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Subject:  “This Time it is Different” Date:  10/4/2012  12:03 PM
Author:  rclosch Number:  405287 of 501116

This excellent book written by two professors from Harvard Carmen M. Reinhart and Kenneth S. Rogoff while not exactly a beach read is an important book for anyone that seeks an understanding of economic history. The title of the book is based the fact that investors, businessmen and bankers in the midst of an economic expansion assume that the expansion will continue indefinitely. But in the real world, as economist Hyman Minsky pointed out “stability is unstable”. Long periods of prosperity feed hubris and greed, and encourage excessive risk taking. In a free market environment each period of economic expansion carries with it the seeds of its own destruction.

The “This Time it is Different” published 2009 contains a huge database of 800 years of country defaults, banking crisis, and currency debasements. Much of material is new, having been complied and consolidated by the authors from statistics collected all over the world. The point is, of course, that this time it is never different. This may not be particularly profound conclusion, but the statistical evidence presented by the authors is none the less quite surprising both in terms of the number of the events chronicled, and the shape of the patterns that develop from these data. Rather than being black swans (uncommon and unpredictable events) they are the evitable result of economic cycles in a free market economy. While timing of a banking crisis may be hard to predict they are never the less unavoidable. While I am not opposed to regulation many attempts to regulate are doomed