This Time Is Different: Eight Centuries of Financial Folly
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graduation from serial default, 87, 88b, 147, 283
hyperinflation in, 88b
Gabon, banking crises in, 365t
Gambia, banking crises in, 365t
gaming, of third parties, 62
GDF. See Global Development Finance
GDP: banking crises weighted by, 204, 205f
data on, 37–38, 120, 311–14t
before and after debt defaults, 129, 130f, 132–33, 132t
financial sector as percentage of, 162, 210
ratios of external debt to, in debt intolerance, 21–29, 23t, 24t, 25f, 27t, 33, 121, 122f
GDP, real per capita: in aftermath of crises, 229–30, 230f
after banking crises, 165, 165f, 166f, 229–30, 230f
in global financial crises, 262–63, 264f
as indicator of crises, 219, 220f
Geary-Khamis weights, 396n10
generations, transfer of debt through, 63
Georgia, banking crises in, 365t
Germany: banking crises in, 365t
domestic debt in, 125
duration of crises in, 235
external default by, 87t
inflation in, 125
U.S. subprime crisis in, 242
Ghana, banking crises in, 365–66t
Global Development Finance (GDF), World Bank, 23t, 24t, 25t, 27t, 40–41, 42, 332t, 336t, 337t, 338t, 341t
global economic factors: in data, 43
in external defaults, 77–81
global financial crises: construction industry in, 266–68, 268t
criteria for, 260–70
cross-country synchronicity of, 260, 265–69
definition of, 260, 260b
difficulty of recovery from, 249, 269–70
economic effects of, 260–69
GDP in, 262–63, 264f
historical examples of, 261b, 270
sequencing of, 270–73, 271f
stock prices in, 262, 263f
trade in, 263–64, 265f, 266–70, 266f, 267f
unemployment in, 268–69, 269t
global financial crisis of the late 2000s. See Great Contraction, Second
global financial system, risks of debt accumulation in, xxv, xxxiii
global recession of 2001, inflation rates after, 187
global savings glut, 79, 209, 211
Glorious Revolution (1688), 65, 70b
gold clauses, abrogation of, 44, 113t, 117, 251, 401n11
Goldman Sachs, 210
gold mines, 93b
gold standard, 44, 71, 76, 200, 242
government, crises of confidence in, xli–xlv
government debt. See public debt
Government Financial Statistics, IMF, 231t
government leaders, this-time-is-different syndrome in, xxxiv. See also policy makers
government revenue. See revenue
graduation, 283–87
from banking crises, 139, 141, 147, 153, 171, 283–84
from debt intolerance, 28–33, 193
definition of, 283–84
from exchange rate crises, 284
from inflation crises, 181, 196–97, 283
measurement of, 284–87
origins of concept, 283
pace of, 278
recommendations on, 290
from serial default, 87, 88b, 147, 151–53, 171, 283
Great Britain. See Britain
Great Contraction, First (1930s), origins of term, 393n7, 403n1. See also Great Depression
Great Contraction, Second (global financial crisis of the late 2000s): common fundamentals of, 242–46
contagion of, 240–47
definition of, xxix, xlv
economic effects of, xlv, 262
equity prices in, 239
Federal Reserve in, 146
GDP in, 262–63, 264f
global scope of, 233
housing prices in, 159, 208
indicators of, 208
inflation in, 189
origins of term, 393n7, 403n1
severity of, 208, 248, 255, 270, 273
stock prices in, 262, 263f
this-time-is-different syndrome in, 20, 290–92
trade in, 263–64, 266f
transformation of subprime crisis into, 206
usefulness of historical comparisons to, 199, 238–39. See also United States sub-prime crisis
Great Depression (1930s): aftermath of, 225, 233–38
banking crises in, xliv, 146, 204–5
banks before and after, number of, 162, 163f
construction industry in, 266–68, 268t
contagion of, 242
