Asian financial crisis

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pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

He showed up in Hong Kong like a bomb-maker protesting the existence of conflict. The rewards of obedience Mahathir’s attacks on the multilateral institutions, and Malaysia’s belated, temporary reintroduction of capital controls in 1998, turned him into the ‘bad boy’ of the Asian financial crisis.68 The Thai government, by contrast, remained the star pupil of the IMF and World Bank. That Thailand has fallen farther than any other country in the region since the crisis is an unfortunate comment on this status. Thailand was also the country where the Asian financial crisis began. Uniquely among south-east Asian states, Thailand was never colonised. None the less, the country has a long history of accepting bad advice. From the time of the Bowring Treaty with Britain in 1855 until 1926, Thailand was persuaded by British negotiators to run the lowest import tariff in Asia – just 3 per cent.

It turned out that too much of Brazil’s earlier growth had been generated by debt that did not translate into a more genuinely productive and competitive economy. Beginning in 1997, with seven economies that have expanded at least 7 per cent a year for a quarter century – Japan, Korea, Taiwan, China, Malaysia, Indonesia and Thailand – east Asia entered a period of reckoning of its own, as the Asian financial crisis took hold. By this point Japan had long since become a mature economy that faced a new set of post-developmental structural problems, ones it showed much less capacity to address than the original challenge of becoming rich. Korea, Taiwan and China, however, were still in the developmental catch-up phase. These states were either unaffected by the Asian crisis or recovered quickly from it, and returned to brisk growth and technological progress.

It was a story of banks being captured by narrow, private sector interests whose aims were almost completely unaligned with those of national economic development. The process was one which has also been observed in Latin America and, more recently, in Russia. The detail of how financial liberalisation went wrong in south-east Asia is explored on a journey to Indonesia’s capital Jakarta, where a new financial district grew like a mushroom in the run-up to the Asian financial crisis. The countries covered I have made a number of simplifications in this book so as not to dilute its central messages and to enable its story to be told (endnotes excepted) in just over 200 pages. One of these involved choosing which east Asian countries to leave out of the narrative. Since the book is about developmental strategies that have achieved a modicum of success, the region’s failed states do not appear.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

The optimism of the preceding boom inspired many Thais to begin borrowing heavily to buy real estate, creating a bubble that when pricked helped trigger the Asian financial crisis of 1997–98. The same story unfolded in Malaysia, where at the peak of its boom in 1995, investment reached 43 percent of GDP, the second-highest level ever recorded in a large economy, behind only China today. Guided by the authoritarian and increasingly megalomaniacal hand of its then prime minister, Mahathir Mohamad, some of the investment proved useful in the end. The vast new international airport that Malaysia opened at the height of the Asian Financial Crisis in 1998, which was criticized as another example of vainglorious overspending, is no longer too big for current demand. But much of the investment unleashed by Mahathir went into grand visions—including a new tech city called Cyberjaya, and a new government administrative district called Putrajaya—that were in the end just unnecessary real estate projects.

A decade later I came to wish that I had internalized this message, as private debt grew rapidly in the United States and Europe in the run-up to the global financial crisis—a disaster that would make the Asian financial crisis look small by comparison. I didn’t listen to the chorus whispering, “Kiss of debt, kiss of debt . . .” Over the last three decades, the world has been subjected to increasingly frequent financial crises, each one setting off a hunt for the clearest warning sign of when the financial mine is about to blow again. Every new crisis seemed to produce a new explanation for crises in general. The postmortems after Mexico’s “tequila crisis” of the mid-1990s focused on the dangers of short-term debt, because short-term bonds had started the meltdown that time. After the Asian financial crisis of 1997–98, it was all about the danger of borrowing heavily from foreigners, because foreigners had suddenly cut off lending to Thailand and Malaysia when their problems became clear.

The global expansion that began in 2009 is on track to be the weakest in post–World War II history. In 2007, just before the financial crisis hit, the pace of growth was slowing in only one emerging economy out of every twenty. By 2013, that ratio was four out of five, and this “synchronized slowdown” was in its third year, the longest in recent memory. It had carried on longer than the synchronized slowdowns that hit the emerging world after Mexico’s peso crisis in 1994, or the Asian financial crisis in 1998, or the dot-com bust in 2001 or even the crisis of 2008.4 As the sluggishness spread, the old hunt for the next emerging-world stars gave way to a realization: Economic growth is not a God-given right. Major regions of the world, including the Byzantine Empire and Europe before the Industrial Revolution, have gone through phases stretching hundreds of years with virtually no growth.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

Once again, I had missed the bigger event unfolding just beyond the horizon. I was hardly alone, of course. With very few exceptions economists were busy singing the praises of financial innovation instead of emphasizing the hazards created by the growth in what came to be known as the “shadow banking system,” a hub of unregulated finance. Just as in the Asian financial crisis, they had overlooked the danger signs and ignored the risks. Neither of the crises should have come as a total surprise. The Asian financial crisis was followed by reams of analysis which in the end all boiled down to this: it is dangerous for a government to try to hold on to the value of its currency when financial capital is free to move in and out of a country. You could not have been an economist in good standing and not have known this, well before the Thai baht took its plunge in August 1997.

Quoted in Jonathan Kirshner, “Keynes, Capital Mobility and the Crisis of Embedded Liberalism,” Review of International Political Economy, vol. 6, no. 3 (Autumn 1999), pp. 313–37. 9 Dani Rodrik, “Governing the World Economy: Does One Architectural Style Fit All?” in Susan Collins and Robert Lawrence, eds., Brookings Trade Forum: 1999 (Washington, DC: Brookings Institution, 2000). 10 For an elaboration of the Sachs argument, see Steven Radelet and Jeffrey Sachs, “The Onset of the East Asian Financial Crisis.” in Paul Krugman, ed., Currency Crises, (Chicago: University of Chicago Press for the NBER, 2000). The story of the Asian financial crisis and the debates around it is well told in Paul Blustein, The Chastening: Inside the Crisis That Rocked the Global System and Humbled the IMF (New York: Public Affairs, 2001). 11 Arthur I. Bloomfield, “Postwar Control of International Capital Movements,” American Economic Review, vol. 36, no. 2, Papers and Proceedings of the Fifty-eighth Annual Meeting of the American Economic Association (May 1946), p. 687. 12 John Maynard Keynes, “Activities 1941–1946: Shaping the Post-war World, Bretton Woods and Reparations,” in D.

