This Time Is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart

Dec 06, 2011

Frank Stein rated it

As almost everyone who reviews this book mentions, this is truly an impressive piece of work. The authors, Carmen Reinhart and Kenneth Rogoff, have assembled an amazing history of government defaults, hyperinflations, banking crises, and currency crises for the past 800 years in dozens of countries spanning the globe. They didn't, understandably, compile a narrative of these hundreds of independent events, but coded them into a massive statistical database with which they could compare the relat...moreAs almost everyone who reviews this book mentions, this is truly an impressive piece of work. The authors, Carmen Reinhart and Kenneth Rogoff, have assembled an amazing history of government defaults, hyperinflations, banking crises, and currency crises for the past 800 years in dozens of countries spanning the globe. They didn't, understandably, compile a narrative of these hundreds of independent events, but coded them into a massive statistical database with which they could compare the relationship of all these financial panics with each other and with numerous other stats like GDP growth and total debt. The result is innumerable new insights and newsworthy conclusions. I'll mention three.

First, while previous researchers, who have focused on emerging market crises, have lavished attention on external defaults of government debt (often to these countries' First world creditors), Reinhart and Rogoff show that defaults on domestically issued debt to these countries' own citizens is almost as common and almost as destructive. They also showed that this domestic debt often constituted over half of all debt issued by these countries, which was often only possible because they repressed financial markets at home and limited investments (at least in the post World War II period. The authors also show that pre-World War II and more recently issued domestic debt had market-level interest rates). In the future, researchers will have to pay more attention to this vital aspect of government finance.

Second, the authors showed that the ratio of debt and deficit to GDP for sovereign defaulters could be shockingly low, often as low as 20%, and the risk of default increased drastically around the very low number of 35% of GDP. This should give no comfort to those who think Italy is safe with "only" a 115% debt to GDP ratio and low deficits.

Third, they also show that around the world the governmental response to financial panics is remarkably similar, in both emerging markets and in developed countries. After a crisis, on average government debt increases by 86%, no matter where the crisis took place, and most of this is not the cost of "bailouts" but is due to decreased tax revenue and increased expenditures. Everywhere they show, governments are subject to similar constraints and similar outcomes after a crisis.

These points barely scratch the surface of the authors work. The book is certainly a monument to empirical insights, but I don't want to oversell it. First, perhaps as befits an empirical economics text, this book is almost exclusively composed of graphs, tables, and the textual interpretation of both of those. These do provide an almost inexhaustible source of new findings and hypotheses, but if that's not your bag don't go near this book (though the the authors do make a real effort to make the results comprehensible even to an economic layperson). Also, much of this statistical work is barely interpreted but often just presented in numerical form. Conclusions drawn from it can seem a little hasty. Also, although the authors emphasize the "eight centuries of financial folly," the book overwhelmingly focuses on the past 200 years, and especially the last 100, so its not quite as comprehensive as some have said. This is due more to the nature of the evidence than the authors' efforts, but it is an important qualifier.

Ultimately, these quibbles can be only that. This is undoubtedly one of the most important works of economic history of the past decade, and will and should be read by anyone who cares about the impact of global finance on the world and its people.(less)

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Mar 29, 2010

Gordon rated it

This book is the current darling of the financial set, and I understand it has become required reading by economists, bankers, policy-makers and the more thoughtful financial pundits alike. That’s a rare feat. The book assembles a vast data set on financial crises, from many countries both developed and emerging, and reduces it to a mass of charts and graphs along with text. The title, as you might guess, refers to the fact that “this time is different” always turn out to be famous last words...more

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May 09, 2010

Nancy rated it

Shelves: history, non-fiction, finance

Don't curl up by the fire intending to read this book.

For most people reading this book would be a real slog. It is dense and full of charts and tables. However, picking it up, opening it to an interesting looking chapter and examining the tables and charts can be very engaging. If you get bogged down, don't give up. Pick it up from time to time and read a section. You'll learn a lot about finance.

While I did not read the whole book I got some good pointers from it. One i...more

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Aug 09, 2011

Phil rated it

It's data. Hooray data!

