Quotes from Carmen M. Reinhart

More money has been lost because of four words than at the point of a gun. Those words are 'This time is different.

What is certainly clear is that again and again, countries, banks, individuals, and firms take on excessive debt in good times without enough awareness of the risks that will follow when the inevitable recession hits.

The lesson of history, then, is that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics, and profits no matter how well regulated it seems to be.

Bubbles are far more dangerous when they are fueled by debt, as in the case of the global housing price explosion of the early 2000s.

unexpected increases in inflation are the de facto equivalent of outright default, for inflation allows all debtors (including the government) to repay their debts in currency that has much less purchasing power than it did when the loans were made.

Of course, the problems of external default, domestic default, and inflation are all integrally related. A government that chooses to default on its debts can hardly be relied on to preserve the value of its country's currency.

In sum, historical experience already shows that rich countries are not as "special" as some cheerleaders had been arguing, both when it comes to managing capital inflows and especially when it comes to banking crises.

The U.S. conceit that its financial and regulatory system could withstand massive capital inflows on a sustained basis without any problems arguably laid the foundations for the global financial crisis of the late 2000s. The thinking that "this time is different"—because this time the U.S. had a superior system—once again proved false. Outsized financial market returns were in fact greatly exaggerated by capital inflows, just as would be the case in emerging markets.

There is nothing new except what is forgotten. —Rose Bertin

The essence of the this-time-is-different syndrome is simple. It is rooted in the firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now.

An event that was rare in that twenty-five-year span may not be all that rare when placed in a longer historical context. After all, a researcher stands only a one-in-four chance of observing a "hundred-year flood" in twenty-five years

Although private debt certainly plays a key role in many crises, government debt is far more often the unifying problem across the wide range of financial crises we examine. As we stated earlier, the fact that basic data on domestic debt are so opaque and difficult to obtain is proof that governments will go to great lengths to hide their books when things are going wrong,

Another deep philosophical issue, in principle relevant to thinking about international lending, surrounds the notion of "odious debt." In the Middle Ages, a child could be sent to debtors' prison if his parents died in debt. In principle, this allowed the parent to borrow more (because the punishment for failure to repay was so great), but today the social norms in most countries would view this transfer of debt as thoroughly unacceptable

As we mentioned in the preamble, banks' role in effecting maturity transformation—transforming short-term deposit funding into long-term loans—makes them uniquely vulnerable to bank runs

Diamond and Dybvig argue that deposit insurance can prevent bank runs, but their model does not incorporate the fact that absent effective regulation, deposit insurance can induce banks to take excessive risk.6

This time may seem different, but all too often a deeper look shows it is not. Encouragingly, history does point to warning signs that policy makers can look at to assess risk—if only they do not become too drunk with their credit bubble–fueled success and say, as their predecessors have for centuries, "This time is different

But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked

The Fiscal Legacy of Crises Declining revenues and higher expenditures, owing to a combination of bailout costs and higher transfer payments and debt servicing costs, lead to a rapid and marked worsening in the fiscal balance.

there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.