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This Time Is Different : Eight Centuries of Financial Folly,9780691142166

This Time Is Different : Eight Centuries of Financial Folly

by
ISBN13:

9780691142166

ISBN10:
0691142165
Format:
Hardcover
Pub. Date:
9/11/2009
Publisher(s):
Princeton Univ Pr
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Summary

Throughout 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.

Author Biography

Carmen M. Reinhart is professor of economics at the University of Maryland. She recently coedited "The First Global Financial Crisis of the 21st Century" and is a regular lecturer at the International Monetary Fund and the World Bank. Kenneth Rogoff is the Thomas D. Cabot Professor of Public Policy and professor of economics at Harvard University. He is the coauthor of "Foundations of International Macroeconomics", and a frequent commentator for NPR, the "Wall Street Journal", and the "Financial Times".

Table of Contents

List of Tablesp. xiii
List of Figuresp. xvii
List of Boxesp. xxiii
Prefacep. xxv
Acknowledgmentsp. xxxvii
Preamble: Some Initial Intuitions on Financial Fragility and The Fickle Nature of Confidencep. xxxix
Financial Crises: An Operational Primerp. 1
Varieties of Crises and Their Datesp. 3
Crises Defined by Quantitative Thresholds: Inflation, Currency Crashes, and Debasementp. 4
Crises Defined by Events: Banking Crises and External and Domestic Defaultp. 8
Other Key Conceptsp. 14
Debt Intolerance: The Genesis of Serial Defaultp. 21
Debt Thresholdsp. 21
Measuring Vulnerabilityp. 25
Clubs and Regionsp. 27
Reflections on Debt Intolerancep. 29
A Global Database on Financial Crises with a Long-Term Viewp. 34
Prices, Exchange Rates, Currency Debasement, and Real GDPp. 35
Government Finances and National Accountsp. 39
Public Debt and Its Compositionp. 40
Global Variablesp. 43
Country Coveragep. 43
Sovereign External Debt Crisesp. 49
A Digression on the Theoretical Underpinnings of Debt Crisesp. 51
Sovereign Lendingp. 54
Illiquidity versus Insolvencyp. 59
Partial Default and Reschedulingp. 61
Odious Debtp. 63
Domestic Public Debtp. 64
Conclusionsp. 67
Cycles of Sovereign Default on External Debtp. 68
Recurring Patternsp. 68
Default and Banking Crisesp. 73
Default and Inflationp. 75
Global Factors and Cycles of Global External Defaultp. 77
The Duration of Default Episodesp. 81
External Default through Historyp. 86
The Early History of Serial Default: Emerging Europe, 1300--1799p. 86
Capital Inflows and Default: An "Old World" Storyp. 89
External Sovereign Default after 1800: A Global Picturep. 89
The Forgotten History of Domestic Debt and Defaultp. 101
The Stylized Facts of Domestic Debt and Defaultp. 103
Domestic and External Debtp. 103
Maturity, Rates of Return, and Currency Compositionp. 105
Episodes of Domestic Defaultp. 110
Some Caveats Regarding Domestic Debtp. 111
Domestic Debt: The Missing Link Explaining External Default and High Inflationp. 119
Understanding the Debt Intolerance Puzzlep. 119
Domestic Debt on the Eve and in the Aftermath of External Defaultp. 123
The Literature on Inflation and the "Inflation Tax"p. 124
Defining the Tax Base: Domestic Debt or the Monetary Base?p. 125
The "Temptation to Inflate" Revisitedp. 127
Domestic and External Default: Which Is Worse? Who Is Senior?p. 128
Real GDP in the Run-up to and the Aftermath of Debt Defaultsp. 129
Inflation in the Run-up to and the Aftermath of Debt Defaultsp. 129
The Incidence of Default on Debts Owed to External and Domestic Creditorsp. 133
Summary and Discussion of Selected Issuesp. 136
Banking Crises, Inflation, and Currency Crashesp. 139
Banking Crisesp. 141
A Preamble on the Theory of Banking Crisesp. 143
Banking Crises: An Equal-Opportunity Menacep. 147
Banking Crises, Capital Mobility, and Financial Liberalizationp. 155
Capital Flow Bonanzas, Credit Cycles, and Asset Pricesp. 157
Overcapacity Bubbles in the Financial Industry?p. 162
The Fiscal Legacy of Financial Crises Revisitedp. 162
Living with the Wreckage: Some Observationsp. 171
Default through Debasement: An "Old World Favorite"p. 174
Inflation and Modern Currency Crashesp. 180
An Early History of Inflation Crisesp. 181
Modern Inflation Crises: Regional Comparisonsp. 182
Currency Crashesp. 189
The Aftermath of High Inflation and Currency Collapsesp. 191
Undoing Domestic Dollarizationp. 193
The U.S. Subprime Meltdown and the Second Great Contractionp. 199
The U.S. Subprime Crisis: An International and Historical Comparisonp. 203
A Global Historical View of the Subprime Crisis and Its Aftermathp. 204
The This-Time-Is-Different Syndrome and the Run-up to the Subprime Crisisp. 208
Risks Posed by Sustained U.S. Borrowing from the Rest of the World: The Debate before the Crisisp. 208
The Episodes of Postwar Bank-Centered Financial Crisisp. 215
A Comparison of the Subprime Crisis with Past Crises in Advanced Economiesp. 216
Summaryp. 221
The Aftermath of Financial Crisesp. 223
Historical Episodes Revisitedp. 225
The Downturn after a Crisis: Depth and Durationp. 226
The Fiscal Legacy of Crisesp. 231
Sovereign Riskp. 232
Comparisons with Experiences from the First Great Contraction in the 1930sp. 233
Concluding Remarksp. 238
The International Dimensions of the Subprime Crisis: The Results of Contagion or Common Fundamentals?p. 240
Concepts of Contagionp. 241
Selected Earlier Episodesp. 241
Common Fundamentals and the Second Great Contractionp. 242
Are More Spillovers Under Way?p. 246
Composite Measures of Financial Turmoilp. 248
Developing a Composite Index of Crises: The BCDI Indexp. 249
Defining a Global Financial Crisisp. 260
The Sequencing of Crises: A Prototypep. 270
Summaryp. 273
What Have We Learned?p. 275
Reflections on Early Warnings, Graduation, Policy Responses, and the Foibles of Human Naturep. 277
On Early Warnings of Crisesp. 278
The Role of International Institutionsp. 281
Graduationp. 283
Some Observations on Policy Responsesp. 287
The Latest Version of the This-Time-Is-Different Syndromep. 290
Data Appendixesp. 293
Macroeconomic Time Seriesp. 295
Public Debtp. 327
Dates of Banking Crisesp. 344
Historical Summaries of Banking Crisesp. 348
Notesp. 393
Referencesp. 409
Name Indexp. 435
Subject Indexp. 443
Table of Contents provided by Ingram. All Rights Reserved.


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