And now, we present you Dick Bove, book reviewer. In a note yesterday, Dick tells us about a great new read he recommends ("great" mostly because someone, finally, is agreeing with what he's been saying forever). It's called This Time is Different: Eight Centuries of Financial Folly and he wants you to pick up a copy today. Yes, it's "not an easy read," but fear not people, Dick broke it down for us: "I recommend that readers buy the book and just read chapters 10, 13, and 16 to get at the thrust of this massive effort. In fact, just read pages 270 to 273 to get at the core of this work." Or you know, just read Dick's notes. "They reach the same conclusion that I have. A flood of unregulated money that pours into a national economy creates the base for a financial collapse."
And here are some excerpts:
"Kaminsky and Reinhart's work concluded that financial liberalization often preceded banking crises. Demirguc-Kunt and Detragiache, who employed a different approach and a larger sample, arrived at the same conclusion."
"Diaz-Alejandro narrates financial liberalization simultaneously facilitates banks' access to external credit and more risky lending practices at home. After a while, following a boom in lending and asset prices, weakness in bank balance sheets become manifest and problems in the banking sector begin. Often these problems are more advanced in the shakier institutions (such as finance companies) than in the major banks."