The authors aren't trying to write a book for a wide audience. It's mathematical and dry; that's the point. I hold a Bachelor's degree in Economics from a top-25 university--my coursework included International Finance and Econometrics--and I still found this book difficult. It's worth it if you are interested in economics and you don't get nervous when the authors don't apologize for being experts. A relatively simple passage from this book is something l...more

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Dec 24, 2011

Bap rated it

Shelves: economics, non-fiction

This book is packed with data to show that economic busts have devastated economies for hundreds of years preceded by greed and bubbles. The euphoria that precedes the bust is remarkable for the mass amnesia and the vain thought that "this time is different". Electricity has brought a new age of prosperity they thought before the great depression. The Internet has created new prosperity that has eliminated the business cycle was the boast before the d,outcome bust in 2000. And befor...more

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Nov 14, 2011

Adrian rated it

Shelves: economics-finance-business, history, nonfiction

This book is a joy if you're the kind of person who likes good statistics and qualitative reasoning. One hundred pages of appendices alone! It's almost beautiful.

A painstaking analysis of statistics of financial crises throughout history. Some are from the 13th century, yes, but the bulk of the data is from the 19th century onwards. What do they learn?

1) Debt accumulation brings risk.
2) Severe financial crises have one of the following: Decline in housing prices, unempl...more

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Aug 21, 2011

Richard rated it

Recommends it for: economists, statisticians, professional investors

It might be unfair for me to rate this book (giving it 2 stars). My rating is subjective. This isn't the book I was looking for, and that isn't the authors' fault. So please view my rating with that in mind.

This book is clearly aimed at an academic or professional economic audience. The book is chock full of tables and graphs. The amount and quality of data is impressive.

As for the writing style, Alan Greenspan would be proud. Here is a typical sentence (pp 192-3): ...more

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Jul 29, 2011

Nilesh added it

This is about the best book on financial crises in a long time. This book does not talk about the history of past financial turmoils in the smooth, story-telling ways of Kindleberger. It certainly does not have a Talebian harangue on what is wrong with almost everyone who has been positively referenced in history books of the world. The discourse on individual episodes of economic or financial events is nearly non-existent and the book does not try to pass judgement on any individuals even remot...more

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Jun 22, 2011

John rated it

· review of another edition

Well, this is one of the few books I tried to finish but couldn't.
First I downloaded it from Audible.com. However, this book has a ton of graphs and tables. The reader of the audiobook frequently makes statements like "As can be seen from table 2.2..." The listener is unable to "see" table 2.2 as no tables or illustrations are provided either with the download or on the internet. So that's frustrating. Then I checked the book out in hardcopy from the library so as to...more

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Jan 01, 2011

Dan rated it

Not for bed-time... this one requires a bit of alertness. Fairly technical... it contains only a handful of accessible, though fascinating, anecdotes (Newfoundland used to be a sovereign democracy until debt drove it into Canada's arms). The authors' central theme is what cool stuff you can learn given enough economic data. Other key messages:

-- There is no exceptionalism, American or otherwise. Nations old and young default regularly. The U.S. and Western Europe may have a good r...more

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Aug 11, 2010

Jason rated it

This book’s an A- graduate paper glorified into 400+ pages. It has impressive academic rigor, an appendices & reference list as long as the body, and charts galore. Unfortunately it’s written as blandly as Ben Stein speaks. I was jazzed to find this at the library, but let down.

Mercifully, in the preface the authors tell us that the book is organized so you can skip to the last 4 chapters if you‘re interested only with “The Second Great Contraction” which began in the US late 2007...more

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Mar 02, 2010

Max rated it

I enjoyed this book’s reliance on objective data. It is difficult to find a pop economics book that doesn’t push an ideological agenda. In general, I find that economics has a hard time disconnecting from the political ideologies, which is unfortunate. If there was an ideological agenda being pushed in this book, I missed it. Obviously, no statistic is completely objective; there is always some judgment call as to what is included and where lines are drawn. But, in reading this book, one ge...moreI enjoyed this book’s reliance on objective data. It is difficult to find a pop economics book that doesn’t push an ideological agenda. In general, I find that economics has a hard time disconnecting from the political ideologies, which is unfortunate. If there was an ideological agenda being pushed in this book, I missed it. Obviously, no statistic is completely objective; there is always some judgment call as to what is included and where lines are drawn. But, in reading this book, one gets the feeling that the judgments were made on the basis of how to arrive at the most accurate conclusions, rather than with the goal of proving some sweeping theory.

