Tuesday, July 6, 2010

Review and backstory of the book "This Time is Different" by NYT

I have previously brought up the book 'This Time is Different" and how the history of sovereign defaults is very instructive considering our current situation in history.  The New York Times recently had a long review of the book and the authors. They started working on the book in 2003 and it was published last September.  Great timing!

Some great quotes :
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years. “
There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”

One interesting point in the book and the article is how often we forget the past with respect to country defaults:

Mr. Rogoff says a senior official in the Japanese finance ministry was offended at the suggestion in “This Time Is Different” that Japan had once defaulted on its debt and sent him an angry letter demanding a retraction.

Mr. Rogoff sent him a 1942 front-page article in The Times documenting the forgotten default. “Thank you,” the official wrote in apology, “for teaching the Japanese something about our own country.”

If you are at all interested in finding a great historical context for what is going on right now throughout the world I strongly suggest you read the book.

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