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. We stress that premise is 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. We 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. We document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. We 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, we show that short memories make it all too easy for crises to recur.
"The four most dangerous words in finance are 'this time is different.' Thanks to this masterpiece by Carmen Reinhart at the University of Maryland and Kenneth Rogoff of Harvard, no one can doubt this again. . . . The authors have put an immense amount of work into collecting the data financial institutions needed if they were to have any chance of making quantitative risk management work." (Martin Wolf Financial Times, September 28, 2009)
"This is quite simply the best empirical investigation of financial crises ever published. Covering hundreds of years and bringing together a dizzying array of data, Reinhart and Rogoff have made a truly heroic contribution to financial history. This single marvelous volume is worth a thousand mathematical models." (Niall Ferguson, author of The Ascent of Money: A Financial History of the World)
"This Time is Different is terrific, for it gives just the perspective we need on the current world economic crisis. People can't expect to understand the current crisis without some in-depth look at past crises. That is exactly what this excellent and timely book provides."
(Robert J. Shiller, author of Irrational Exuberance and coauthor of Animal Spirits)
Carmen M. Reinhart
Carmen M. Reinhart is Professor of Economics and Director of the Center for International Economics at the University of Maryland. Professor Reinhart held positions as Chief Economist and Vice President at the investment bank Bear Stearns in the 1980s, where she became interested in financial crises, international contagion and commodity price cycles. Subsequently, she spent several years at the International Monetary Fund. She is a Research Associate at the National Bureau of Economic Research, a Research Fellow at the Centre for Economic Policy Research and a member of the Council on Foreign Relations. Reinhart has served on numerous editorial boards, panels, and has testified before congress. She has written and published on a variety of topics in macroeconomics and international finance and trade including: international capital flows, exchange rates, inflation and commodity prices, banking and sovereign debt crises, currency crashes, and contagion. Her papers have been published in leading scholarly journals.
Her work has helped to inform the understanding of financial crises for over a decade. In the early 1990s, she wrote about the fickleness of capital flows to emerging markets and the likelihood of abrupt reversals--before the Mexican crisis of 1994-1995. Prior to the Asian crisis (1997-1998), she documented the international historical links between asset price bubbles and banking crises, and how the latter could lead to currency crashes creating a "twin crisis." She identified the possibility of severe economic dislocations from the sub-prime crisis in 2007. Her work is frequently featured in the financial press around the world.
Her latest book (with Kenneth S. Rogoff) entitled This Time is Different: Eight Centuries of Financial Folly documents the striking similarities of the recurring booms and busts that have characterized financial history. It has been translated to 13 languages.
Kenneth S. Rogoff
Kenneth Saul "Ken" Rogoff is currently the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University.
He received a B.A. from Yale University summa cum laude in 1975, and a Ph.D. in Economics from the Massachusetts Institute of Technology in 1980.
Early in his career, Rogoff served as an economist at the International Monetary Fund, and at the Board of Governors of the Federal Reserve System.
He is an elected member of the American Academy of Arts and Science as well as a Fellow of the Econometric Society, and a former Guggenheim Fellow.
Rogoff was the Charles and Marie Robertson Professor of International Affairs at Princeton University.
He later served as Economic Counsellor and Director, Research Department of the International Monetary Fund from August 2001 to September 2003.
Rogoff was also in the spotlight because of his dispute with Joseph Stiglitz, a former Chief Economist of the World Bank and 2001 Nobel Prize winner. The dispute was triggered by the critique made by Stiglitz on the International Monetary Fund. Rogoff, in response to the critique, wrote an Open Letter To Joseph Stiglitz.
Rogoff has published extensively on policy issues in international finance, including exchange rates, international debt issues, and international monetary policy. Together with Maurice Obstfeld, he is co-author of a 1996 graduate text/treatise Foundations of International Macroeconomics.
His most recent book is This Time Is Different: Eight Centuries of Financial Folly, of which he was a co-author with Carmen Reinhart.