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on 23 December 2009
The book is significant and substantial. The data collated by the authors from other sources or emanating from their own research is impressive. But the book is not simply the product of hard working and meticulous authors but also of intelligent ones. The authors are insightful and incisive. The wealth of data render tables and graphs illustrate the points made in the text with crystalline clarity. The authors certainly do not lack wit but their aim is not to entertain and create pyrotechnics but to inform, provide substance and in this way fulfill the reader in his/her gaining insight into the nature, severity, indicators and sequencing of a wide array of financial crises. The authors are meticulous and explain with professional integrity to the reader the methodologies they employ and the merits but also limitations of these methodologies;they are considerate to the reader to the point of advising which parts to skip without losing continuity. It is true that the book is rigorous and scholarly but accessible to the intelligent layman with elementary knowledge in Statistics and modest exposure to Economics vocabulary.

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.
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on 13 April 2010
It's a fairly dry read, though not overly technical. With the exception of the Great Depression, it doesn't drill too far into any particular prior crisis, but then if it had, it would have been 30,000 pages instead of 300.

Three types of crises are identified - external debt, domestic debt, and banking crises. Of the three, banking crises are identified to be the worst.

Common denominators leading up to banking crises include liberalization of laws, high capital mobility, and large capital inflow. We had all of those leading up to the current crisis. It furthermore points out that the effects of banking crises include a sharp reduction in tax intake, bailouts, stimulus, and large deficits - we've also had all of those.

Two things in particular that should make everyone take notice of this work - the authors find that typically, countries do NOT grow out of their debts, and since the wide-scale introduction of fiat currencies, inflation has been the weapon of choice in this fight. Since the average banking crisis lead to a debt increase of 86% - which is not out of line with what we can expect at the end of the current - and since we live in a society dominated by fiat currencies, should we expect inflation?

However, all throughout the book, I just couldn't help myself thinking that this time really IS different. With the exception of the Great Depression, not once has a crisis hit with anywhere near the kind of global impact we currently experience. And since most of the issues still persist - deficits are worse than ever, banks are still in deep trouble, and tax revenue continues to drop - I can't come to any other conclusion that this crisis will be felt for a long time to come.

Definitely worth a read.
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TOP 1000 REVIEWERon 28 February 2012
This, I suspect, is one of those books, like Stephen Hawking's A Brief History Of Time, which far fewer people read than own. It is not a book of popular economics, and it does not have a straightforward story line. It is, however, a book of extraordinary significance to our times, and of more immediate importance, I'd venture, than Professor Hawking's opus. This is a book that looks backwards, sideways and forwards all at the same time, examining financial crises of the past, drawing comparisons with the current crisis, and outlining some ways those of the future may be spotted on the horizon and at least alleviated. It warns particularly of the all-too-frequent tendency of developing countries to assume that times of plenty will never end and therefore to spend profligately, a tendency also seen in certain developed countries. Find the steepest point in the uptrend and extrapolate to infinity. We're rich forever!

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.
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on 6 April 2010
The authors have written a monster of a refence book which spans 800 years of financial history. It's somewhat galling to see Brown/Darling on TV declaring "this time is different", and "we're in uncharted waters, we've not been here before", only to read just how many times we HAVE been here before. Wasn't it Einstein who said that the definition of stupidity is making the same mistake again and again?

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.
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on 17 November 2009
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."
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on 5 May 2014
Huge volume with links to a huge volume of reference material. As M Pedersen suggests it's dry as a panda's breast milk too. This book looks at 5 aspects of financial crisis, external and internal debt, inflation, banking crisis and currency collapse, and reveals some interesting insights into as to why they matter, and to what extent they matter. If you can't get an idea or two out of this volume, then you probably couldn't crack a snail's shell with your heel.
The information on banking crises being the worst of all possible crises, and that ratings agencies are poor predictors of these events was very enlightening.
So why does't it merit the full 5 stars?

The authors analyse recessions, and mention for example it means a loss of tax revenue. They completely omit that increase in government spending is usually a couple of multiples higher than loss of tax revenue. The authors also after-time in their definitions. This is to be expected, as you define the indicators of a problem after the sequence of events resulting from the problem has been revealed. But it's still after-timing nonetheless.