These countries had been growing rapidly for decades and had become the darlings of the international financial community and development experts. But all of a sudden international banks and investors decided they were no longer safe places to leave their money in. A precipitous withdrawal of funds ensued, currencies took a nose-dive, corporations and banks found themselves bankrupt, and the economies of the region collapsed. Thus was born the Asian financial crisis, which spread first to Russia, then to Brazil, and eventually to Argentina, bringing down with it Long-Term Capital Management (LTCM), the formidable and much-admired hedge fund, along the way. I might have congratulated myself for my prescience and timing. My book eventually became a top seller for its publisher, the Washington-based Institute for International Economics (IIE), in part, I suppose, because of the IIE’s reputation as a staunch advocate for globalization.

Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics by Francis Fukuyama

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Asian financial crisis, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, Carmen Reinhart, cognitive bias, cuban missile crisis, energy security, flex fuel, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John von Neumann, mass immigration, Menlo Park, Mikhail Gorbachev, moral hazard, Norbert Wiener, oil rush, oil shale / tar sands, oil shock, packet switching, RAND corporation, Ray Kurzweil, reserve currency, Ronald Reagan, The Wisdom of Crowds, trade route, Vannevar Bush, Vernor Vinge, Yom Kippur War

Hurricane Katrina, for example, was one of the most fully predictable and scenario-tested natural disasters in American history, but that fact still did not lead to appropriate preparatory actions or adequate crisis responses on the part of responsible officials at the local, state, or federal levels. The following section, “Cases: Looking Back,” looks more closely at some historical examples of surprise—upside as well as downside—and asks why the social and economic impacts of emergent technologies and events like the collapse of the former Soviet Union and the 1997–98 Asian financial crisis were not anticipated. David Landes, Bruce Berkowitz, and David Hale draw on their knowledge of history and policy to pinpoint those institutional, and not just personal, failures that prevented policymakers and others from properly anticipating major events of the time. 2990-7 ch01 fukuyama 4 8/8/07 2:12 PM Page 4 francis fukuyama The third section discusses potential future cases of surprise.

But acknowledging when intelligence is successful is equally important. So too is appreciating the differences between an intelligence failure and policy frailties whose sources lie elsewhere. Without an understanding that such things can happen, we are certain to be blindsided in the future. 2990-7 ch05 hale 7/23/07 5 12:09 PM Page 42 Econoshocks: The East Asian Crisis Case David Hale T he East Asian financial crisis of 1997–98 was one of the most dramatic economic events of the twentieth century. A region that had enjoyed several years of robust economic growth was suddenly plunged into a financial crisis that produced widespread bankruptcies and sharply higher unemployment. The crisis brought down one of Asia’s oldest dictators, Indonesia’s Suharto, and helped to topple a democratically elected government in Thailand.

The bank problems would constrain the ability of central banks to tighten monetary policy and thus set the stage for currency depreciation. They found that such crises tended to be more severe in developing countries than in industrial ones. One of the best examples of such a crisis was Chile in 1983, but they found similar examples in Argentina (1981), Brazil (1987), Colombia (1983), Finland (1983), Mexico (1994), Peru (1985), and Turkey (1984). Despite this evidence, on the eve of the East Asian financial crisis few believed that the region was vulnerable to major financial shocks. East Asian countries, after all, had but modest budget deficits and generally low infla- 2990-7 ch05 hale 46 7/23/07 12:09 PM Page 46 david hale tion. The Reinhart-Kaminsky paper therefore did not produce much discussion in East Asia because most of the crises they reviewed had been in Latin America, and East Asia was free of Latin America’s problems with large fiscal deficits.


pages: 859 words: 204,092

When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom by Martin Jacques

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Admiral Zheng, Asian financial crisis, Berlin Wall, Bob Geldof, Bretton Woods, BRICs, British Empire, credit crunch, Dava Sobel, deindustrialization, Deng Xiaoping, deskilling, discovery of the americas, Doha Development Round, energy security, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global reserve currency, global supply chain, illegal immigration, income per capita, invention of gunpowder, James Watt: steam engine, joint-stock company, Kenneth Rogoff, land reform, land tenure, Malacca Straits, Martin Wolf, Naomi Klein, new economy, New Urbanism, one-China policy, open economy, Pearl River Delta, pension reform, price stability, purchasing power parity, reserve currency, rising living standards, Ronald Reagan, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, the scientific method, Thomas L Friedman, trade liberalization, urban planning, Washington Consensus, Westphalian system, Xiaogang Anhui farmers, zero-sum game

The main downside with such a strategy is that the savings which have underpinned China’s huge level of investment might be undermined as savers go abroad in search of rates of return far in excess of the paltry levels they can find at home, thereby denying the country the funds for investment that it has hitherto enjoyed, with the inevitable consequence that the growth rate would decline. In addition, a floating renminbi would be vulnerable to the kind of speculative attack suffered by the Korean won, Thai baht and Indonesian rupiah in the Asian financial crisis.43 Although Zhu Rongji, the then Chinese premier, intended to begin the liberalization of the capital account in 2000, the Asian financial crisis persuaded him that such a change would be imprudent. The present global financial turmoil only goes to confirm the wisdom of the Chinese leadership in continuing to regulate the capital account, despite persistent calls from the West to deregulate. In due course, a gradual liberalization could well be initiated, indeed there are already clear signs of this, but the Chinese government is aware that the existing system provides the economy with a crucial firewall, especially given its open character and consequent exposure to external events.44 Whatever the consequences of the global recession, there are powerful reasons for believing that the present growth model is unsustainable in the long run, and probably even in the medium term.