This strategy does carry some downside as well. While their objectivity leads me trust their judgment, it also made the book less memorable. I will have trouble remembering anything more than a few simple conclusions from this book. Partly, this is the nature of this type of argument and partly this is a reflection of the fact that Reinhart and Rogoff spend a lot of ink talking about how they arrived at their conclusions and perhaps not enough ink talking about what we can take away from these conclusions.

In the end, the main conclusion that I would take away from our reading is that domestic debt plays an underrated role in spurring financial crises. I’m not enough of an expert in the theory of financial crises to be surprised by this fact, but it sounds intuitive enough to be believable. The statistics are compelling, as are the few arguments suggested by Reinhart and Rogoff. It makes sense that countries who can no longer borrow abroad would turn to domestic lenders for funds. And it makes sense that countries would be more likely to default on debts to foreign creditors than domestic actors who might threaten their position of sovereignty.

Also of interest was the discussion of different types of financial crisis. I had never considered these distinctions and I found it quite useful to learn about the differences between an inflation crisis, a currency crash, an external debt crisis, and a banking crisis. I found the chapters about debt defaulting particularly interesting. I thought one of the most fascinating facts of the book was that certain countries, such as the United States and Australia, have never defaulted, while other countries, such as Argentina, France and Spain have been chronic defaulters (pg 58). It shocked my pre-conceptions about culture and nation-states and development to learn that once a nation has defaulted on its debts, it becomes, statistically, a much greater risk for future defaults.

On a similar level, I found it almost equally shocking that “banking crises have impacted rich and poor countries alike (pg 141).” It is fascinating and instructive to learn that rich countries, despite their ability to conquer almost all of the other demons of instability, still have been unable to master the balance between encouraging healthy financial institutions and regulating these institutions sufficiently to maintain financial stability for their nations.

Finally, I was happy to learn that countries “can and do graduate” from “debt intolerance” (pg 30). I’ve always considered it to be one of the most promising aspects of development that once a country has graduated into the club of developed countries, it is there to stay. It is helpful that countries, once they reach a certain level of development, seem to graduate from debt intolerance concerns, making them more stable and more likely to stay developed.
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Nov 17, 2009

getAbstract rated it

Sobering study of fiscal failures

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 cen...more

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Dec 07, 2010

Harry Barnett rated it

Shelves: finance

A more appropriate title for the book would have been "This Time is Different: Four Hundred Pages of Quantitative Analysis". The author gets it right in the Preface when he calls the book "a quantitative history of financial crises in their various guises". He goes on to say "earlier works take an essentially narrative approach, fortified by relatively sparse data". Reinhart and Rogoff provide you with data overload and no narrative. This results in some pretty dry ...more

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Aug 30, 2011

Karen rated it

The writing style WAS boring, but it was great to see someone using a truly empirical approach to the "science" of economics. SO much of economics is pure theory with no attempt to verify whether the real world actually works the way the theorist thinks it does.

This book is an impressive attempt to process a lot of data collected from varied sources in a way that maintained objectivity by avoiding getting into too much detail on any particular crisis. I think its approach i...more

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Sep 10, 2011

Tyler rated it

Shelves: economics

“This Time Is Different” is the psychology of speculative bubbles. In this important book, of the same name, Ken Rogoff and Carmen Reinhart offer forth a thesis that debunks this reoccurring, blind faith in markets: “History repeats itself.”

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 ha...more

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Feb 03, 2012

Carlos rated it

Una descripción muy detallada, del desarrollo de las crisis economicas desde hace 800 años. Con los pies en firme sobre una amplia base de indicadores económicos, los autores exponen la génesis, desarrollo y 'graduación' de las crisis. De aquellas graduables, ya que los datos muestran la incapacidad de los sistemas económicos de superar las crisis monetarias y financieras.

