Esta Vez Es Distinto. Ocho Siglos De Necedad Financiera (2011) - Plot & Excerpts
Poyais -- fictional Latin American country issues sovereign debt in the 1820s debt boom (93)"Recognizing the significance of domestic debt can go a long way toward resolving the puzzle of why many countries default on (or restructure) their external debts at seemingly low debt thresholds. In fact, when previously ignored domestic debt obligations are taken into account, fiscal duress at the time of default is often revealed to be quite severe." (119)"The incidence of banking crises proves to be remarkably similar in both high-income and middle- to low-income countries. Indeed, the tally of crises is particularly high for the world's financial centers: France, the United Kingdom, and the United States." (141)"For the period after 1970, Kaminsky and Reinhart have presented formal evidence of the link between crises and financial liberalization. In eighteen of the twenty-six banking crises they have studied, the financial sector had been liberalized within the preceding five years." (155)"This literature on financial crises suggests that markedly rising asset prices, slowing real economic activity, large current account deficits, and sustained debt buildups (whether public, private, or both) are important precursors to a financial crisis." (216-7)"Broadly speaking, financial crises are protracted affairs. More often that not, the aftermath of severe financial crises share three characteristics: First, asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years. Second, the aftermath of banking crises is associated with profound declines in output [9 points over two years] and employment [7 points over four years]. ... Third, as noted earlier, the value of government debt tends to explode; it rose an average of 86 percent (in real terms, relative to precrisis debt) in the major post-World War II episodes. ... [T]he main cause of dent explosions is not the widely cited costs of bailing out and recapitalizing the banking system. ... In fact, the biggest driver of debt increases is the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions." (224)"Here we pause to underscore why global financial crises can be so much more dangerous than local or regional ones. Fundamentally, when a crisis is truly global, exports can no longer form a cushion for growth." (269)"For banking crises, real housing prices are nearly at the top of the list of reliable indicators, surpassing current account balance and real stock prices by producing fewer false alarms." (279)"Capital flow and default cycles have been around since at least 1800, if not before in other parts of the globe. Why they would end anytime soon is not obvious." (291) This book is fantastic. I'd been looking for some type of actual statistical analysis of banking / currency / default crises and this covers everything I wanted. While I still don't believe that countercyclical interventions can do anything to prevent the business cycle this book does paint some rather interesting pictures about how we are never exempt from risk and how history repeats itself very often. The main thesis covers the myth that "established" countries are not susceptible to the same types of financial mistakes as developing countries, 2008 proved that myth wrong and this book gives all of the hard data to back it up.
What do You think about Esta Vez Es Distinto. Ocho Siglos De Necedad Financiera (2011)?
Very informative and any one who think things are going to have a better turn got to read this.
—ravage
didn't get through it. a little redundant.
—Kcorrigallmillins
