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The Perils of Financial Historicism

Every financial crisis is inherently unknowable – before it occurs, and as it occurs. By contrast, we understand past crises very well. Accountants go over the books, the participants tell their tales to the newspapers (or sometimes before a judge), politicians explain why they are sorting out a mess, and in the end historians put together a story.

Because the past is knowable, the best way of understanding a current crisis is to search for a model in past experiences, even those that are long past. But which is the right template?