More a thesis than a book, it is very dry reading. However, Greece & friends are showing the truth of the contents... ( )

Although this book is a valuable contribution to the economic history of economic crises, it is strongly recommended to avoid the e-book version. The book consists of countless very detailed charts and graphs that are extremely difficult to read in the e-book version. Reading the book is made even more difficult when reading several of the chapters which consist primarily of a set of charts with the text that explain the charts.

The book has increased in importance now that Carmen Reinhardt has been named as the Chief Economist at the World Bank. It can be expected that she will be utilizing her analysis from this book as she is forced to deal with the coming Corona-inspired Recession ( )

An interesting empirical macroeconomic book targeted towards a popular audience. Very readable and not as long as it looks, because of the extensive use of tables, and graphs that stretches the physical length of the book. As a threshold matter, the book does not use the controversial data that created a bit of a stir in the academic community. Some of Reinhart/Rogoff's other empirical work purported to show that high debt levels were correlated with slow growth, but some other economists had challenged this by purporting to show coding errors in the dataset (https://www.newyorker.com/news/john-cassidy/the-reinhart-and-rogoff-controversy-a-summing-up) [How do you know a macroeconomist has a sense of humor? She adds a decimal place to her estimates]. That data does not show up in this book, and that analysis is not mentioned in this book. However, it is fair that the skeptical reader may think that the same habits/methods that lead to alleged coding errors in that analysis may extend over to the dataset used in this book (but as far as I'm aware, there has been no such allegations).

The book is readable and an enjoyable review of macroeconomics. It is mostly empirical, and relies heavily on a massive unprecedented dataset that the authors have put together that span centuries (though the bulk of the analysis focuses on the 20th century, with a secondary focus on the 19th century. The claim to "eight centuries" is a bit of a marketing gimmick, since the data only extends that far by including a few rather ancient discrete illustrations of currency debasement). Much of the book is creating categories (such as types of crisis), counting occurrences, finding correlations and constructing interesting indexes (like a measure of global crisis by counting crisis experienced on a geographical scope). This can get a little unsatisfying sometimes, because it's somewhat rote and since some data can be extremely spotty. However, here and there, there are short succinct explanations of theory when it ties into the empirical analysis. In particular, I enjoyed learning about Krugman's theory that hard peg fixed foreign currency exchange rates are prone to failure because of the lack of political will power to impose internal constraints to maintain the exchange rate, Bernanke's theory that the Great Depression hit hard and last long because of its crippling of the financial lending sectors which froze credit to businesses, and the multiple equilibrium theory of debt lending (because countries can rely on their tax base to borrow money, default never occurs from lack of ability to pay, but from a complex interaction between a lack of a willingness to repay [and with the loss of gunboat diplomacy, there's no real way to force them to meet their obligations, and notions of fairness can influence the decision to repay (relevant to "odious debt")], and the unwillingness of the international credit market to roll over debt. As a result of these interactions there are actually multiple theoretical fragile equilibrium points making it hard to predict sovereign crisis).

The dataset which stretches over such a long time period has some interesting implications. For one, many stereotypes about the economic stability/instability of regions are wrong when looking at the region through the lens of a larger time span. For example, many "advanced" nations frequently defaulted from their sovereign debt obligations in their early days before "graduating" to nations that rarely default. And unlike sovereign debt crisis, no country has graduated from banking crisis (as 2008 shows). Another interesting pattern that occurs in the data, is that banking crisis are frequently preceded by large capital inflows into countries (either from de-regulation of the financial sector or freeing of capital constraints) [and on a more general level the clustering of different types of financial crisis because of their relationships to each other]. Somewhat surprisingly, the authors explain that there has been a lack of scholarship on domestic debt relative to the scholarship on external debt. Part of the issue is the spotty data caused by government in-transparency. The authors collect some preliminary data on domestic debt and argue that it could be the missing explanation for some otherwise unexplainable external debt defaults/inflation crisis (inflation is one way to effectively default on debt without a formal default). A running theme of the book is "this time is different" mentality, where people make an argument about a "new" economy that somehow freed from old constraints and concerns lead excessive debt accumulation which leads to a crisis. The authors imply that a broader view of history, for example stepping back and observing datasets that run for centuries reveal patterns that could help ameliorate this time is different mentality. ( )

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, unemployment rises, output falls, government debt rises even higher.
3) Not all economic predictions are created equal.
4) Developed nations might be able to avoid and graduate from external debt defaults, but all are still at risk from bank defaults.