The marginalization of the US is also manifest in the Chiang Mai Initiative, first agreed in 2000 on the proposal of the Chinese,37 which involves bilateral currency swap arrangements between the ASEAN countries, China, Japan and South Korea, thereby enabling East Asian countries to support a regional currency that finds itself under attack. The agreement was a direct product of the Japanese proposal for an Asian Monetary Fund during the Asian financial crisis,38 which was strongly opposed at the time by both the United States (on the grounds that it would undermine the IMF) and China (because it came from Japan). China has since swallowed its opposition - no doubt in large part due to the strengthening position of the renminbi - while the United States, weakened by the IMF debacle in the Asian financial crisis, has not resisted.39 If ASEAN has provided the canvas, it is the diplomatic involvement and initiative of China that has actually redrawn the East Asian landscape. In effect, China has been searching out ways in which it might emerge as the regional leader.40 Underpinning its growing influence has been the transformation in its economic power.

With China’s growing economic power, the greatest single threat to the United States’ global economic pre-eminence, apart from its own decline, lies in China’s attitude towards the international system.174 Since Deng Xiaoping decided that the country’s interests would be best served by seeking admission to it, China has become an integral part of the international system, but China’s attitude towards it will not necessarily always remain unambiguously supportive.175 Take the IMF, for example, of which China is a member. During the Asian financial crisis, Malaysia and Japan proposed that there should be an Asian Monetary Fund, such was the level of dissatisfaction within the region about the role of the IMF. This was strongly opposed by both the US and the IMF, which correctly saw the proposal as a threat to the IMF’s position, and also by China, which was concerned that it had emanated from Japan. China has since abandoned its opposition and is now exploring with others in the region the possibility of creating such a fund. Any such body would undoubtedly have the effect of seriously weakening the role of the IMF. In the event of another Asian financial crisis, it is likely that a regional financial solution would play a much bigger role than was the case before.

Global Governance and Financial Crises by Meghnad Desai, Yahia Said

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Asian financial crisis, bank run, banking crisis, Bretton Woods, capital controls, central bank independence, corporate governance, creative destruction, credit crunch, crony capitalism, currency peg, deglobalization, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, floating exchange rates, frictionless, frictionless market, German hyperinflation, information asymmetry, knowledge economy, liberal capitalism, liberal world order, Long Term Capital Management, market bubble, Mexican peso crisis / tequila crisis, moral hazard, Nick Leeson, oil shock, open economy, price mechanism, price stability, Real Time Gross Settlement, rent-seeking, short selling, special drawing rights, structural adjustment programs, Tobin tax, transaction costs, Washington Consensus

The consistent bias of national protectionism in all its guises was the subordination of finance to industry, the proclamation of the importance of production. Since the 1970s, the re-emergence of financial crises has been accompanied by a revival in national protectionism, but in a much weaker form than in the 1930s. 74 Andrew Gamble In general, the territorial conception of world order has been less influential than in some earlier periods (Gamble and Payne 1996). It retains considerable power, however, as shown in the Asian financial crisis, when several states responded to the serious situation facing them by reasserting their national sovereignty. Malaysia, in particular, sought to insulate its economy from external pressures, resorting to exchange controls amongst other measures. But despite the extreme nature of the financial crisis which engulfed many economies in East Asia, as well as subsequently in Latin America, there was no general retreat to protectionism and the crisis measures proved temporary; states have sought to negotiate their way back into the global economy.

Many have constantly predicted the eruption of a major financial crisis which will finally destroy the political basis for the continuance of the post-1945 liberal economic order in the same way that the 1929–31 crisis finally destroyed the nineteenth-century liberal economic order. But it has not so far happened and the liberal economic order has even survived its greatest test so far, the Asian financial crisis. Territorial order, however, remains an indispensable characteristic of the contemporary world order, because of the continuing importance and relevance of national jurisdictions within it. In moments of extreme crisis in the system, the possibility of a resort to national jurisdictions and national sovereignty remains a possibility. That it has not so far happened is testament to the material, institutional and ideological strength of two other conceptions of world order.

The debate reached its peak in the 1980s when the contrast was between the market led Anglo-American model and the state-led or trust-based models of Germany and Japan. For a time decline fever which had long afflicted Britain gripped the United States and the superiority of the German and particularly the Japanese models of capitalism were much trumpeted. But the roles were reversed in the 1990s and the century ended with the Anglo-American model apparently back on top. The Asian financial crisis was one of the most significant events in promoting this reversal. It raised the question of whether the different models that flourished in the decades since 1945 were the product of the era of national protectionism and US hegemony in the global economy and has gradually been undermined as the logic of the global capitalist economy has reasserted itself. In this view, a particular phase of capitalist development has ended and the space for certain models of capitalism has disappeared with it.


pages: 411 words: 114,717

Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma

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3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, labour market flexibility, land reform, M-Pesa, Mahatma Gandhi, Marc Andreessen, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population, zero-sum game

The China scholar Yukon Huang argues that spatial balance “was an obsession of planners in the former Soviet Union” and a prime objective of leaders in Egypt, Brazil, India, Indonesia, Mexico, Nigeria, South Africa, and other developing nations. Huang says Deng was virtually alone in his understanding that rising regional inequality was a necessary political risk, at least in the short term. He also clearly knew that the boom in these coastal zones would serve as a magnet to rural migrants. The congress in 1997 coincided with the onset of the Asian financial crisis and the collapse of currencies across the region. As falling global demand idled plants around the country, Beijing began to downsize bloated state factories, laying off tens of millions, and sold many small state firms to private owners. It also privatized the real estate sector, allowing individual property ownership for the first time. The sight of the Communist Party slashing state jobs and bankrolling the rise of a home-owning bourgeoisie showed that communism as Mao knew it was truly finished.

