Reddit reviews This Time Is Different: Eight Centuries of Financial Folly
We found 45 Reddit comments about This Time Is Different: Eight Centuries of Financial Folly. Here are the top ones, ranked by their Reddit score.
Princeton University Press
This is the only one of these comments I'm going to respond to, because I wrote this three days ago, for ONE PERSON, and all you /r/bestof armchair jackasses can seriously take a flying fucking leap 'cuz I've got a shuttle to watch, but since I said one let's break it down:
>We face unique problems today, namely the fact that we've expanded pretty much to the limit of what the natural world can support, particularly in terms of energy.
This is not unique. This has been argued since Malthus 200+ years ago. The current world-is-ending fad dates to The Limits to Growth, a book published 40 years ago. Thing about LtG, though, is it used computer simulations and five scenarios to run some numbers and put some math to the problem. One of their models appears to be pretty close to what's happened but even the Club of Rome doesn't think it's spot-fucking-on. So while people who actually study this stuff think that there are conclusions to be drawn and problems to solve, they
a) are hardly settled on the scope of the issue or approaches to take
b) don't insist that high school kids worried about WWIII focus on it.
>This pretty much guarantees that the economy will stop growing and begin to contract in the near future
Economies have been expanding and contracting throughout history. Rogoff and Reinhart make a pretty compelling case that we're in uncharted territory but nobody - nobody is proclaiming the end of the world except wise-cracking Keyboard Kommandos such as yourself.
>Our currencies, which are now all but entirely fiat, are only designed to work in an expanding economy
This is a nonsensical statement unworthy of rebuttal. If you can HFT Forex, currencies are not "entirely flat."
>So the OP is right, I believe, to fear a financial collapse, as it is more or less a mathematical certainty at this point.
This isn't about whether or not the OP is right or wrong, this is giving OP tools to deal with his anxiety. As I hope is becoming clear, I feel myself qualified to do so. I cannot say the same for you.
>WWIII? Who knows.
Who knows? Most people. People who have studied the problem. My statement (no heavy combatants in 70 years) is factual. Your deflection is speculative and does not add to the conversation.
>I haven't even mentioned global warming, which is way more depressing if you follow the science to its logical conclusion.
GLOBAL WARMING WAS NOT LISTED AS A CONCERN BY OP.
We could talk science there, too. I've studied the problem to my satisfaction. Have you? Or are you just waving your hands?
>I don't advise the OP to lie awake at night worrying, but I don't think anyone should assume the future will be like the past just because it has been before.
Who are you making your point to? What I said is that by and large, the world is in pretty good shape. What you said is "WWIII? Who knows."
>If you wanna talk about history, though, remember that every empire in history has fallen.
OP did not say "I'm worried about my empire." He said "I'm worried about WWIII." I've worked with a number of talented and skilled ex-Soviet scientists and regime members. They're all doing fine, CCCP-be-damned.
>Don't waste your time worrying. Prepare for what you can prepare for and let fate handle the rest.
Got it. You just wanted to listen to yourself talk.
Hey, /r/bestof friend: This question was asked, and answered handily by a number of erudite people other than myself, three days ago. This is a quiet place, a respectful place, and the situation is handled. Now do everyone a solid and keep your muddy boots off this holy place. And tell all your friends. There's nothing quite like a default sub coming in and retconning a sensitive discussion because every worldly 15-year-old needs to hear himself type.
First, thanks for reading, man! I really appreciate your thoughtful response. I'm a fan of Noah, too.
To your point: I agree with a lot of what you said. Stussy and Supreme have both been around for a minute, and each weathered a trend shift or two in their own right (90's skate/surf -> 00's maximalism). Union LA is an especially great example - it's the same genetics (edgy, effortless, inaccessible "youth culture"), just a different expression.
However, I would add one thing: at the risk of sounding too "this time is different", I think the economics of this situation make it relatively unique in terms of past trend cycles. There's A LOT of fast money chasing overvalued assets for nothing other than arbitrage (sneakers, Supreme, etc) and that alone adds an element of risk past just "this shit's now wack."
If you're interested, here's a great book: "This Time is Different: Eight Centuries of Financial Folly." It's about exactly this phenomenon. The people who are getting rich always think that their success is because they are smarter than other people and they've figured out what went wrong last time. It's part of an essential fallacy wherein people attribute their successes to their own efforts/genius and externalize their failures.
