800 Years of Financial Folly

[Henk Elegeert]

REPLY TO: D66 at nic.surfnet.nl

http://www.motherjones.com/kevin-drum/2009/09/800-years-financial-folly
"
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800 Years of Financial Folly — By Kevin
Drum<http://www.motherjones.com/authors/kevin-drum>| Mon September 28,
2009 4:00 PM PST

Carmen Reinhart and Kenneth Rogoff have done something that, apparently, no
one has done before: rigorously collect data on debt and risk management (or
lack thereof) over the past 800 years, rather than only since 1980.  Their
conclusion: excessive debt accumulation is always and everywhere a very,
very bad thing.

Also: credit booms and busts happen over and over throughout history, with
only the details changing; public sector debt crises are common and
devastating; banking crises hit every country, rich and poor alike; and when
credit bubble pop, *everything* pops along with it.  And finally, a fifth
lesson, as summarized by Martin
Wolf:<http://www.ft.com/cms/s/2/b41626be-ab83-11de-9be4-00144feabdc0.html>

The final lesson is that financial liberalisation and financial crises go
together like a horse and carriage. It is no surprise, therefore, that the
last 30 years have seen waves of financial crises, of which the latest one
is merely the biggest. The current crisis is the worst since the Great
Depression. Yet, argue the authors, no one should have been surprised by
this outcome. The US showed all the classic symptoms of a country heading
for crisis: a huge current account deficit; soaring house prices; headlong
credit growth; and, let us not forget, excessively complacent regulators.

It always comes back to debt and leverage, doesn't it?  There are lots of
other things to watch out for too, but the bottom line is that if you keep
leverage at reasonable levels, your financial crises are likely to be
manageable.  If not, not.  Tim Geithner, please take note.
"

Nu de 'lessons learned' nog in praktijk brengen?

Gaan we nu een borrel drinken, Hein? :)
Of wil je eerst "The Match King" - Frank Partnoy, lezen?

Henk Elegeert

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