Rose Bertin was the 18th century Alexander McQueen. As Marie Antoinette’s personal fashion guru, she designed massively skirted ornate gowns and 3-foot high poufy hair styles. More than clothing, though, her designs embodied power, presence and opulence.

In This Time It’s Different, economists Kenneth Rogoff and Carmen Reinhart quote Rose Bertin’s reminder that, “There is nothing new except what is forgotten.” (p. 275)

The Economic Lesson

According to Reinhart and Rogoff, our current financial plight is indeed “nothing new.”

Categories for financial crises (p. xxvi):

• Sovereign debt defaults
• Banking
• Exchange rate
• High Inflation

Typical pre-crisis warning signs (p. 223):

• “asset price inflation” (U.S./housing)
• “rising leverage” (U.S./borrowing)
• “large sustained current account deficits” (U.S/more imports)
• “a slowing trajectory of economic growth”

Typical post crisis “aftermath” (p. 224):

• 6 years for real housing prices to bottom
• A 3 1/2 year duration for “equity price collapses”
• Soaring government debt
• Declining tax revenues
• Rising sovereign debt interest rates

An Economic Question: Do you believe that government is the problem or the solution when considering a financial crisis?