Ideally we would have stayed Neutral during ww1 and mirrored our military like the Swiss's militia system. Iran is a problem because the CIA & British fooled around with Iran which blew up in their faces. We still feel the repercussions of their mess up yet the organizations who caused the mess in the first place say that things will be different this time.
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?keywords=different+this+time+stock+market&qid=1567395501&s=gateway&sr=8-1
http://www.amazon.co.uk/This-Time-Different-Centuries-Financial/dp/0691152640
Spoiler alert: It was never different.
The question is difficult to answer because one reads about impending collapse for a great many reasons, and why the economy doesn't actually collapse (or, rarely, it does) depends on what thing people are worried about and whether it really is a problem. There's no dogmatic answer to the question that I can think of. Sometimes it's right to worry about collapes (e.g. when we were at the high point of the financial crisis), usually it's not because the problems are over-stated.
You should read Reinart and Rogoff's This Time is Different if you're interested in this topic. They show that financial crises are a part of every market economy ever to exist, and they have strikingly similar properties across time and space despite the experts tendency to claim they're different from the past. That's reassuring in the sense that most nations--though not all--survive a great many crises and avoid complete collapse over the years, which is what you asked about. It's not so reassuring in trying to figure out how to actually prevent or moderate the crises.
>I would say that predicting an exponential trend will continue "forever" is usually not a good bet.
There is an excellent book that all investors should read on exactly this idea. The title explains it all:
This Time Is Different: Eight Centuries of Financial Folly
They cover dozens of investment bubbles from all over the world and over the centuries.
It's a world class city / rich Chinese are moving here / 100k immigrants per year / the greenbelt
AKA: "It's different this time"
It's not too hard to identify a debt-fueled asset bubble, which is what we have. The book This Time is Different does a good job of describing asset bubbles, where they come from and how they function.
Basically house prices are rising faster than wages are. The money has to come from somewhere so it's coming from increasing debt. Eventually servicing the debt will become impossible, some catalyst will occur, and house prices will revert to what the rent they can bring in justifies.
You could prove it's not a bubble by pointing to something like a commensurate rise in wages (which hasn't occurred), a population and demand explosion (which isn't occurring) or anything else that would justify the rise in prices beyond "they've been rising so they'll continue to rise so get in quick" group mentality.
As the title of the book sarcastically suggests, there isn't anything particularly novel about what's going on here. At some point interest rates will rise, or China or America will have a recession, or a newspaper scare campaign will happen, and then we'll revert. Predicting when that happens is tricky and could make you rich, but predicting that it will happen isn't and wont.
A better financial history type book is the Reinhart & Rogoff one.
As long as you are building a list, let me share my to-read list after I finish reading my current book:
You should also read Piketty's book and Bernanke's book but I didn't list them since I have read them and assume you have read them too.
I tend to only read and alternate between history and econ books for my pop/non-academic reading. I've only listed the pop-econ books since I assume that's what you are after.
Has anyone else read any of the books on my list? Are some terrible? If so let me know so I can avoid them.
That's an awesome list. I'd echo that the two very best sources to learn about the exact crimes committed leading up to the financial crisis are The Untouchables and
Inside Job.
And I'd add a third:
Predator Nation (written by the guy who made Inside Job)
If people just want a single source, The Untouchables is where they should go. It shows how banks sold products they knew were defective. That is fraud, and it is criminal. Simple as that. The executives were knowingly selling those products (and there were many) should be in jail.
Here's a fuller list of selections I can recommend from a reading list at TooBigHasFailed.org. Any of these sources are good for learning what was going on leading up to the crash.
Podcasts
NPR: The Giant Pool of Money |
NPR: Return to the Giant Pool of Money |
NPR: Another Frightening Show about the Economy |
EconTalk interview w/ Simon Johnson
Documentaries
Addendum to Inside Job |
PBS: Money, Power, & Wall Street |
Aljazeera: Meltdown |
60 Minutes: The Speed Traders |
Quants: The Alchemists of Wall Street
Books
I.O.U. - John Lanchester |
Griftopia - Matt Taibbi |
Infectious Greed - Frank Partnoy |
All the Devils are Here - Joe Nocera & Bethany McLean |
Traders, Guns, and Money - Satyajit Das |
Financial Crisis Inquiry Commission Report
ETA: I see that a moderator here is requesting academic sources. Here are three good ones: Fault Lines - Raghuram Rajan | Republic, Lost - Lawrence Lessig | This Time Is Different - Reinhart & Rogoff
To be honest, most of the academic sources I've read don't focus on criminality on Wall Street. I'd love to find more that do, though.