corporate default in, 251
cross-country synchronicity of, 265–69
domestic default during, 14, 111
duration of, 234–37, 234f
economic effects of, 262
external default during, 71, 73
GDP in, 262–63, 264f
versus postwar crises, 225, 233–38
public debt in, 237–38, 237f
stock prices in, 262, 263f
this-time-is-different syndrome in, 15–17, 16b
trade in, 263–64, 265f, 266–68, 266f, 267f
unemployment in, 225, 228, 237, 268–69, 269t
versus U.S. subprime crisis, 200–201
Great Depression, Second, 248
Great Moderation, 256–57
Greece: banking crises in, 366t
currency debasement in, 174–75
exchange rate crises in, 6
external default by, xxx, 12–13, 83b, 92, 98
graduation in, 287
international capital markets in, 398n8
Greenspan put, 291
gross domestic product. See GDP
gross national product, data on, 307–10t
Group of 20, 406n1
growth. See economic growth
growth collapse crises: in Argentina, 252
definition of, 252, 407n6
in financial turbulence index, 250
Guatemala, banking crises in, 366t
Guinea, banking crises in, 366t
Guinea-Bissau, banking crises in, 366t
gunboat diplomacy, 54, 81, 83b
Haiti, debt repayment to U.S. by, 54, 83b
Honduras: banking crises in, 366–67t
external default by, 13, 92
Hong Kong: banking crises in, 159, 226, 367t
housing prices in, 159, 226
inflation crises in, 182
sovereign risk rating of, 284
household debt: defaults on, in financial turbulence index, 251
and U.S. subprime crisis, 209, 212, 220
housing prices: in aftermath of crises, 226, 227f
around banking crises, 142, 158–62, 160t, 172, 226, 227f
bursting of bubbles in, 7–8
Case-Shiller index of, 207, 226, 404n6, 404n7, 405n29
as indicators of crises, 217, 217f, 221, 279–81
need for more data on, 278, 279
problems with data on, 8, 225–26, 279, 405n29
in Second Great Contraction, 244
sources of data on, 324–25t
U.S. policy debate over, 212–13
in U.S. subprime crisis, 207–8, 207f, 221, 226
Hungary: banking crises in, 159, 367t
contagion of crises in, 246
housing prices in, 159
inflation crises in, 5
hyperinflation: before 1800, 183t
after 1800, 184t, 185, 186–87t
currency conversions in, 6–7
definition of, 5
domestic public debt and, 104, 119, 125, 126f. See also inflation crises
hysteresis, 191
Iceland: banking crises in, 158, 226, 367t, 404n5
current account balance in, 244
equity prices in, 226
housing prices in, 159, 244
IFS. See International Financial Statistics
IIR. See Institutional Investor rating
s
illiquidity: versus insolvency, 59–61
in reschedulings, 90
imports, data on, 320–22t. See also trade
incentives: for inflation control, 119, 125
for repayment of domestic debts, 65–67, 110–11
for repayment of external debts, 54–58
independence, wars of, in Latin America, 92
independence, year of, 43, 45–46t, 91t, 92
time spent in banking crises since, 147–50, 148–50t, 154t
time spent in default since, 95–100, 97t, 99–100t, 148–50t, 150. See also colonies
indexation: consumer price, 35–36, 296–301t
cost-of-living, 35, 296–301t
housing price, 207, 226, 404n6, 404n7, 405n29
index of financial turbulence. See financial turbulence index
India: banking crises in, 204, 367t
capital flow bonanzas in, 401–2n18
domestic debt in, 66
external debt in, 12, 94, 117
external default by, xxx–xxxi, 92–94, 98
interest rates in, 117, 143
indicators: of banking crises, 8–10, 216–22, 279, 280t
data on, 323t
in early warning system, 279–81
of external default, 73–81
housing prices as, 217, 217f, 221, 279–81
of Second Great Contraction, 208
signals approach to, 279–81, 408n3
of U.S. subprime crisis, xxix, xliii, 200, 216–22
