This Time is Different

k8973Much has been said & written about this book and its authors. Published six years ago with the financial crisis of 2008 as background, this book is still relevant and proves its title again – this time is different.

This syndrome, presently evident in Greece – forced by rest of Europe – point mostly to only one direction.That aside, this book throws an important lesson – that we do not learn from the past.

A line from the book will draw parallel to what we see these days in Europe – “The fact that lenders depend on a Sovereign Nation’s willingness to repay not simply its ability to repay, implies that sovereign bankruptcy is a distinctly different animal than corporate bankruptcy.”

Compare this sentence with what transpired in last two months between Greece and its creditors. Greece was tested on its willingness to pay. The German Chancellor said “simple declarations of intent are not enough,” proving that willingness, rather than its ability (all knew they do not have one) was tested. Again, we kid ourselves – this time is different.

This book is loaded – with economic theories, statistical inferences, tons and tons of charts & tables and for sure will perplex people without any introduction to or understanding of these subjects. However, the is subtle storyline running and hidden between these numbers. Analysis of what happens before, during and after a crisis, a sort of leading indicators lie there like breadcrumbs, leaving the possibility of future researchers to build and work on the causes.

Consider this fact. The historical average for how long a banking crisis will last, i.e., how long it will last before its pre-crisis level is six years. And this book came out in 2009, probably the research being for few years before that. And being in 2015, we still see its after effects in the US and other countries.

The lesson is simple – when there is boom, the bust follows. This has been explained with innumerable historical facts, be it for housing bubble, stock bubbles, capital inflows (or outflows from one) to a country, or even a panic. The boom simply means – more people buy into a story than what it is really worth.

Read it, few pages a day or a week. Its worth it.

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