> The financial crisis made the economy more vulnerable to other negative shocks.
Not entirely sure what you mean by that
> Trend growth may have been slowing down before the crisis
This is 100% true
> Financial crises lead to big drops in labour productivity that take a long time to reverse.
Not really? But financial crises have historically led to slower recoveries than other types of recessions (see This Time is Different by Harvard economists Carmen Reinhart and Ken Rogoff).
One more factor that I would add is the severity of the recession. Normally we fight recessions through monetary policy; the Federal Reserve cuts interest rates to decrease borrowing costs and stimulate the economy. But this recession was large enough that interest rates hit zero and couldn't go any lower, so monetary policy ran out of ammo. You could fix that by augmenting it with fiscal policy (i.e. government deficits), but instead, after a short burst of deficit spending in 2009, the US and Europe turned to deficit-cutting fiscal austerity.
> I'm also a bit clueless as to how you would incorporate trade theory into this example
You wouldn't. The GFC and its anemic recovery had basically nothing to do with international trade. Trade theory impacts long run supply/productivity issues and income/wealth distribution, but not the business cycle (except VERY indirectly).
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
Book recommendation
Just keep in mind, bubbles are not permanent. Corrections in the financial world are like forest fires. They clear out harmful debris and foster future growth. For you hodlers, if you're in this for the long haul, here's some things to keep in mind:
The thing about revolutionary new paradigms is that they don't do it without bumps in the road.
>this time it feels different.
What could possibly go wrong...
> this time it'll be very very different
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
Good book. This Time Is Different: 8 Centuries of Financial Folly
If you look at past years' primary polls from before February of the season, you see complete mess. Here's 2012. The polls are meaningless that far out, and in every past primary, establishment endorsements helped choose an electable candidate. Silver used endorsements as a big factor in his analysis. His site even has a tracker that states "endorsements have been among the best predictors of which candidates will succeed and which will fail" which in every other primary was true. Normally, you couldn't just rely on the polls.
In finance, they say the scariest words are "This time it's different" where previous models that accurately made predictions no longer apply. Well, this time it's different. The large, shifting field of candidates made a lot of powerful Republicans abstain from endorsing anyone, and the hatred toward the Republican establishment made endorsements almost worthless. Anyone who read the polls and saw it coming were lucky unless they could also predict why the normally accurate model no longer applied. If they just relied on the polls, any other year they would've been wrong.
EDIT: One analyst who actually did predict that the old rules no longer applied was Norm Ornstein. He even wrote an article back in August titled "Maybe This Time Really Is Different"
Det finns garanterat mer än ett alternativ till en marknadsekonomi. Och gång på gång ser vi även marknadsekonomier fallera, men vi har inte ens en diskussion kring hur vi skulle kunna skapa ett bättre system, så vi kör på same old igen och väntar på nästa krash. Jag kan rekommendera This Time is Different som går igenom statistik och data från 1800 till idag och visar på hur ingen ekonomi i världen klarat sig från någon form av krash. Uppenbarligen är något fel med det nuvarande systemet, men det finns ingen som vill/vågar/orkar ta diskussionen om ett nytt system.
You still have to connect that problem with technological displacement. I mean Rogoff and Reinhart wrote a book saying that financial recession are long lasting and that the long term effects of it are well understood. http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
Still you can clearly say that the Fed and the federal government did not do enough. Austerity was a problem and was counterproductive and the Fed should have pushed for a higher inflation target or go the market monetarist route and pushed for a NGDP level targeting.
The understanding is that unemployment is caused by friction in the market and when the economy shrinks due to a bubble bursting or what not, the wages are "sticky" so they do not adjust and instead people are laid off. That is a harm to the economy that we are experiencing right now. Governments doing nothing to boost the economy and the Fed not committing to a higher inflation target is keeping the economy underperforming.