Indonesia: banking crises in, 368t
duration of crises in, 235
external default by, xxx–xxxi, 92, 98
housing prices in, 159
inflation crises in, 182
inflation: costs of, 111
data on, 35–36
before and after debt defaults, 129–33, 131f, 132t
domestic default through, 65, 111–17, 175
external default associated with, 75–77, 76f, 175, 400n2
fatigue, 106
median rates of, for all countries, 180–81, 181f
partial default through, 44, 75
stabilization of, 187
as tax, 124–25, 400n7
before U.S. subprime crisis, 220
inflation crises (high inflation), xxxii–xxxiii, 180–97
before 1800, 181–82, 183t
after 1800, 182–89, 184t, 186–87t, 188f
aftermath of, 180, 191–93
chronic, 4
and currency debasements, 35, 174–79
definition of, xxvi, 4–5, 7t
dollarization after, 180, 191–93, 192f
domestic public debt in, 119, 124–27, 126t
duration of, 4
and exchange rate crises, 180, 189–97, 272
fatigue in, 106
in financial turbulence index, 249–50, 406n4
graduation from, 181, 196–97, 283
incentives for avoiding, 119, 125
incidence of, xxxii–xxxiii, 133, 134f
recommendations on responses to, 289
in sequencing of crises, 272
stabilization of, 187
this-time-is-different syndrome in, 187, 291
universality of, 180, 196–97. See also hyperinflation
inflation tax, 124–25, 400n7
information technology (IT) industry bubble, xlv, 162, 171
innovation, financial: as form of liberalization, 156
as precursor to crises, 217
in U.S. subprime crisis, 156, 208, 210
innovation, technological, negative effects of, 179
insolvency, versus illiquidity, 59–61
institution(s): failings of, in debt intolerance, 30–31
financial, number before and after crises, 162, 163f. See also international institutions
Institutional Investor ratings (IIR): after banking crises, 233f
in debt intolerance, 26–29, 27t, 29f
historical changes in, 284–87, 285–86t, 288f
as indicator of crises, 280t
interest rates: in aftermath of crises, 222, 224
on domestic versus external debt, 106, 107t
in exchange rate crises, 6
reduction of, in reschedulings, 90
repression of, 66, 106, 117, 143
for short-term debt, 59
after U.S. subprime crisis, 222, 405n33
usury laws against, 69b
international contagion. See contagion
International Currency Experience, League of Nations, 407n19
International Financial Statistics (IFS), IMF, 35, 36, 131f, 132f, 134f, 135f, 217f, 218f, 221f, 229f, 301t, 302t, 303t, 304t, 307t
international institutions: on best practices, 401n10
in data collection and monitoring, 278, 281–82
in debt crisis of 1990s, 94
and duration of external default, 81–83
in international regulation, 278, 281–82
in partial default, 62
in public debt transparency, xxxiv, 138, 281–82
recommendations on role of, 281–82
in reputation approach to lending, 55–56. See also specific institutions
international law, enforcement of debt repayment in, 53, 56–57
international lending: economic theory on, 54–61
illiquidity versus insolvency in, 59–61
legal approach to, 53, 56–57
reputation approach in, 55–58
third parties in, 62. See also external public debt
International Monetary Fund (IMF): on best practices, 401n10
and confidence, xli–xlii
on consumer price indexes, 36
in debt crisis of 1990s, 18, 94
on debt thresholds, 394n6
on domestic public debt, xxxi
and duration of external default, 81–83
on exports, 39
frequency of default since creation of, 62
on global economy before subprime crisis, 214
Government Financial Statistics, 231t
guarantees of, for public versus corporate default, 406n1
in Mexican domestic default, 14, 108b
on national accounts, 39
on prices, 35, 36
