This Time is Different: A Panoramic View of Eight Centuries of Financial CrisesThis paper offers a "panoramic" analysis of the history of financial crises dating from England's fourteenth-century default to the current United States sub-prime financial crisis. Our study is based on a new dataset that spans all regions. It incorporates a number of important credit episodes seldom covered in the literature, including for example, defaults and restructurings in India and China. As the first paper employing this data, our aim is to illustrate some of the broad insights that can be gleaned from such a sweeping historical database. We find that serial default is a nearly universal phenomenon as countries struggle to transform themselves from emerging markets to advanced economies. Major default episodes are typically spaced some years or decades apart, creating an illusion that "this time is different" among policymakers and investors.
This Time Is Different: Eight Centuries of Financial Folly
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Even somebody living in a bubble stretching over Harvard Yard would have difficulty believing that. In addition, it has created another huge embarrassment for an economics profession that was still suffering from the fallout of the financial crisis and the laissez-faire policies that preceded it. In the United States and Europe, the big debate was about whether these expansionary policies, which involved taking on high levels of borrowing to finance additional government spending and tax cuts, should be continued or wound down in an effort to balance the budget. Yet, the sooner politicians reconcile themselves to accepting adjustment, the lower the risks of truly paralysing debt problems down the road. It may be true, as Reinhart and Rogoff now claim, that some politicians exaggerated the conclusions of their research, which purported to show that countries with high levels of debt—specifically, those with debt-to-G.
are utterly convinced that, in terms of economic events, “this time is different.” • Otherwise-savvy of Financial Folly by Carmen M. Reinhart & Kenneth S. Rogoff .
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The giant wave in the top section of the graphic depicts the percentage of world GDP by region in crisis during the year period. It includes the four major financial crisis types sovereign default, banking, currency, and inflation along with stock market crashes. The bottom section provides a detailed chart of all sovereign defaults by country, region and year. It shows the repeating nature of sovereign default, a central theme of the book. Created in partnership with the Princeton University Press, this graphic provides a comprehensive yet accessible view into the historical and current cycles of financial crises. People can't expect to understand the current crisis without some in-depth look at past crises.