There is certainly more. These are some of the most salient points. I won't say more because 1) the arguments are complicated and 2) I want you to take a look at this. Seriously.

As for our current crisis? Well, there simply has been little comparison for a global crisis so far. Exports might not be as big an aid for growth as seen before. We are lucky that this is only the worst crisis since the Great Depression.

A necessary book. Hard mathematical truths. I quote: "We hope that the weight of evidence in this book will give policy makers and investors a bit more pause before they declare, 'This time is different'. It almost never is." ( )

A decent reference, but a lousy read. ( )

Warning! This is an academic work, not a novel, and is not suitable for casual reading. It is a rigorous, exhaustively documented and very thorough look at the history of financial crisis in world history. In so doing, it compares the warning flags and false economic policy that has perpetuated macroeconomic theory and practice for world countries over past centuries and looks at common trigger events leading to historical meltdowns.

The title is a facetious play on words that has led, predictably, to the current economic woes for the U.S. and world markets and economic bases. It takes into account debt, tax revenue and liberal economic policies in the banking industry that have failed to stem the tide. There are hundreds of references to world level economic studies, and anyone who wants to learn what and who pushed us into the present economic state must read this book. ( )

It is hard to imagine that anyone with even the slightest awareness of economic issues has failed to notice two things that have occurred over the last several years: (1) governments around the world have been borrowing breathtaking amounts of money and (2) the central banks in those countries have pumped a profligate amount of new currency into the financial system in order to support that borrowing by keeping interest rates low. Whether you think these actions are remarkable or mundane probably comes down to how you would answer the following question: Does debt—particularly sovereign-level borrowing—really matter?

Throughout this engaging volume, noted economists Carmen Reinhart and Kenneth Rogoff make a persuasive case that the answer to that question is a resounding “yes”. Further, the authors argue that how a sovereignty borrows (i.e., from foreign investors or from its own citizens) as well as how it chooses to default on its loans (e.g., currency debasement, inflation propagation, restructured borrowing terms) also matter when it comes to the country’s future growth prospects and access to capital markets.

As its title suggests, the overall theme of the book is that governments and investors alike keep repeating the mistaken economic policies of the past under the assumption that “this time is different” (e.g., the more sophisticated market structures today allow us to control economic outcomes better than in the past, so we can borrow more without consequence). Using a dizzying array of data tables and charts, Reinhart and Rogoff examine the causes and aftermaths of several hundred years of financial crises and sovereign-level defaults and end up concluding that, in fact, this time is not different in ways that ultimately matter. They finish their analysis with a discussion of the root causes of the recent sub-prime debt crisis, which they term the Second Great Contraction (after the Great Depression of the 1930s).

I should note that neither the subject matter nor the expositional style in this book makes for the easiest reading experience. That said, though, the authors do a very nice job in the volume of taking an extraordinary amount of primary academic research—much of it their own—and translating into a more digestible form. There are definitely redundancies throughout the various topics they cover, but Reinhart and Rogoff provide the reader with considerable guidance as to what sections or chapters can be skipped without loss of continuity. Overall, I found this to be a well-executed book with an important message to convey about the current state of global economic affairs. ( )

Not the ideal book for the electronic format as the numerous tables are hard to read. The content, however, is very good ( )

"This time is different" offers the data necessary to point out, sorry, you're not so special. I love the books many data tables that include countless stories untold, which is also the book's main weakness. Its great collection and presentation of empiric crisis data makes the missing data on the surrounding political economy all too conspicuous. After all, the sovereign and internal debt crises and banking crises are the result of economic and political mismanagement. Reinhart and Rogoff are in the business of body counting at the scene of the crime. The perpetrators are left out of the picture. Hopefully, somebody will add them soon, although, like unhappy families, it will be difficult to assign them to simple categories. War is certainly one activity that seldom pays and often triggers crises.

