Default and the 'This Time is Different' Mentality

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This chapter explores the issue of default during financial crises, focusing on the impact on domestic and external creditors and the concept of default through inflation. It also discusses the ironic meaning behind the book's title 'This Time is Different' and the psychological frame of mind that leads people to believe they are exempt from financial crises.

Carmen Reinhart of the University of Maryland talks with EconTalk host Russ Roberts about the ideas in her book This Time is Different: Eight Centuries of Financial Folly (co-authored with Kenneth Rogoff). They discuss the role of capital inflows in financial crises, the challenges of learning the right lessons, and what is generally true about financial crises over time and place. Reinhart applies these observations to the current crisis, discusses the possibility of the U.S. defaulting on its sovereign debt, and discusses the possibility of financial reforms that might make a difference.