Book Summaries
This Time is Different Summary (9/10)
> …the most commonly repeated and most expensive investment advice ever given in the boom just before a financial crisis stems from the perception that “this time is different.” [This Time is Different](https://www.amazon.
…the most commonly repeated and most expensive investment advice ever given in the boom just before a financial crisis stems from the perception that “this time is different.”
This Time is Different places 200 years of financial crises under sharp scrutiny. Reinhard and Rogoff note that financial fallouts occur in clusters and with surprising consistency, intensity, and duration.
They examine the causes of currency crashes, hyperinflation, and government defaults (international and domestic debts). Some countries weather their financial storms better than others, but short memories make it too easy for crises to recur.
The advice, that the old rules of valuation no longer apply, is followed up by confident rhetoric by government leaders and financial professionals, that we are smarter and better than we were before.
The weight of evidence of this book suggests that we should be skeptical when we hear the words, “this time is different.” It almost never is.
Below is a list of the main themes that I found to be most important in This Time is Different with summaries of each.
External Debt Crises
External debt crisis is when a government defaults on its external debt obligations. Typically, but not always, this loan is denominated in a foreign currency, and held mostly by foreign creditors.
The largest default on record is held by Argentina. In 2001, it defaulted on more than $95 billion in external debt.
Debt Intolerance
Debt intolerance is a syndrome in which weak institutions and political systems make external borrowing a tempting prospect for governments, to avoid difficult decisions with regards to spending and taxing.
Domestic Debt
To stabilize inflation in the late 1980’s, the Mexican peso was tied to the U.S dollar via an official exchange rate band. It was a peg to the U.S dollar. In early 1994, the peso came under speculative pressure after the assassination of a Mexican presidential candidate Colosio.
Banking Crises
Countries can outgrow a history of repeated bouts with high inflation, but no country yet has graduated from banking crises.
Currency Collapses
Countries that experienced a prolonged period of inflation often experience dollarization (heavy use of foreign currency as transaction medium, unit of account, and store of value).
Practically, the use of foreign hard currency in trade, or the indexation of bank accounts and bonds is possible.
If you’re an entrepreneur and you want a quick guide to know what to think about before launching you business, check out The Myth of Entrepreneurship.
YARPP List
Related posts:
- Will It Fly Summary (7/10)
- Habit 6: Synergy (The 7 Habits of Highly Effective People)
- The Wealth of Nations Summary (8/10)
- Chapter 4: The Feeding of the Nine Billion: Farming After 10,000 Years Ago (The Rational Optimist)
Keep Reading
Related Articles
Book Summaries
Doomsday Predictions
Human predictions go wrong all the time. For example, in the 1800s, people thought that the world was going to end in 1883. Turns out it didn’t. But some people still predicted it would. And in the 20th century, there have been more doomsday predictions.
Book Summaries
The Circadian Code Summary (8.3/10)
[The Circadian Code](https://amzn.to/3yZX4Ka) is about Sleep. > Germ theory—and its related breakthroughs of sanitation, vaccination, and antibiotics—was the groundbreaking health development of the past century.
Book Summaries
Tomaso Poggio (What to think about machines that think)
Tomaso Poggio advocates for interdisciplinary research in understanding intelligence, integrating cognitive science, neuroscience, and computer science. He argues that the quest to understand and replicate intelligence in machines is not only beneficial but essential for societal advancement.
Book Summaries
The Great Reset by Alex Jones Summary (7/10)
In his book [The Great Reset](https://amzn.to/3kuyLRg), author and radio host Alex Jones details his belief that the world is on the brink of a major societal upheaval.