El libro expone con datos detalles aterradores y que parece imposible que las autoridades económicas y políticas ...more

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Jan 22, 2012

Olegs Tkacevs rated it

On the one hand thorough descriptive analysis of banking, debt and currency crises based on massive statistical database makes this book extremely useful for students, teachers of economics and professionals (NB. it is important to stress that some understanding, at least at the bachelor level, of macroeconomics, monetary economics and international economics are prerequisites to understand terminology and concepts used in the book). On the other hand, I found that the book lacks something that ...more

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Sep 19, 2010

Bob Pearson rated it

· review of another edition

The book does an excellent job of compiling facts, statistics and trends in a few key areas for each of a series of financial crises over the last eight centuries. For a non-expert, it's tough going, but even if you read it lightly and get the gist of the presentations, parts V and VI of the book will make more sense than if you just jump into this last discussion (even though the authors invite you to make that jump if you want to). We'll probably never have another meltdown like this in my l...more

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Nov 28, 2011

Cliff rated it

· review of another edition

Shelves: non-fiction

This Time is Different: Eight Centuries of Financial Folly is, in the words of the authors, Carmen Reinhart and Kenneth Rogoff, 'a quantitative history of financial crises'. These crises include government defaults on debt, bank failures, currency devaluations and hyperinflation and the fallout from them including contagion (spread to other countries) and severe recession (falls in per capita income).

The authors are economists of international repute. Their approach is to assemble d...moreThis Time is Different: Eight Centuries of Financial Folly is, in the words of the authors, Carmen Reinhart and Kenneth Rogoff, 'a quantitative history of financial crises'. These crises include government defaults on debt, bank failures, currency devaluations and hyperinflation and the fallout from them including contagion (spread to other countries) and severe recession (falls in per capita income).

The authors are economists of international repute. Their approach is to assemble data that enable intercountry comparisons and intertemporal comparisons. These latter extend back in some cases to the middle ages.

One of the many virtues of the book is that commentary on causes and relationships is built on reasoned interpretations of the data. Where conclusions are speculative or the data admits of alternative interpretations the authors say so. Another is that, although written as a reference work for economists, the book is intelligible to non-economists (like me). It is virtually jargon free.

The analysis extends to 2009, so the book covers the beginning of what the authors refer to as the Second Great Contraction, the global financial crisis that began with the sub-prime crisis in the US in late 2008 and is still playing out. Key features cf financial crises generally that should have sounded warnings were: deregulation of the banking system, globalisation of the financial system, a housing price bubble, high indebtedness of individuals, and large capital inflows financing burgeoning government debt. The book admirably avoids finger pointing and self congratulation (on instances prior to the event when the authors pointed to the dangers of a crisis) but does identify the former Federal Reserve Chairman, Alan Greenspan, as a leading proponent of the 'this time is different' syndrome and one whose opinions stemmed from ideology (or perhaps an unbending faith in the correctness of his own opinions) rather from a sound basis of fact and theory.

From this layman's perspective, a shortcoming of the book is its failure to classify and include in its data set various forms of government regulation by country and by time. Particularly when the relationship between deregulation and bank failures is so clear cut, it would be valuable to have a factual basis from which inferences of the effectiveness of various types of regulation in averting banking crises could be drawn. The writers seem almost to take the attitude that financial excesses by banks are inevitable in boom times and large scale bailouts after the event by government are a sufficient policy response.

This e-book shows the strengths and weaknesses of Kindle. The price of around US$9 was a bargain for such a large, current and authoritative book. On the other hand the tables and figures, which were a large and essential component of the text, do not display well in the Kindle reader.(less)

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Mar 16, 2011

Brian rated it

Shelves: financial-crisis-2008-must-reads

Mostly showing off their data set...