That’s a big reason why the value of Brazil’s stock market rose 300 percent in dollar terms from 2000 to 2010, more than triple the rise in China’s market, despite Brazil’s slower economic growth. In this respect at least, Brazil represents a positive turn in emerging markets. Stock markets should rise in value when the economy is growing, but in recent decades in the emerging world, they often have not. A case in point was South Korea, where the benchmark KOSPI index peaked in 1989, while the economy continued to grow at a 6 percent pace until the outbreak of the Asian financial crisis in 1997. Companies saw the stock market as a place to raise quick money, not as a basic measure of the company’s long-term value. Emerging-market companies focused on getting big—more employees, more sales, more market share—and didn’t pay much attention to whether all that revenue was generating bottom-line profit, the metric stock market investors care about most. In recent years with a few glaring exceptions, such as China, that has begun to change: as companies from Brazil to South Korea have started to refocus on profit, stock markets have started to rise (and fall) with emerging economies.

South Korea, with a GDP of $1.1 trillion and a population of forty-eight million, is twice the size of Taiwan ($505 billion and twenty-three million) and is pulling away as a competitive force: in 2006 the total value of the South Korean stock market surpassed Taiwan’s for the first time, and it is now considerably larger, at $1 trillion versus $700 billion. Intriguingly, the family dynasties that still dominate the top-thirty Korean companies, and that were widely seen as the heart of a severe “crony capitalism” problem at the depths of the Asian financial crisis in 1998, have reformed so dramatically that they are now a core strength for the local economy. Hyundai, spoofed a decade ago for its authoritarian management style, impenetrable bookkeeping, and laughably bad cars, is now a world-beater. Taiwan, meanwhile, sticks to the narrow niche of banging out goods sold under the “made in” label of other countries. And while both gold medalists are the richer halves of divided nations, Taiwan has little to gain from the distant prospect of reunification with the much-larger Chinese mainland, while South Korea is already preparing to adopt the well-disciplined workforce of North Korea, which could fail at any moment.


pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

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Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

See Stephan Haggard, The Political Economy of the Asian Financial Crisis (Washington: Peterson Institute for International Economics, 2000), 56–57. 12. Sung Wook Joh, “Korean Corporate Governance and Firm Performance” (working paper, 12th NBER seminar on East Asian Economics, 2001). 13. Joh, “Corporate Governance and Firm Profitability,” supra note 4. See also Jae-Seung Baek, Jun-Koo Kang, and Kyung Suh Park, “Corporate Governance and Firm Value: Evidence from the Korean Financial Crisis,” Journal of Financial Economics 71 (2004): 265–313. 14. Details of Korea’s economic performance immediately prior to the crisis are in “Korea Letter of Intent to the IMF,” supra note 1. 15. For a timeline of events, see Congressional Research Service Report for Congress, The 1997–98 Asian Financial Crisis, February 6, 1998, available at http://www.fas.org/man/crs/crs-asia2.htm.

In this situation, borrowing in U.S. dollars only increased the vulnerability—fears that a country is in trouble can become self-fulfilling as foreign bankers and bondholders scramble to pull their money out first, triggering the defaults that they were afraid of. For the first nine months of 1997, the Korean economy grew at an impressive rate of around 6 percent.14 In July, however, the “Asian financial crisis” broke out in Thailand as a crisis of confidence caused a collapse in the local currency, the baht. Overleveraged companies saw their debts double practically overnight (because their debts were in foreign currencies, the amount they owed doubled when the value of the Thai baht fell by half) and were forced to default, causing mass bankruptcies and layoffs. One month later, the crisis spread to Indonesia, where the currency collapsed and domestic companies failed.

Peter Orszag, Clinton economic adviser and director of Rubin’s Hamilton Project, became head of the Office of Management and Budget; Gary Gensler, treasury undersecretary for domestic finance under Summers (and former Goldman partner), became head of the CFTC; Mary Schapiro, first head of the CFTC under Clinton and later head of the Financial Industry Regulatory Authority, the financial industry’s chief self-regulatory body, became head of the SEC; Neal Wolin, treasury deputy counsel and general counsel under Rubin and Summers, became deputy treasury secretary; Michael Barr, special assistant and deputy assistant secretary in the Rubin Treasury, became assistant secretary for financial institutions; Jason Furman, director of the Hamilton Project after Orszag, became deputy director of the NEC; and David Lipton, treasury undersecretary for international affairs during the Asian financial crisis and later Citigroup executive, also became one of Summers’s deputies at the NEC. Even President Obama’s chief of staff, Rahm Emanuel, had a similar background, having worked both as a Clinton adviser and as an investment banker at Wasserstein Perella. Geithner’s counselors as treasury secretary included Lee Sachs from the Clinton Treasury (and most recently a New York hedge fund) and Gene Sperling, Rubin’s successor as director of the NEC (and most recently a highly paid adviser to a Goldman Sachs philanthropic project).


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

But it is impossible to look back at the developments of the past three decades without concluding that, notwithstanding the failures and disappointments, the general direction has been towards more accountable governments, more market-oriented economies, and so towards more cooperative and positive-sum relations among states.11 The creation of the World Trade Organization in 1996 is just one, albeit particularly important, sign of these fundamentally hopeful developments. Yet much has also gone wrong. During the 1990s, and particularly during the Asian financial crisis of 1997–98, I became concerned that the liberalization of the 1980s and 1990s had brought forth a monster: a financial sector able to devour economies from within. I expressed those concerns in columns for the Financial Times written in response. This suspicion has hardened into something close to a certainty since 2007. Connected to this is concern about the implications of ever-rising levels of debt, particularly in the private sector, and, beyond that, what is beginning to look like chronically weak demand, at the global level.

