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Arrogance, Ignorance Recurring in Economic History

Paul Solman speaks with economists Carmen Reinhart and Ken Rogoff about the financial crisis and how it compares to previous economic meltdowns.

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  • GWEN IFILL:

    Next: a conversation about the financial meltdown and whether it's really any different from crises of the past. It's part of economics correspondent Paul Solman's Making Sen$e of financial news.

    HENRY PAULSON, former U.S. Treasury Secretary: We have experienced significant turmoil in our financial markets.

  • PAUL SOLMAN:

    It's been one year since the onset of the financial crisis.

  • WOMAN:

    Stocks all around the world are tanking because of the crisis on Wall Street.

  • WOMAN:

    One of the biggest financial failures in U.S. history.

  • WOMAN:

    A near-total collapse of the financial system.

  • PAUL SOLMAN:

    So, a world economy in unprecedented peril? No, says Harvard economist Ken Rogoff — more like crisis as usual.

    KENNETH ROGOFF, coauthor, "This Time Is Different: Eight Centuries of Financial Folly": The U.S. economy is driving down the tracks of a typical deep postwar finaincial crisis.

  • PAUL SOLMAN:

    In a new book, "This Time Is Different," Rogoff and co-author Carmen Reinhart document the long history of financial crises. And we do mean long.

    If you looked at financial crises across virtually every continent for something like 800 years, is it just something in the nature of human beings that we go through these cycles?

  • KENNETH ROGOFF:

    There's no doubt about it. I mean, the recurring theme is arrogance and ignorance: ignorance that this has happened before in other places, in other countries; and arrogance thinking we're special, this time is different. We have financial globalization. We're running our economy better. "They're lending us a lot of money because they love us and we're doing a good job." That's what the officials think.

  • PAUL SOLMAN:

    Co-author Carmen Reinhart:

    CARMEN REINHART, coauthor, "This Time Is Different: Eight Centuries of Financial Folly": "Whatever rules of the game are, they just simply don't apply to us." And that is the essence of the arrogance that dominates the boom phase. And it is. The seeds of the crisis are sown during the boom.

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