One puzzle of the book seems to be the lenders' willingness to finance serial defaulters such as Greece. A hard-nosed look at the Greek track record should have discouraged even the most eager banker. In one of The Economist's Xmas issues was a great article about the Russians serially fleecing Western creditors through the centuries. The magic of "This time is different" is unbreakable. One wonders why the continuous currency debasement of most kings (actually an indirect form of taxation) didn't trigger offsetting waves of inflation. How can Reinhart/Rogoff's longterm view be blended into short-term thinking?

With two years hindsight, the text offers a good standard overview of sovereign and internal debt crises as well as banking crises. Recommended. ( )

Very much a book driven by its data. So a bit dry, but otherwise an excellent book to give some historical perspective on crises in general and in particular the cris of 2008/09. I particularly enjoyed the last few chapters more specifically about the current crises. ( )

Shorter version: No, it’s not. This data-stuffed book is for people who know/care a lot about macroeconomics. I’m not sure it’s the best for general audiences (e.g., me), but they have looked at a lot of different data sources. The book connects external sovereign debt to internal debt (what the government owes its citizens, including sometimes what it extracts from them by regulating what interest they can earn in banks) and argues that internal debt plays a bigger role in debt crises than has been acknowledged. They also argue that the run-up in sovereign debt that occurs in financial crises owes more to decreased tax receipts than to bailouts, though the costs from the latter are not negligible. But the overriding message is more: everyone thinks that they’ve figured out where past bubbles went wrong, but in reality, when countries pull back on financial regulation, they get big booms that end in big booms. ( )

This book has been widely praised for its quantitative analysis of financial crises going back 100 years or more, which it uses to put our own current (and very serious) crisis into perspective. It is written for readers with a general knowledge of economics, and the authors suggest those primarily interested in the current crisis start reading at Chapter 13. The first twelve chapters describe and explain the authors' model and seemed designed primarily defend their work within the academy. They will certainly interest economic historians, who in the past have relied on less quantitative analyses such as Charles Kindleberger's classic “Manias, Panics, and Crashes.” Overall, it's an excellent study, and deserves a much wider readership than it will receive.

Being good academic economists (rather than policy pundits), the authors are careful in their conclusions, but they take a strong stand on a few issues. One, of course, is that the siren song of “this time is different” always leads to fatal outcomes. They demonstrate that such arguments, whether justifications for huge, destabilizing inflows of foreign investment (which inevitably reverse course at some point) or confident claims that burgeoning debt balances are based on new valuations for risk and investment (and thus are safer than in the past), invariably prove to be wishful thinking. They offer no solutions for this problem; in fact, they are quite pessimistic that such behavior can be changed. As they put it: “The fading memories of borrowers and lenders, policy makers and academics, and the public at large do not seem to improve over time, so the policy lessons on how to 'avoid' the next blow-up are at best limited.” They suggest some useful warning indicators, but doubt they will prevent future crises.

A second conclusion takes aim at the “belief in the invincibility of modern monetary institutions,” in particular central banks' obsession in the past few decades with inflation targeting. They are not suggesting that keeping inflation low is a bad thing, but rather that central banks have come to view it as an end in itself, a solution to the volatility of the business cycle. What this has meant in practice they illustrate with their description of the “Greenspan put.” That is, “the (empirically well-founded) belief that the U.S. central bank would resist raising interest rates in response to a sharp upward spike in asset prices (and therefore not undo them) but would react vigorously to any sharp fall in asset prices by cutting interest rates to prop them up.” This, the authors conclude, led markets to believe (accurately, as it turned out), that the Fed would do nothing to spoil the party in financial markets, and would bail out the party-goers if things went to hell. They reasonably conclude that “in hindsight, it is now clear that a single-minded focus on inflation can be justified only in an environment in which other regulators are able to ensure that leverage (borrowing) does not become excessive.” Which is another way of saying that inflation-targeting policies become increasingly dangerous as corporate-sponsored deregulation (such as we've witnessed steadily since the 1980s) weakens government supervision. ( )

