic crisis. People can't expect to understand the current crisis without some in-depth look at past crises. That is exactly what this excellent and timely book provides."--Robert J. Shiller, author of Irrational Exuberance and coauthor of Animal Spirits
"You will be hard-pressed to find a more comprehensive and insightful analysis of financial crises. Reinhart and Rogoff's superb book is a must-read for anyone looking to understand past and present crises, as well as navigate those of tomorrow."--Mohamed El-Erian, author of When Markets Collide
"I would say that her [Carmen Reinhart's] book with Ken Rogoff on debt crises and financial crises is an extraordinary piece of work."--Federal Reserve Chairman Ben Bernanke, speaking before the House Budget Committee (6/9/2010)
"The most important authorities probably in the world now on financial crashes are Kenneth Rogoff and Carmen Reinhart. . . . And I read it [This Time is Different]."--Former President Bill Clinton, speech at Youngstown, OH, October 31, 2012
"A classic."--Nouriel Roubini
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Top international reviews
In creating this relatively short but gigantically impressive and influential (while some possibly have not read it, many nevertheless have) work the authors have dug deep into what archives they have been able to delve. At times the charts are so numerous the text has a job keeping up. The tables, too, are frequent, informative and, often, frightening. But they underline the herculean task involved in prising the data out of some hands, and make a case for a centralised clearing house for making such data transparent, rather than the current opacity and obfuscation.
The central point, of course, is that the fundamental tenets of economics do not change. You can't spend what you'll never have and get away with it. There's a price to pay, always, as the world economy, and especially the increasingly pauperised south Europeans are now finding. This time, and any other time you care to mention, really is not different. The dotcom boom was replete with spotty youths accusing the oldsters that they didn't "get it", all too often hounding them out of the boardroom so they could observe at a distance as their dire predictions came true. Ditto with the armies of derivatives sellers explaining how their CDOs, CDSs and their like would completely diversify risk away. Instead, they were the root of the problem as the subprime deck of cards came tumbling down, leading to the discovery that much of the risk had been diversified away to the same place.
Perhaps of most pressing interest is the coverage received by Greece, including the disclosure that since independence in 1820 the country has spent over half the time in default, and looks like continuing that illustrious achievement for a few more years still. But the authors use the example of Argentina in 2001-2 to demonstrate the perils awaiting should Greece leave the eurozone, a sentiment echoed by, amongst others, former central-bank governors of Argentina and Mexico (The Economist, February 18th 2012), who remind us of the chaos following the abandonment of Argentina's peg to the dollar and point out that, given the deep integration of Greece with the rest of Europe, the result of the country abandoning the euro would be many times worse.
We have, say Reinhart and Rogoff, learnt a lot about the way the world economy works since the Great Depression. But we have much left to learn, and besides, the world is constantly in a state of change and the learning process never ends. Their book is a valuable part of that learning process.
I wholeheartedly recommend this book. It's not a light bedtime read but is accessible and more than readable, and more's the point, you can dip in to whatever chapter is relevant for your enquiry. There are swathes of tables and reference charts, and the later chapters deal with the current crisis - which we learn is not new (though the debt mountain is the greatest on record).
I would suggest it helps to have a modicum of understanding of world finance, this is not a book for beginners (for that go to "Conspiracy of the Rich" by Robert Kiyosaki - possibly the best there is to really get inside what's going on in the world of finance and highly readable), but for those already engaged in this area, "This Time is Different" is essential.
Their title refers to the recurring belief that we are now too smart to have crises: this time is different. Before every crisis, governments, financiers, bankers and pundits promise that this time we really have reached the end of crises, of history, etc. For example, in April 2007, the International Monetary Fund told us that the risks to the global economy were extremely low.
The authors show that repeated sovereign default on external debts is the norm throughout every region of the world since the birth of capitalism. Defaults peaked in the wars against Napoleon, the 1820s-1840s, the 1870s-1890s, the 1930s-1950s and the 1980s-1990s. There were lulls in 1890-1914 and 2003-8. 1947 was the peak of the largest default in modern history, when countries representing 40 per cent of world GDP were in default or rescheduling.
Serial default is the norm. Since 1800, there have been 70 defaults on domestic public debt. Britain defaulted in 1749, 1822, 1834, 1888-89 and 1932 by converting debt into lower coupon rates. The USA defaulted in 1933 by abrogating the gold clause, to reinflate its economy through expansionary fiscal and monetary policy. Other countries have defaulted by inflation.
Serial banking crises are also the norm. De-regulation encourages high international capital mobility, which repeatedly produces international banking crises. These crises drag down economic growth and are contagious.
The authors show that after crises, house prices fall by 35 per cent on average, for 6 years; unemployment rises by 7 per cent for 5 years (in the Great Depression, by 16.8 per cent); GDP falls by 9 per cent for 2 years (in the Great Depression, for 4 years); it takes 4.5 years for output to reach its pre-crisis level (after the Great Depression, 10 years); and average government debt rises by 86 per cent after 3 years. As they point out, "the biggest driver of debt increases is the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions."
The authors dispel compellingly and conclusively the "this-time-is-different" syndrome. The syndrome simply stated is that the old rules of valuation no longer apply and that the current boom, unlike the many that preceded catastrophic collapses in the past, is built on sound fundamentals, structural reforms, technological innovation, and good policy. The book in detailing crises that have arisen over the past eight centuries exposes this myth and shows that boom-bust cycles recur with relentless regularity, a trend that is likely to continue in the future.
But the preceding serves simply as a point of departure and the focus of the book is on the crises themselves while systematic data and Macroeconomic Time Series cover the period 1800-2008.
The book examines a wide array of financial crises such as sovereign defaults (foreign and domestic), banking crises, exchange rate crises, hyperinflation while it observes that crises often occur in clusters. The penultimate chapter examines situations such as the Great Depression of the 1930s and the latest world wide financial crisis which it labels the "Second Great Contraction"- in which crises occur in clusters and on a global scale.
The book shows that advanced countries and economies may have "graduated" from serial default on sovereign debt and recurrent episodes of very high inflation as the cases of Austria, France, Spain and others illustrate. But History tells us that "graduation" from recurrent banking financial crises is much more elusive and that advanced economies are as vulnerable to them as emerging economies.
The literature suggests that markedly rising asset prices, slowing real economic activity, large current account deficits, and sustained debt built ups (whether public, private, or both) are important precursors to financial crisis;also sustained capital inflows are particularly strong markers for financial crises. The preceding were very prevalent and pronounced preceding the subprime crisis in the United States which evolved into a major global financial crisis parallel only to the Great Depression of the 1930s.
The aftermath of severe financial crises particularly global are characterized by asset market collapses which are deep and prolonged, profound collapses in output and employment, and government debt that explodes not only due to bail outs but also due to collapse in revenues and soaring interest rates on debt.
Serious global financial crises are painful and protracted events extending over several years.
In concluding, I cannot recommend the book strongly enough to the serious reader but at the same time I caution that the book is not suited to the casual reader and the faint-hearted.
It contains an insane amount of data, it is very professional and comparable with an academic article
Daten und Text führen zu vielen interessanten Schlussfolgerungen. Der Staatskonkurs ist langfristig der Normalfall und keine Ausnahme.
Patenrrezepte gibt es nicht.