If the financial and monetary authorities managed to sustain the pegged exchange rate, despite the depression, adjustment would then occur via falling nominal wages and prices (what the Eurozone calls ‘internal devaluation’), emigration and a write-down of the bad debt of insolvent banks, non-financial companies, households and possibly even the government. In time, with competitiveness restored and debt restructured, the economy would recover. This used to happen in the nineteenth century. It has happened, more recently, in small open economies, such as Hong Kong after the Asian financial crisis and the Baltic states after the crises that began in in 2007. This is, in effect, the old gold-standard mechanism. If, however, the authorities let the peg go, the adjustment would be accompanied by a depreciation of the nominal exchange rate. That would obviate debt deflation and the need to cut nominal wages and prices. It is likely, though not certain, that the result would be a swifter and less painful adjustment, without a tidal wave of defaults.

The latter have suffered huge financial crises, big recessions, and correspondingly large rises in fiscal deficits and debt. This is the sort of picture we used to see in emerging and developing countries: one crisis came on the heels of another, notably the Latin American debt crisis of the 1980s, the ‘Tequila crisis’ in Mexico and then other Latin American countries in the mid-1990s, the Asian financial crisis of 1997–98, and the crises in Russia (1998), Brazil (1998–99) and Argentina (2000–01). But emerging countries suffered far fewer banking crises in the 2000s than in the 1980s and 1990s, largely because few had experienced big credit booms in the earlier 2000s. That left them in a good position to expand domestic credit in response to the crises of 2008 and 2009. Thereupon, after the immediate collapse in external demand was over, they mostly tightened credit again.


pages: 278 words: 82,069

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

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Asian financial crisis, banking crisis, Bretton Woods, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, John Meriwether, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, money market fund, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

I want to talk about two recent crises that have something to teach us. One of them is the Asian financial crisis in 1997–98, and the other is the Argentina economic meltdown in December 2001. In The Shock Doctrine, I have a chapter about the Asian financial crisis. It’s called “Let it Burn,” and the reason why it’s called that is because the very same banks that have been so anxious to get bailouts from U.S. taxpayers at the time were saying that what Asia needed—this is a quote—“what Asia needs is more pain.” Because, of course, Citibank, Goldman, Morgan Stanley, went into Asia after the crisis reached bottom and bought up the crown jewels of the Asian tiger economies. What I want to read you from the book is something Alan Greenspan said at the time. He said that what he thought was being witnessed with the Asian financial crisis was “a very dramatic event towards a consensus of the type of market system which we have in this country,” this country being America.

It would be better if we got it right the first time, but that is expecting too much of this president and his administration. View from Asia WA L D E N B E L L O September 24, 2008 Manila Many Asians absorb what is happening in Wall Street with a combination of déjà vu, skepticism and “I-told-you-so.” For many, the Wall Street crisis is a replay, though on a much larger scale, of the 1997 Asian financial crisis, which brought down the red-hot “tiger economies” of the East. The shocking absence of Wall Street regulation brings back awful memories of the elimination of capital controls by East Asian governments, which were under pressure from the International Monetary Fund and the U.S. Treasury Department. That move triggered a tsunami of speculative capital onto Asian markets that sharply receded after sky-high land and stock prices came tumbling down.

The markets would do the job instead—and if other governments did not like the new risks, tough. For a long time, it looked as though private markets could step into the breach—recycling first petrodollars in the 1970s and then Asian dollars back into the global system. Floating exchange rates were volatile, but instruments like markets in future exchange rates emerged to manage new risks. There might be serious ruptures, like the 1980s Latin American debt crisis or the 1990s Asian financial crisis when private markets took fright, but basically governments could step away from global economic management. The U.S. could have guns, butter and allow its great multinationals and banks to expand abroad willy-nilly—and the markets would manage the implications spontaneously, finding the capital the U.S. needed with no constraint on either its government or financial system. Now we know they cannot.


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

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Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

When the United States and Europe were hit by their own financial crises in 2008, it was well noted in Asia that the policies pursued seemed to be the exact opposite of those urged on Asia a decade earlier—interest rates were slashed, banks were bailed out, governments indulged in massive deficit spending. A second major consequence of the Asian financial crisis was that it encouraged countries in the region to build up huge foreign reserves to give themselves defenses against future waves of speculation. By 2008, when the global financial crisis hit, China’s reserves alone were almost $2 trillion. Cash piles of that sort gave Asian policy makers a huge boost in confidence when dealing with their Western counterparts. Finally, the Asian financial crisis hastened a transfer of power within the Asian continent itself. The countries that were affected worst were Thailand, Indonesia, and South Korea, and the fallout extended to other Southeast Asian tigers such as Singapore and Malaysia.

And yet, for all that, Japan was still a nation comfortable with the prevailing international system. The years of rapid growth had gone, but Japan remained a wealthy and orderly country, the second-largest economy in the world throughout the period, a title only ceded to China in 2010. As America’s closest Asian ally, Japan was comfortable with the “unipolar moment.” And, as a major exporting power, Japan had little reason to question the merits of globalization. The Asian financial crisis of 1997–98 gave some of Japan’s neighbors much more reason to ask fundamental questions about how the international capitalist system was working. In a sequence of frightening events that prefigured the global financial crisis of 2008, a series of Asian economies were hit by capital flight, collapsing currencies, defaulting loans, folding businesses, and, finally, catastrophic-sounding collapses in economic output.

