Professor Reinhart is co-author of This Time Is Different, a history of defaults that is without question the economics book of the last 18 months. Professor, all of what we're seeing has happened before, hasn't it?
Yes, indeed. The Irish situation is quite reminiscent of the early 1980s, when bank debts started the roller coaster, rather than sovereign debt, as was the case in Greece.
Is bailing out the Irish banks the same thing as bailing out the Irish government?
Not yet, because those banks are still in private hands. The Irish government better be careful how it takes on the bank debts. Since this crisis, it's been taking on a massive amount of debt in what I have argued were completely overpriced conditions.
The Greek problem is back, too.
We can wish away high levels of debt, but that's just what it is—it's wishing them away. The debt problems that we have in Ireland, that we have in Greece, that we have in the U.S., that we have in Japan—they have different compositions and different degrees of severity. But they going to be with us for a while.
I'm not sure if anybody knows just who owes what to whom.
One of the reasons that we got into the "too big to fail" problem in the U.S., as elsewhere, is that we don't know who owes what to whom. So isolating the patient becomes very difficult.