This Time is Different: Eight Centuries of Financial Folly
Selected Book Details
- Hardcover
- Author: Carmen M. Reinhart, Kenneth Rogoff
- Publisher: Princeton University Press
- Release Date: October 2009
- ISBN-10: 0691142165
- ISBN-13: 9780691142166
- List Price: $35.00
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Summaries and Customer Reviews provided by Amazon
SummaryThroughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. This book proves that premise wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned. Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts--as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur. An important book that will affect policy discussions for a long time to come, This Time Is Different exposes centuries of financial missteps. |
Customer Reviews
Average Rating: 
Terrific historical analysis
Rating:
This book really is an amazing achievement; the historical breadth is astonishing. I highly recommend it to anyone trying to make sense of our current economic crisis (you'll learn that we've been here before, lots of times, and that we wil likely be in this spot again as another cycle repeats).
I suggest some complementary titles for people who liked this book:
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves
The Return of Depression Economics and the Crisis of 2008
The Pecora Report: The 1934 Report on the Practices of Stock Exchanges from the "Pecora Commission"
Keynes: The Return of the Master
The Great Crash 1929
Sobering study of fiscal failures
Rating:
Every so often, experts sucker people into bidding up the prices of stocks or real estate because they announce that the economy has fundamentally changed. As the aftermath of the real estate bubble illustrates, the basics of economics don't really change, no matter what fantasies people come to believe. Economics professors Carmen M. Reinhart and Kenneth S. Rogoff present a thorough historical and statistical tour of financial hubris through the centuries, a postmortem that will make you wonder how anyone ever believed "this time is different." The staid tone, formulas, charts and somewhat confusing organization make this fascinating history challenging to absorb. Yet, the content, which sweeps ambitiously and carefully across centuries and countries, rewards the persistent reader with many insights and gems, like the nation-by-nation appendix of fiscal history low points. getAbstract recommends this analytical overview to history buffs, investors, managers and policy makers who seek perspective on "financial folly."
less than what I hoped for
Rating: 
I have little to add to previous reviews of book contents. However, my take away was different than that of prior reviewers. The book provided less than I expected. I had hoped for an attempt to relate the various crises in a holistic manner by considering interplay between banking, currency, internal and external political pressures including war, markets and flaws and excesses therein, debt, inflation, greed of the ruling class, competition between societal classes, etc. I expected to receive the benefit of the authors' experience, wisdom and insight. I imagine such an effort would have required focus on one or perhaps a few comparators for the present situation. That was not the purpose. Instead the book is a vehicle for showcasing an extensive new economic data set developed by the authors of 800 years of economic crises. One receives a birds-eye statistical analysis of that data.
That is not to say that the work was poorly written or uninformative. A number of insights were provided and supported through cogent argument and readable graphics. The text was quite readable though redundant in places. Good effort was made to provide two reading tracks - one for those who wanted to know details behind the analysis and one for those focused on findings and conclusions. Important, recurring themes were demonstrable through the data, and considerable useful and interesting information was certainly provided.
Nevertheless, only a few general and cursory allusions were provided to the "why and wherefore" factors noted above; i.e., context was studiously avoided. Absent consideration of the larger picture including motivations of significant players, the authors' concluding recommendations for avoiding future crises were produced with blinders and appear real-world unrealistic at best.
This is a readable economics text which provides historical economic data that are likely to be relevant to the course of the present crisis. Its weakness is that beyond statistical delineation of selected historical economic markers of risk (which were mostly intuitive in any case) it does not provide insight into the nature of past, present or future difficulty. Perhaps my expectations were misguided but I was not prepared for the measured, academic tone of the book with steadfast refusal to venture beyond the central data set. As such I was disappointed and found the effort sterile and overly long.
Unfortunately, Reruns Are Already Starting!
Rating:
Reinhart and Rogoff's book provides a quantitative history of financial crises derived from over 600 years and 66 nations. The basic message from all their data is that there are remarkable similarities in today's financial crises with experience from other countries and nations. The common theme is that excessive debt accumulation by government, banks, corporations, or consumers often brings great risk. It makes government look like it is providing greater growth than it is, inflates housing and stock prices beyond sustainable levels, and makes banks seem more stable and profitable than they really are. Large-scale debt buildups make an economy vulnerable to crises of confidence - especially when the debt is short-term and needs to be refinanced (the usual case).
Reinhart and Rogoff go on to conclude that most of these booms end badly. Outcomes include sovereign defaults (government fails to meet payments on its debt), banking crises (heavy investment losses, banking panics), exchange rate crises (Asia, Europe, Latin America in the 1990s), high inflation (a de facto default), and combinations of the preceding (1930s, today).
What did the authors learn from their data digging? Severe financial crises share three characteristics: 1)Declines in real housing prices average 35%, stretched out over six years, while equity prices fall an average 56% over 3.5 years. 2)The unemployment rate rises an average of 7 percentage points during the down phase (average length = four years). Output falls more than 9% over a two-year period. 3)Government debt tends to explode, an average 86% in real terms. The biggest driver of this debt explosion is the collapse in tax revenues; counter-cyclical fiscal policy efforts also contribute, as well as spiking interest rates.
Reinhart and Rogoff also identify what they find to be the best and worst (pronouncements from the Federal Reserve, U.S. Treasury heads, and more than a few 'successful' academics and stock-pickers) early warning indicators of crises. Finally, the authors warn that premature self-congratulations on early successes in correcting a banking crisis may lead to complacency and an even worse state of affairs.
The 'good news' is that Reinhart and Rogoff have provided a detailed and credible accounting of past experiences. The 'bad news' is that despite the authors' scholarly and intense efforts, "This Time is Different" is not likely to sway many minds for two reasons. 1)The book is too much of a scholarly tome to become widely read, and there are too many self-serving 'think-tanks' offering contrarian opinions. Others, more data-driven, will point out that most of "This Time Is Different" is drawn from earlier days and non-U.S. nations, and thus of limited applicability to the U.S. today. 2)Despite recent disproof of claims that government has mastered the economic cycle via Federal Reserve fine-tuning and counter-cyclical government spending, and that 'the old rules of valuation no longer apply,' we're back blowing bubbles. Today's MSNBC headline reads 'New Market Bubble May be Brewing,' the 'Greenspan Put' (government will bail out falling markets, while allowing soaring ones) continues, no action has been taken to rein in Wall Street gambling and unwarranted bonuses, financial institutions believed 'too big to fail' are bigger than ever, and 2010 election pressures will undoubtedly auger for continued easy money, inflating ourselves out of debt, and increased debt at all levels.
A must have in the shelf of any policy maker or practitioner who needs to understand the mechanics behind financial crisis.
Rating:
This book is very well documented, with tons of data, anecdotes and references that let the reader decide how deep he might want to go in a given theme. Reinhart and Rogoff explain brilliantly the details of financial crisis from different perspectives, like currency crisis, banking crisis or debt crisis, with a unique historical perspective.
I will like to highlight section 3, where they focus on issues related to domestic debt, which are often forgotten or overlooked in the related literature that mostly focuses in external debt. Reinhart and Rogoff know that bringing domestic debt into the picture is critical, because it lets us understand how a process of high inflation is related to a crisis, besides the usual channel that is through currency devaluation. There is also an interesting discussion regarding seniority issues between domestic and international debt bondholders.
I would also recommend the section about the US crisis. The authors present a very up to date discussion about it and discuss the policy options ahead. It is very hard to have so many references, data, thoughts and information in just one volume, but Reinhart and Rogoff did it. This book will become in the Ecyclopedia of Crisis in the years ahead.
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