Their economies slowed but they did not tip into recession. The first part of the Asian story had been about the rise of Japan in the postwar era. Then came the first Asian tigers—South Korea, Taiwan, and Singapore. By the time I moved to Bangkok in 1992, the action had shifted to Southeast Asia. Thailand for a time was the fastest growing economy in the world. Growth did return to Thailand and Southeast Asia, after the Asian financial crisis, but the world’s attention had moved on. By 1999, it was clear that the really world-shaking developments were taking place in China and India. As the citizen of a Southeast Asian nation, Kishore Mahbubani could have regarded this as a worrying development. Instead he chose to rejoice in the rise of Asia as a continent. For Mahbubani, the biggest worries concerned the West. Would the United States have the wisdom to welcome China’s “peaceful rise”?


pages: 128 words: 35,958

Getting Back to Full Employment: A Better Bargain for Working People by Dean Baker, Jared Bernstein

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, Asian financial crisis, collective bargaining, declining real wages, full employment, George Akerlof, income inequality, inflation targeting, mass immigration, minimum wage unemployment, new economy, price stability, publication bias, quantitative easing, Report Card for America’s Infrastructure, rising living standards, selection bias, War on Poverty

The developing world uses capital from rich countries to sustain the consumption of its population while it builds up its capital stock. The world economy has never fit this textbook story very well, but there were periods, such as the early and mid-1990s, when capital flowed from rich countries to developing countries. The United States in these years ran a trade deficit, but a relatively modest one. This situation changed with the onset of the East Asian financial crisis of 1997, when investors pulled money not only out of East Asia but from the developing world as a whole. The dollar soared in value against the currencies of the countries in the region, partly because the countries needed to export more to repay money borrowed to get through the crisis, but partly because they wanted to accumulate massive amounts of foreign exchange to protect themselves against future crises.

A drop in the dollar by 10 percent against other currencies is equivalent to a 10 percent increase in the productivity of the U.S. economy, assuming no offsetting increase in wages. This swamps any plausible increase in productivity even with a very effective program of improved education and infrastructure. The drop in the dollar from its peak in the last decade has brought the non-oil trade deficit almost down to where it was before the run-up in the dollar in the late 1990s.[40] In 1996, before the East Asian financial crisis sent the dollar soaring, the non-oil deficit was less than 0.3 percent of GDP. It peaked at 3.7 percent of GDP in 2004, three years after the peak of the dollar, and had fallen back to 0.8 percent of GDP in 2012, following the dollar back to its former level. But counting oil, for which the United States paid far more in 2012 than it did in 1997, the trade deficit is still large. In textbook economics the higher price of oil imports should lead to a further decline in the value of the dollar, as increased exports and reduced imports of non-oil products offset the impact of higher oil prices.

Instead, we should have a policy focused on getting the trade deficit closer to balance. While there are many policies, such as improving education and infrastructure, that will increase the economy’s productivity, even in a best-case scenario these strategies can have only a marginal impact on the trade balance in the near term. The trade deficit was relatively modest until the late 1990s, when the East Asian financial crisis led to a run-up in the value of the dollar. While the dollar has since reversed much of this gain, it needs to fall still further. Lowering the value of the dollar is not a difficult task economically; the problem is political. Powerful domestic interest groups benefit from an overvalued dollar, and getting it down to a level consistent with more balanced trade will mean overcoming the opposition of these special interests


pages: 350 words: 109,220

In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel

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Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, Black Swan, break the buck, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial innovation, financial intermediation, fixed income, full employment, George Akerlof, housing crisis, inflation targeting, information asymmetry, London Interbank Offered Rate, Long Term Capital Management, market bubble, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, savings glut, Socratic dialogue, too big to fail

But his words were so emphatic that listeners later were stunned by his subsequent actions. As Lehman’s problems deepened, the Treasury secretary’s style occasionally brought him into conflict with Geithner, his partner in managing the crisis. Geithner’s approach — at least when he was at the New York Fed — was more disciplined, calmer, and politically savvy. A veteran of the U.S. Treasury’s management of the Asian financial crisis of the 1990s, Geithner had learned at the side of Clinton’s agile Treasury secretary, Bob Rubin. Rubin placed a high premium on what his then-deputy Lawrence Summers called “preserving optionality” — deferring final decisions until they had to be made and avoiding any public statement that could limit his political wiggle room. Rubin prized flexibility, and so did Geithner. That made sense in an ever-changing panic, but this approach risked turning crisis management into a series of ad hoc decisions that left everyone from traders in the markets to politicians in Congress guessing at the rules of the game.

The result was lower unemployment without higher inflation — and a technology stock market bubble for which Greenspan got substantial blame. But even after that bubble burst, and a recession ensued, the Greenspan Fed managed to get the economy going again by aggressively cutting interest rates — and the United States avoided the misery that followed the bursting of a real estate and stock market bubble in Japan. Bush was right. Greenspan was a rock star — at least at that moment. He had steered the U.S. economy around the Asian financial crisis in 1998, two wars with Iraq, and the September 11 attacks. To economists, bond traders, and businessmen, he was a hero. “No one has yet credited Alan Greenspan with the fall of the Soviet Union or the rise of the Boston Red Sox, although both may come in time as the legend grows,” Princeton’s Alan Blinder, a former Fed vice chairman, and Ricardo Reis wrote in a 2005 evaluation of Greenspan that pronounced him “amazingly successful.”

Translation: Lenders were more willing to lend because they share with the investors the risk that borrowers wouldn’t repay. Derivatives allowed investors to hedge their bets, making them comfortable with positions they might once have shunned. Hedge funds and other huge pools of capital reduced volatility by pouncing when markets push an asset price even slightly out of line. That was all to the good, but recalling the 1987 stock market crash and the 1998 Asian financial crisis, Summers observed presciently: “Some of the same innovations that contribute to risk spreading in normal times can become sources of instability following shocks to the system as large-scale liquidations take place.” (Translation: Everyone was counting on always being able to quickly sell any newfangled financial instrument.) Normally, that made sense. But if something bad happened, and everyone tried to sell at once — look out!


