Nonetheless, the mentality “this time it’s different” always seems to win out, supported by supposedly credible arguments. Warnings often go unheeded and are drowned out by the party music to which everybody is dancing. What hinders us from learning the lessons from past crises despite the fact that crises occur repeatedly? First, memories fade away.
For example, investors or portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage.