Books Economics Finance Politics

Currently Reading: “This Time Is Different,” by Carmen M. Reinhart and Kenneth S. Rogoff

“What Have We Learned,” is the title of the penultimate chapter of this serious look at government financial crises, and the answer, sad to say, seems to be ‘not much.’ Reinhart and Rogoff’s book, however, is mandatory reading for anyone who wants to understand the arc of government borrowing and bankruptcy in the post-industrial era.


Working with a unique cross-country data set, the authors exhaustively analyze the mechanics and psychology of cycle after cycle of debt crises that have affected nations around the world. In page after page of chart and graphs, what emerges is a cycle of economic boom, debt acquisition, and, finally, over-leveraging that winds down quickly when the inevitable downturn arrives.

A potential reader may wonder what’s new, then, since this cycle is something that has been written about by many others. In response, I would argue that this book is more than a report of what happened — it’s more like a detailed autopsy of failed policies and theories that argued that, for reason A or B, some country or region was now “cured” of this cycle. It’s clear, note the authors, that no country has been or can be cured of this illness.

As the authors note:

The lesson of history, then, is that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics, and profits no matter how well-regulated it seems to be.

Interestingly, I can imagine that last phrase exciting the hard-core Austrians who think markets need no regulation. What’s the point, after all, of the expense and inefficiency of artificial regulation of financial markets and system if, in the end, their efficacy is temporary or  maybe even futile. As much as I personally sympathize with this philosophy, one might reply that maybe without regulation this book might have been two volumes or three? Or  that regulation protects the small investor from being abused — an argument increasingly difficult if not impossible to support. My sense is that the authors would reply that these crises are so dangerous and can cause so much social damage in their organic development that if nothing else regulatory mechanisms, in their best moments, hedge the most extreme outcomes. Thus, they are kind of like a hedge on a black swan: useless most of the time but really good to have once in a great while.

Perhaps exhausted by the sheer volume of their analyses, in the end, the authors do not make too many prescriptions for policy makers. This a flaw of the book, I think. For hundreds of pages they make the case that no one has gathered the kind of data set that they present (and to which they reference constantly, almost to the point of distraction), so it would have been good to get some idea of not just what has happened but how to better avoid it. Yes, “better policy” is understood to be a sound goal, but I would have liked to see specific ideas or theories. Still, this is a small critique of an excellent book. It is not for the casual reader, though, who will have to work through a lot of data and analyses. Yet for someone wishing to understand the long and often sad relationship of governments to debt, this is as fine place to start.

Get it here:


    1. That’s a fair conclusion, and what commentary there is they place in small sections at the end of each chapter. At one point I thought that perhaps their aim was to make the reader analyze the charts and graphs, some of which certainly are illuminating. A good example is Table 10.6 on page 154, which lays out the “share of years in a banking crisis since independence or 1945” for various parts of the world. It’s interesting to see that the biggest share (13.5%) goes to a group of 3 countries: Argentina, Mexico and Brazil, which together beat both Africa (with 12.3%) and Asia (12.4%).


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