As several of the Amazon reviews indicate, much of the book is devoted to explaining their data collection methods. Though I'm sure the data they amassed is in itself a publishable achievement, I agree that the lengths to which they describe their methods are not of general interest. However, I do believe they explain this to the reader early on, indicating that the sections on the current global financial crisis are can stand on their own without reading the ...more

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Aug 17, 2011

Ed rated it

This time is never different: after any prolonged period of financial calm, policy makers and their advisers either forget history or invent reasons to believe that historical experience is irrelevant so the cycle of overvalued assets, huge trade imbalances and rapid acquisition of debt begins with the cheerleaders in academia and the business community telling each other (and everyone else) that this time the old valuation rules don't apply; we are smarter, have better systems and have learned ...more

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Nov 27, 2011

todd rated it

This reviewer gives four stars because I really appreciated the academic detail provided by Reinhart and Rogoff. Not everyone will. In fact this is likely to be one of those books that most people who claim to have read it, have not really. The basic premise is simplicity itself. When it comes to debt, especially sovereign debt, default is the norm not the expected. R&R provide hundreds of years of examples showing the many ways that investors who lend to states can be screwed. As we watch...more

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Aug 09, 2011

Jason Roberts rated it

This is the most important book that no one will ever read. The data provided is enormous, and presented in a manner that only economists would truly grasp. I know of few people that could fully grasp the information provided in the work, myself included at times. However, the information is sobering and necessary. Nothing in our current economic situation is new, and this work proves the point that this time is not different. People can attempt to read into this work and slant that data an...more

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May 18, 2010

Hermes rated it

Shelves: economics

I thought the European Community's quarrelling over the required monetary aid for Greece was a good moment to pick up this book. It takes a quantitative outside-in approach to economic shocks, using a relatively limited number of macro-economic data per country per year (economic growth, inflation, exchange rate, national debt, etc.). It does not try to describe or explain the mechanics of such shocks, and should be easy enough for an economic layman to understand. The book is very proud of the ...more

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Sep 19, 2011

Diego Castañeda rated it

Un viejo dicho dice que aquellos que no aprenden de la historia están condenados a repetir... esa es la premisa básica de "this time is different" las crisis financieras ya sean, defaults externos o internos sean crisis de tipo de cambio, bancarias, inflación o devaluaciones; han estado presentes en la historia humana siempre, desde reyes hace miles de años que devaluaban reduciendo el contenido de plata en su moneda hasta las técnicas modernas de ingeniería financiera.

En est...more

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Jan 02, 2010

Mike Horne rated it

I got to page 197 and just quit! This book is about sovereign debt, domestic debt, and inflation. But I have not figured out the thesis yet. It looks like it will explain the whole recent meltdown--"the second great contraction" (and place it in the broader 800 year context). But I just can't look at one more table or chart!! I wish could understand this stuff.

So after reading yet another Economist article about sovereign default (Greece), I felt I better finish this. I wil...more

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Jul 19, 2011

Jordan Peacock rated it

‎*Very* data heavy, but they walk you through it pretty well. A few highlights are that:

a) on the long view, defaults, inflation and other crisis are quite common, and sovereign defaults on external debt are particularly common amidst emerging market economies.
b) in the economics literature, little to nothing has been done to analyse domestic defaults, except as bailouts relate to external defaults, and what data they were capable of compiling seems to indicate that domestic de...more

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Oct 16, 2010

Chris rated it

Using a historical time-series data set of the last 500 years, the authors of "This Time is Different" provide a quantitative analysis approach in explaining why we continually see global and regional crises relating to excessive sovereign external debt, banking crises, currency crashes, inflation, and bubbles. The authors also explain why our current "2nd Great Contraction" happened and why it is very similar with several other examples of boom and busts, i.e. Japan's housin...more

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Aug 14, 2010

Jason rated it

What is the history of financial crises? Why to they occur? Are they common? In this book, Reinhard and Rogoff assiduously review the history of government defaults and crisis of the financial system. Their data on government default is truly astounding. They document instance of government default in multiple ways: renegotiating the terms of a loan, failing to pay investors, and reducing the value of their debt through inflation or devaluation. Although defaults on external debt (from fore...more

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