2008 - 2010 seems not different

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 long record of data it has crunched (it is mentioned ad nauseum, actually), but still mainly looks at the 20th century. It consists of three parts, a historical analysis, an analysis of the current (2007 - 2010) crisis, and some recommendations, which could all be read separately.

Economic shocks, the book observes, are of all times and of all places, although mature economies seem to have less debt crises than emerging economies. On the other hand, economies with large financial sectors have a larger chance of banking crises. Banking crises are almost a guaranteed consequence of relaxing regulation or financial innovation. The current crisis is a global one, and a deep one.

In a crisis like the current one, historical analysis predicts that:
• Equity prices drop about 56%, but recover in averagely 3.5 years
• House prices drop about 35% and stretch about 6 years;
• Economic output falls 9% and requires about 2 years to get even to pre-crisis levels
• Unemployment rises about 7percentage points above the norm, and only improves after nearly 5 years
• Government debt nearly doubles, rising an average of 86%, and the costs of the increase in national debt far outweigh the costs of saving banks.

These are only averages; the average Mr. Watanabe has not seen a return to pre-crisis levels since the 1990’s, just like the Great Depression lasted longer in the United States. In many cases, the financial authorities use inflation as a way to reduce (“tax”) their way out of debt. The effect of large-scale crises is worse for emerging markets, because capital flows to such markets are pro-cyclical.

The book also addresses debt crises. In emerging markets these can happen at any level of national debt. However, national debt is an opaque factor as it requires the inclusion of local debt and liabilities of governments (like guarantees) not found in the national accounts.

In an article in the Financial Times of the 6th of May, 2010 Rogoff elaborated on the case of Greece: “Graduation from emerging market status is a long, painful process that can take 75 years or more to complete. Twenty years without, say, a sovereign debt crisis is significant, but hardly enough definitively to declare a country a “graduate”. Greece resolved its last sovereign default only in the mid-1960s and Portugal had an International Monetary Fund programme as recently as 1984. (Spain’s modern history is much better, despite holding the record – more than 12 – for most independent sovereign default episodes.). The eurozone experiment was, in effect, an attempt to speed up the graduation process through the carrot of the single currency and the stick of harsher bail-out rules. Instead of having to demonstrate fortitude and commitment through decades of surpluses and declining public debt levels (as for example, Chile has done), euro members were allowed to have their cake and eat it, too.”

The general conclusion that man does not seem to learn from past experience when it comes to financial markets (“this time is different”) is far from revolutionary: you may find it in many observations about stock markets. We may ask ourselves the question why that is such a recurring phenomenon (and in itself a great forecast factor for a coming crisis), including among the professionals of monetary authorities, who don’t have the same incentives for risk taking as bankers or investors. The authors consider it hubris without any further elaboration.

So far in much of northern Europe and Asia the consequences of the shock have been quite benign. You can ask yourself why. To some extend it may have to do with the high amount of Asian savings vis-à-vis the size of their economies: they could almost overextend their stimulus packages, that trickle down across the globe. A better reason might be the quick response of the financial authorities through expansion of the money supply and government expenses. If the latter is the case, this may result in more than average post-contraction inflation and/or government debt.

Another forecast you might want to make is a coming economic shock in China and Hong Kong, given that house prices are a much better forecast factor than rating agents’ assessments.

I liked the book, and I am sure I shall read it again when the data mentioned here will announce the next shock. And I am sure it made me a little bit better at investing. I wish the book had been around in 2008. ( )

Rogoff, Kenneth S. (Author)