on public debt, 40–42
in public debt transparency, xxxiv, 281–82
in Second Great Contraction, 239, 240
Special Data Dissemination Standard, 42, 282. See also International Financial Statistics
World Economic Outlook
international regulation: in financial sector, 145
international institutions’ role in, 278, 281–82
need for, 278, 282
international trade. See trade
investors: rationality of, 62–63
reschedulings’ impact on, 90. See also creditors
Ireland: banking crises in, 158, 368t, 404n5
current account balance in, 244
housing prices in, 159
Israel: banking crises in, 368t
de-dollarization in, 194f, 195–96
Italy: banking crises in, 368–69t
duration of crises in, 235
early international debt markets in, 69b
repayment of English debts to, 55, 56, 57, 69b–70b
IT industry bubble, xlv, 162, 171
It’s a Wonderful Life (movie), xl
Jamaica, banking crises in, 369t
Japan: banking crises in (See Japanese banking crises)
domestic debt in, 126
duration of crises in, 235
external debt to GDP ratios in, 22
financial turbulence index for, 259
inflation in, 126
lost decade of, 215
sovereign risk rating of, 233
U.S. subprime crisis in, 242
Japanese banking crises: asset prices in, 206
bailout costs for, 164
equity prices and, 162
housing prices in,
159, 226
public debt after, 402n35
recession after, 230
severity of, 215
stimulus measures in, 169, 290
summary of, 370–71t
Jordan: banking crises in, 371t
Brady bonds in, 84b
Kazakhstan, U.S. subprime crisis in, 242
Kenya, banking crises in, 371t
kleptocracy, 53, 63–64, 136–37
knowledge transfer, and incentives for repayment of debts, 58
Kolmogorov-Smirnoff test, 80f, 130f, 132f, 133, 400n4
Korea: banking crises in, 371t
debt reversals in, 84b
duration of crises in, 235
graduation in, 284, 287
housing prices in, 159
inflation crises in, 182
Korean War, 264
Kuwait, banking crises in, 372t
Kyrgyz Republic, banking crises in, 372t
land seizures, 89
Lao People’s Democratic Republic, banking crises in, 372t
Latin America: banking crises in, 147, 149–50t, 152–54t
commodity price boom of 1970s in, 17–18
contagion of crises in, 246–47
data coverage of, 43, 46t
debt crisis of 1980s in, 17–18, 246
debt crisis of 1990s and early 2000s in, 19
domestic public debt in, 104–5, 105f, 399n2
external default in (See Latin American external default)
financial turbulence index for, 257, 258f, 259
GDP during global crises, 262–63
graduation in, 287
inflation crises before 1800 in, 182, 183t
inflation crises after 1800 in, 185, 186–87t, 187, 188f, 189, 259, 407n12
international capital markets of 1800s in, 92, 93b–94b
lending boom of 1820s in, 15
this-time-is-different syndrome in, 15, 17–18, 19
wars of independence in, 92. See also specific countries
Latin American external default, xxx–xxxi
in 1800s, 91t, 92, 400n6
in 1900s and 2000s, 94, 96t
debt ratios at time of, 120, 121f
time spent in, since independence, 98, 99–100t
Latvia: banking crises in, 372t
current account balance in, 244
League of Nations: Annual Reports, 37
on domestic public debt, 104f, 105, 105f, 106f, 107t, 117f
International Currency Experience, 407n19
on public debt, 41, 121f, 122f, 123f
Statistical Abstract, 114t
Statistical Year-book, 41, 82b, 330t, 331t, 332t, 333t, 334t, 335t, 336t, 337t, 338t, 339t, 340t, 341t, 342t, 343t
World Economic Survey, 263, 266f, 268t, 269t, 407n18
Lebanon: banking crises in, 372t
de-dollarization in, 195
legal framework, for enforcement of debt repayment, 53, 56–57
Lehman Brothers, 210
lenders. See creditors
Lesotho, banking crises in, 372t
leverage: in debt intolerance, 28