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, Westphalian system, women in the workforce, yield curve

This prompted a period of rapid and in many cases injudicious growth in lending, which ultimately led to the collapse of a number of “second-tier” financial institutions (including several banks owned by Australian state governments) and “near-death” experiences for two of the four major banks in the early 1990s. These experiences, together with some subsequent smaller ones (including those arising from the Asian financial crisis later in the decade), imparted a greater degree of caution on the part of Australian bank managers than turned out to be the case in the United States or Britain. Australian banks were also arguably under less pressure than their peers in other countries to adopt lower credit standards in pursuit of higher shareholder returns. Nor was there as much pressure to add riskier but higher-yielding assets to their securities portfolios, because they were achieving improvements in profitability from the consumer and funds management sides of their businesses.

Australia’s relatively mild experience with the downturn in international trade was also aided by a decline of more than 25 percent in the trade-weighted value of the Australian dollar between mid-2008 and the first few months of 2009, although this decline has since been more than entirely reversed. This echoed the role that large swings in the value of the Australian dollar had in cushioning the impact of the Asian financial crisis on Australia’s trade in the 1990s. There is little doubt that if China’s response to the downturn in its economy had been less effective, Australia’s experience with the financial crisis would have been less benign. It also follows that if China were to experience a more sustained downturn at some point in the future, the impact on Australia may be greater than that of the North Atlantic financial crisis turned out to be.

If this money is suddenly withdrawn, countries have to drastically increase interest rates for their currency to still be attractive.”1 Since the idea required a drastic change in global tax regimes and went against the idea of free markets, particularly the drive toward frictionless financial markets, the proposed tax was never adopted or considered seriously in official circles. Most economists, international banks, and governments do not like the idea of the Tobin tax proposal because they feel that it would be difficult to implement and may even add instability to foreign exchange markets. The Recent Financial Crises Have Renewed Interest in the Tax When currency speculation became controversial again during the 1997–1999 Asian financial crisis, the idea of a Tobin tax was revived as part of the antiglobalization movement. Again, the idea was deemed by the official Group of Eight (G-8) circles as not worth considering. The idea went against the grain of the free market ideology, which advocates liberalizing financial markets and encourages the free flow of capital. After all, booming financial markets in the early 2000s seemed to confirm that the ideology worked well in creating limitless prosperity.


pages: 309 words: 95,495

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

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Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Asian financial crisis, asset-backed security, bank run, banking crisis, break the buck, Bretton Woods, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, Kenneth Rogoff, London Whale, Long Term Capital Management, market bubble, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, savings glut, technology bubble, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

I was also skeptical about the wisdom of protecting investors from such turmoil. I asked a Fed governor that fall: should the Fed repeatedly intervene when the market was in trouble? Well, I remember her answering, it’s a central bank’s duty to act when the financial system is threatened. In the following decades, I saw a fiscal crisis convulse interest rates and the dollar in my native Canada, an exchange rate crisis erupt in Europe in 1992, the Asian financial crisis, the near failure of Long-Term Capital Management in 1998, and then the rise and fall of the technology bubble. By 2007, I was looking for the next crisis everywhere: in home prices, leveraged buyouts, the trade deficit. I was not, however, looking for catastrophe. I had by now developed a deep respect for the authorities’ ability to counteract mayhem; I assumed that the economy, though it might get bumped around a bit, would come out okay.

As the coming chapters will show, the most important factor was the sense of safety that resulted from years of successfully fighting crisis and recession. The twenty-five years before the global financial crisis were unusually peaceful for the economy; recessions were rare and mild, inflation was low and stable, and periodic financial crises, whether the stock market crash of 1987 or the Asian financial crisis of 1997, were contained by the global fire brigades—the Fed, the Treasury, and the International Monetary Fund. Economists called this era the “Great Moderation,” and credited it to changes in how businesses operated—using fewer inventories, for example—and a more disciplined, more nimble Federal Reserve, able to snuff out both inflation and recession. The global economy in 2008 was like a forest that hadn’t burned in decades; it was choking with the fuel of leverage, risk, and complacency.

Brady hatched a plan that would let them convert their loans to bonds, and then sell them to investors. The Brady bond program was a crucial step back toward health for America’s big banks. It also gave birth to the emerging market bond industry. As a result, emerging economies would henceforth borrow not from banks, with the attendant risks to banks’ solvency, but from the capital markets. This didn’t eliminate sovereign debt crises such as the Asian financial crisis, but it made them less likely to be a threat to America’s financial system; American banks’ exposure to Mexico in 1994, and East Asia in 1997, was far smaller than in 1982. A similar feat was accomplished with securitization. Banks had always been able to sell individual loans, usually to other banks. But starting in the 1970s Lewis Ranieri of Salomon Brothers hit upon the idea of packaging many mortgages, and later credit card receivables or auto loans, together into a single “mortgage-backed security” (MBS) or “asset-backed security” (ABS) and selling it to investors just like a corporate bond.


pages: 437 words: 115,594

The Great Surge: The Ascent of the Developing World by Steven Radelet

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Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, creative destruction, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global supply chain, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, Kenneth Arrow, land reform, low skilled workers, M-Pesa, megacity, Mikhail Gorbachev, off grid, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Second Machine Age, secular stagnation, Simon Kuznets, South China Sea, special economic zone, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, women in the workforce, working poor

Researchers at the World Bank estimate that upward of 150 million people have been lifted above the extreme poverty line because of social protection and safety net programs.9 Indonesia provides a good example of these forces. Today it is the world’s fourth most populous country, with 250 million people. Poverty began to fall in the 1970s, and continued to do so through the mid-1990s until the Asian financial crisis erupted in 1997. At that point, the number of extreme poor rose for about three years, but it has been falling ever since. Like so many other countries, Indonesia’s poverty reduction was ignited in the rural areas. The government introduced deliberate strategies to support agriculture, including distributing new varieties of seeds and fertilizers as part of the Green Revolution, ensuring favorable prices for small rice farmers, and building an extensive network of rural roads to connect markets.