This matters in a sense as many economists are now saying that across the spectrum of modern advanced economies an experiment is being conducted to see if 'austerity' is the solution or part of the problem. Naturally these same economists will give it another 15 years or so before defining their terms as to what austerity on the part of a government actually means, and then fit the definition to predict the outcome. This is not the scientific method, that is for sure.

As the authors went to great trouble to define their 5 crisis events, I think they missed an opportunity for a genuinely superb opus which is of future relevance by failing to define 'austerity' and omitting crises of excessive government spending. They did labour the 'This time is different' point excessively too.

They've written something of historical relevance, that has to be admitted, and many ideas are suggested.
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on 17 March 2012
Would you wish!! This book was published in 2009 and thus managed to miss the Euro crisis by about a year or so but that doesn't matter because it would have happened anyway..

Carmen Reinhart and Kenneth Rogoff do a fine job in recounting the financial crisis of the last 8 centuries. Most readers would presumably only read Part V of the book as this covers the recent US subprime meltdown but I would urge you to read the whole book because it is quite a story.

In Parts I to IV the authors look at financial crises induced by indifferent events such as sovereign external debt crises (compulsory reading for Euroland politicians), domestic defaults and various kinds of banking crisis to name just a few. Part V, as noted above, deals with the US subprime crisis and it is covered in quite some detail which may well be the result of the event having happened only recently. Another good book to learn how the crises came about may be The Big Short although admittedly Michael Lewis takes a somewhat different angle in looking at the events than the authors.

Part VI deals with what we have learnt from these events. Having read the book I have learnt a lot about the history of financial crises of various natures and there are plenty of other lessons to be learnt on how to avoid these situations in future. However, one feels that none of these will be learnt and that financial crises will continue to visit us on a regular basis.

What I was incredibly impressed by is the amount of data the authors have accumulated. The data appendixes make up almost a third of the entire book.

Although this book should be compulsory reading for virtually everyone (including politicians) it is destined to become a doorstop of sorts because economic studies rarely excite people. Nevertheless, it remains essential reading if only to find out what the future may have in store for you.
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on 9 September 2010
"This Time is different: Eight Centuries of Financial Folly" by Carmen Reinhart and Kenneth Rogoff is an exhaustive econometric analysis of eight centuries of financial crisis. It reads as an extended economic paper where terms and methodologies are defined at length and data treated with rigor. The value of the book is the extensive set of data, an unprecedented study that compiled statistics over 66 countries accounting for 90% of world GDP over nearly 8 centuries, with an emphasis on the past 2 centuries, for which they have the most data.

The tone is sober and cautious and unfortunately stays very descriptive. I felt that the book lacked deep insights in the cause and development of crisis. The book insists on the common traits of crisis and its predicanta but stays sober regarding the remedies. I was hoping to find clues about the current economic trajectory _ is the current economic deceleration a sign of a double-dip coming or a normal slow-down in a recovery ? _ but unfortunately, the book did not address this question at length.

However, this is what I enjoyed and learnt.
- The part called "The this-time-is different syndrome" in Chapter I is interesting and entertaining. In six pages, the authors go over five important crisis of the XXth Century and oppose the reason why people discard the risk of a bubble and the unfortunate reality.
- The book stresses the difficulty for a serial defaulter to cure itself. Indeed, the market confidence is key and crisis can happen at benign level of debt/gdp ratio.
- There are some very interesting reflections on the lack of legal framework. Country risk and corporate risk is quite different as a country can decide to default whatever its financial conditions and creditors might have very limited recourse. The bargaining power of each parties are very key at that stage.
- Defaults come in cluster. We have had waves of defaults in 1940s, 1980-1990 and a very mild 2000 period.
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on 27 November 2009
An essential text book for those interested in the financial panic of 2007/08, with all the required data. It puts the crisis in an historic perspective. By looking at the multitude of financial crises that have ocurred, it gets away from the narrow comparison with the Great Depression. An important read.
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on 22 February 2011
In this very useful book, authors Carmen Reinhart, a professor of economics at the University of Maryland, and Kenneth Rogoff, a professor of economics at Harvard University, present the findings of decades of research into economic crises.

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."
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