I'm not sure if I should be using the silver sticky for this but here goes. I took some basic macro and macro classes a while back as part of my minor and in one of them we had an extra credit reading assignment that I really enjoyed (http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640). I was just curious what the opinion of the book is on any of the people who are more more informed in general.
https://www.amazon.co.uk/This-Time-Different-Centuries-Financial/dp/0691152640/
Account of one of the first govt debt "crisis" (more for the lender than the borrower), Phillip II in the 16th century: https://www.amazon.co.uk/Lending-Borrower-Hell-Princeton-Economic/dp/069117377X
The market has changed significantly since the 16th century but it is crisis are fairly common (there are several going on right now). Argentina, for example, is a serial defaulter (I think they have defaulted ~6 times) and they have just applied to the IMF...again, after exiting default completely a couple of years ago. It is important to understand that debt crises are dissimilar (for example, it matters whether your debt is owned domestically) but they are all damaging.
So you're saying "this time is different?"
> Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learne
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
I think the majority of people in this sub need to read this book
Because that's how people think.
Yeah it has, in the 19th century and during the 30s. Cool how history works like that. --source: This Time Is Different: Eight Centuries of Financial Folly
Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe.
This Time it's Different: 8 Centuries of Financial Folly is pretty freaking awesome and is very detailed plus look at the cool cover.
book
This Time Is Different has a good 100 pages on it: https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640.
Also this Critical Review is more holistic: http://criticalreview.com/crf/current_issue21_23.html.
I think they did a book treatment on that as well haven't read it but my buddy who is an econometrician recommended it: https://www.amazon.com/Caused-Financial-Crisis-Jeffrey-Friedman/dp/0812221184
Freefall and The Big Short are very good. While not exactly on the 2008 crisis, reading Reinhart and Rogoff is strongly recommended.
I will just suggest you to see an inflation graphic from the 70s. Back then, the dollar was the reserve currency of the world...
There is an awesome book called "This time is different" it goes on showing several times in history when people thought that debt/easy money was ok and backfired resulting in inflation, bank runs, or sovereign defaults.
But who knows, maybe this time really is different and the US can keep printing money to pay debt without any consequences.
It's Wikipedia but I'd start reading the real estate bubble article. You can go through the individual articles and read anout the more recent ones. Research on the older crashes are usually very academic. If you're into dry material then I'd recommend This Time is Different, which talks about financial crashes in general and goes back hundreds of years.
This book looks like a good read; should I get a kindle I'll make sure to pick it up. But what about This Time Is Different? It seems like another good book to get some relative history on economic collapse and recovery.
https://www.amazon.co.uk/This-Time-Different-Centuries-Financial/dp/0691152640
but it's okay, next time will be different!
/r/SecurityAnalysis maintain a decent reading list.
The following is taken from it:
History
Dude R&R looked post 1913 too and like pretty much everything. Disclaimer, like most people I never finished it, think I got about halfway(maybe 2/3?).
Not clear to me why you think firms would magically stop becoming rent seekers during a recession.
What? Dude some of the best most efficient run companies have pretty low profit margins because of how competitive the field is, if they had to make cuts during a recession it wouldn't be because of fat they had.
> it’s different this time
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
>let the market do it's job and it will.
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
Or we could do what has data behind it like stimulus.
Its happened quite frequently throughout world history, although dry this book gives an exhaustive overview of the different varieties of financial crisis and default.
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?ie=UTF8&qid=1517941240&sr=8-1&keywords=this+time+is+different
lol.
Boy have I got a book for you
*sigh*
This Time It's Different
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
So you're saying you do not know what it's worth, do not understand it, and do not think it's not a bubble. Alright then. Maybe this time it'll be different. https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640
Right, so debt doesn't matter because it's cheap and will create jobs, got it. So let's just take out loans to buy equipment in order to do infrastructure projects : half of the country will dig holes in the ground during the day, the other half will bury them during the night shift. Everyone would be employed and problem solved.
It's a "broken window" fallacy, and economists haven't learned shit. Here's a book I'm sure you've heard of -- This Time It's Different. In it, Reinhart and Rogoff describe how much economists "learn every time" for 800 years.
I don't listen to Fox or anyone else for that matter because I'm a skeptic. I included WSJ links because they come from a reputable financial publication, which you've proceeded to attack via a veiled ad hominem slam. The problem is debt and spending, which for 5 years now is trying to be resolved by issuing more debt and spending. All it did was jack up the Dow, keep wars going, and inflate the student loan debt. In the meantime, the Fed is lying about inflation, and everyone who doesn't get at least a 5% raise every year is taking a pay cut.
Let banks fall -- we don't need them because smaller, more nimble banks will come to replace them. Let Detroits go out of business and wilderness reclaim that dinosaur relic from the times of embarrassing excesses. As Americans, we can take care of ourselves -- we are creative, self-reliant, and generous.