If there is one common theme to the vast range of crisis we consider in this book, it is that excessive debt accumulation, whether it be the government, banks, corporation, or consumers, often poses greater systemic risks than it seems
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The famous “Greenspan put” was based on the (empirically well- founded) belief that the U.S. central bank would resist raising interest rates in response to a sharp upward spike in asset prices (and therefore not undo them) but would react
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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. Many players in the global
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..one of the main this-time-is-different syndromes had to do with a belief in the invincibility of modern monetary institutions. Central banks became enamored with their own versions of “inflation targeting,” believing that they had found a way both to keep
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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
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