Carmen M. Reinhart and Kenneth S. Rogoff
For eight centuries, investors and governments have convinced themselves that "this time is different" before plunging into catastrophic financial crises. History reveals that debt-fueled booms always end in the same predictable disasters.
The belief that current economic booms are built on sound fundamentals rather than excessive leverage is a recurring psychological trap that precipitates major financial collapses.
Banking crises inflict deep, protracted economic damage characterized by plunging housing prices, soaring unemployment, and massive surges in public debt due to collapsing tax revenues.
Analysts frequently underestimate the danger of domestic government debt, which has historically played a massive role in triggering both external defaults and severe inflationary spikes.