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Subject:  Re: “This Time it is Different” Date:  10/4/2012  5:45 PM
Author:  AdvocatusDiaboli Number:  405303 of 536953

I read the book too, but I must contradict some of your conclusions:

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 from the start. The notion that we can eliminate market cycles is born of the same sort of hubris that says “this time is different”, and more likely to make things worse than it is to prevent disaster.
Clearly there is a strong relationship between free markets and the number of banking crises, but if we admit this relationship then are we not faced with the conclusion that the price of reducing these crises would be much slower grown in GDP per capita and living standards.

That is absolutely not borne out by the book.
Those countries you mention show long, long stretches of high economic growth in the 20th century without banking crises. Just consider the US, which didn't have any banking crises between 1932 and Reagan and which had HIGHER economic growth before it decided to foolishly deregulate the financial sector.
In fact, a major point of the book is that banking crises tend to bring with them enormous damage and cause weak growth and mass unemployment and government deficits for several years after (depending on the size of the bubble).

The book also mentions that if you deregulate the financial sector (or fail to regulate financial "innovation", which has the same effect as active deregulation), the result is virtually always a massive financial crisis.
The book mentions just a handful of cases where financial disaster has NOT occurred after such deregulation, and makes a point of the fact that disaster is the NORMAL outcome of deregulation.
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