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This Time Is Different: Eight Centuries of Financial Folly Hardcover – October 1, 2009
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Winner of the 2011 Gold Medal Arthur Ross Book Award, Council on Foreign Relations
Winner of the 2010 Paul A. Samuelson Award, TIAA-CREF
One of USA Today's "Year's Best Business Books To Make Sense of Financial Crisis"
Listed on Bloomberg.com by James Pressley as one of "our favorite financial-crisis books this year"
Shortlisted for the 2010 Spear's Book of the Year Award in Financial History
Finalist for the 2011 Estoril Global Issues Distinguished Book Prize
Runner-Up for the Book of the Year, The Atlantic
Finalist for the 2009 Business Book Award ("Best of the Rest") in Current Interest, 800-CEO-READ
One of Library Journal Best Business Books - Economics/U.S. Economy category
"Mr. Rogoff, a professor of economics at Harvard University, accurately predicted the eurozone debt crisis and for years has been telling anyone who would listen that China posed the next big threat to the global economy. He is starting to look right, again. . . . 'China is the classic "This time is different" story,' Mr. Rogoff said."--Andrew Ross Sorkin, New York Times
"[E]ssential reading . . . both for its originality and for the sobering patterns of financial behaviour it reveals."--Economist
"Reinhart and Rogoff have compiled an impressive database, which covers eight centuries of government debt defaults from around the world. They have also collected statistics on inflation rates from every country where information is available and on banking crises and international capital flows over the past couple of centuries. This lengthy historical study gives what they call a 'panoramic view' of the unending cycle of boom and bust, showing how claims that 'this time is different' are invariably proven wrong. . . . This Time Is Different doesn't simply explain what went wrong in our most recent crisis. This book also provides a roadmap of how things are likely to pan out in the years to come. . . . This Time Is Different is an important addition to the literature of financial history."--Edward Chancellor, Wall Street Journal
"Everyone working on economic policy should own This Time is Different and open it for a bracing blast of sobriety when things seem to be going well."--Greg Ip, Washington Post
"[T]he most comprehensive study of financial crises and their aftermath."--Eduardo Porter, New York Times
"The authors use copious amounts of data . . . to make the compelling case that any well-informed person should have seen the Great Recession coming. The essence of their book is that while financial crises come in different varieties, they are not mysteriously born of undersea earthquakes, but frequently occurring events that can be spotted and even controlled if politicians and regulators know what to look for."--Devin Leonard, New York Times
"This Time is Different takes a Sergeant Friday, just-the-facts-ma'am approach: before we start theorizing, let's take a hard look at what history tells us. One side benefit of this approach is that the current book manages to be both extremely useful to professional economists and accessible to the intelligent lay reader. The Reinhart-Rogoff approach has already paid off handsomely in making sense of current events."--Robin Wells and Paul Krugman, New York Review of Books
"[A] terrific book."--Andrew Ross Sorkin, New York Times
"Among policy experts and economists, This Time is Different: Eight Centuries of Financial Folly . . . has become so influential that when somebody says, 'We live in a Reinhart-Rogoff world,' everybody else in the room nods sagely."--Justin Lahart, Wall Street Journal
From the Inside Flap
"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 ofThe 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 ofThe 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 ofAnimal 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)
"A classic."--Nouriel Roubini
"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
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This highly lauded book is considered one of the most important to address the 2008 financial crisis, or "The Second Great Contraction" as Rogoff and Reinhart have coined it.
"This Time Is Different" is unique from other books that have explored financial booms and busts.
What sets this account apart from its finest predecessors is the scope of the data underlying its central findings. "Our aim here is to be expansive, systematic, and quantitative...earlier works take an essentially narrative approach, fortified by relatively sparse data," argues Rogoff and Reinhart in the opening of their book.
And they do present an impressive breadth of data; and alarmingly, their data indeed makes a strong argument that history does, and likely will continue to, repeat itself.
Equally alarming is the lack of prescriptions the authors put forward to address the "The Second Great Contraction".
At the time this book came out, the narrative that Reinhart and Rogoff use to explain what caused the crisis was well represented and certainly not unique to these authors:
"...financial liberalization simultaneously facilitates banks' access to external credit and more risky lending practices at home. After a while, following a boom in lending and asset prices, weaknesses in bank balance sheets become manifest and problems in the banking sector begin."
Through the authors' recounting of history, we see this narrative- regarding the causes of crises- is a familiar pattern of economic activity across countries and time.
The next part of the story is too, but it is the part of the story that in 2009 pundits were not, and to some degree still are not, recognizing could happen again, and to us:
"The next phase of the crisis unfolds when the central bank begins to provide support for [failed banks] by extending credit to them."
"If the exchange rate is heavily managed," which the US Dollar essentially is through the Fed's mandate to maintain stable prices, "...a policy inconsistency arises between supporting the exchange rate and acting as lender of last resort to troubled institutions...the exchange rate is subjugated to the role of the central bank as the lender of last resort..."
"The depreciation or devaluation of the currency...exacerbates the problem of the banks that have borrowed in a foreign currency..." It "usually worsens inflation...and it increases the odds of external and domestic default if the government has foreign currency denominated debt."
In other words, the goal of stable prices and of correcting a banking crisis like "The Second Great Contraction" come in direct conflict. Throughout history, the result of this conflict has most typically been inflation followed by default on domestic or external debt, or some combination of the two. The type of default usually depending on the said country's history of default and their mix of debt.
This time is decidedly not different. The cycles of boom and bust that Rogoff and Reinhart have painstakingly recorded in this book seem to be playing out yet again.
History inevitably repeats itself, and for no reason I suppose other than because of humanity's desire to pretend it doesn't.
The question after you read this book is not whether or not this time is different; the question is what do to solve the problems that arise when history inevitably does repeat itself. It seems to much to ask, based on human nature, to actually prevent these recurrences from ever happening.
I had hoped to derive useful insights for investing. I have read other books - The Big Short, Dying of Money, Lords of Finance, etc. - with this same purpose. However, while I was greatly impressed with the authors' effort and commitment, the main lesson that I drew from the book is that financial distress is quite common and recovery from it can be painful and lengthy. I expect our recovery to be so.
The book may aid an investor if one invests overseas. The historical tendencies of individual countries may be of some use. An investor may avoid some countries because of their financial history. For instance, if one loans money to Argentina or Greece with an expectation of repayment, you are quite likely to get what you deserve.
The book notes that inflation is one common political response to national financial distress. Indeed, I have read a blog by Professor Rogoff observing that the United States' current overcommitted financial circumstances might be eased by inflation. This, too, probably lies in our future. The book, Dying of Money, about the German hyperinflation of the 1920's may provide some practical guidance on this point.