During the Great Depression, critics in the United States on both the left and right assailed the economic meltdown as a consequence of failed democracy, and pointed to Italy and the Soviet Union as examples of the superiority of illiberal systems. In the 1950s and 1960s, the Soviet Union was seen as an economic juggernaut that was sure to outperform the West, just as China is seen today. During my years in Indonesia, I regularly heard the story that people wanted development, and they didn’t care much about democracy. But when the Asian financial crisis erupted in 1997, citizens seized the opportunity to rise up, at great personal risk, and throw out Suharto. It turned out, contrary to the old argument, that Indonesians cared a lot about personal freedoms and holding their leaders accountable. They had just been afraid to say so. They didn’t see a trade-off: they wanted both democracy and development. Today that’s what they’re getting, as they are well into more than a decade of vibrant (imperfect) democracy alongside rapid (imperfect) development.

The government, and a few select cronies, maintained strict control over oil, gas, gold, tin, timber, and other mineral resources, but it created more extensive opportunities in agriculture and manufacturing. Suharto’s government followed the lead of South Korea, Taiwan, Thailand, and Singapore by stimulating economic growth while imposing firm political control. It was only in the late 1990s, with the threat of Communism (and unquestioned US support) waning and the Asian financial crisis exploding, that Suharto fell and Indonesian democracy took root. Indonesia is just one example. The details of the story lines differ across other developing countries, but the themes are similar. Most of today’s developing countries were under some kind of colonial rule until a few decades ago, and had been for a century or more. Those not under colonial controls were under local rule that often was similarly brutal, with a small ruling group extracting resources from the broader population, such as in imperial China.


pages: 840 words: 202,245

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

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accounting loophole / creative accounting, Asian financial crisis, bank run, Bretton Woods, capital controls, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Meriwether, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, market bubble, minimum wage unemployment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, short selling, Silicon Valley, Simon Kuznets, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

A large body of American opinion supported this development, and was mostly uncriticized by mainstream economists and the media. The acquiescence to ideology occurred even when markets lurched from financial crisis to crisis under Greenspan’s tenure—a stock market crash in 1987, a thrifts crisis in 1989, the collapse of junk bonds by 1990, a derivatives crisis in 1994, the Mexican peso collapse of 1994, the Asian financial crisis of 1997, the failure of Long-Term Capital Management and the Russian default on debt in 1998, and the severe stock market crash of 2000. Speculative binges enabled by both stimulative monetary policy and regulatory neglect preceded all these collapses. Levels of speculation rose to ever more dangerous heights each time. In the 1980s, the takeover movement built on soaring levels of debt, much of it ultimately bad, rose to unmanageable levels.

When Russia, its citizens increasingly refusing to pay taxes, defaulted in 1998, Soros’s funds (by then he had opened more funds) lost up to $2 billion in direct Russian investments and another $2 billion on the Russian ruble. The Russian investment was driven more by Soros’s political views than by his financial acumen. The year before, however, Soros made hundreds of millions of dollars in the Asian financial crisis by selling Asian currencies in much the same way he sold the British pound. The Asian currencies had pegged their levels to the U.S. dollar, and held the peg far too long. The nations attracted an enormous amount of capital because they paid high interest rates, but ultimately the lid would burst, Soros felt. In one day, for example, the Thai baht fell 16 percent. The Malaysian ringgit also fell rapidly.

There was too much money chasing the same investments. Secrecy was at the core of Meriwether’s strategies; the price advantages were small, and if competitors knew them, the advantages disappeared quickly. Many were trying to find out what LTCM was doing and copying it outright, exactly as some hedge fund managers and others on Wall Street tried to emulate Soros and Paul Tudor Jones. In 1997, the financial devastation created by the Asian financial crisis also took its toll and LTCM made only 17 percent on its capital that year, its historical relationships no longer holding. In 1997, by contrast, the S&P 500 was up 31 percent as high-technology stocks were taking off. In early 1998, LTCM decided to give a large portion of its capital back to its original investors because profitable opportunities were so hard to find. At the end of 1997, LTCM had nearly $7.5 billion under management, compared to $1 billion when it started, and it now returned $2.7 billion of that to investors.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

But both the grand principles and the local clientelism and patronage were totally embedded in local notables and balances of power.”83 This was the “crony capitalism” that the IMF would demand be extirpated in exchange for its emergency loan packages after the Asian financial crisis erupted in 1997. And when the contagion from that crisis spread to Russia the following year, it was the IMF’s very public despair at not being able to do anything about this “crony capitalism” in the Russian case that led it to pull back from its emergency lending, sparking the Russian government’s default in August 1998 on its foreign debt (which at $61 billion represented 17 percent of Russian GDP). Yet until then the pretence had been maintained. In August 1997, just as the Asian financial crisis reared its head and exactly a year before the Russian default, the IMF executive board proudly affirmed that its staff had “assisted its member countries in creating systems that limit the scope . . . for undesirable preferential treatment of individuals and organizations.”84 However hard this was to credit, what was true was that, in terms of the making of global capitalism—the main objective that structural adjustment was actually designed to foster—there had been real success.

Instead, this global financial volatility left the developing countries of Asia, Africa, and Latin America increasingly dependent on the crisis-management role of the US empire, as Chapter 10 shows. In the 1990s, at the same time as the US was called upon to act as the global policeman against human rights violations by “rogue states,”48 so was it also expected to put out financial conflagrations around the world. In the wake of the 1997–98 Asian financial crisis, with the US Treasury now explicitly defining its role in terms of “failure containment” rather than “failure prevention,” the cover of Time pictured Alan Greenspan of the Federal Reserve and Robert Rubin and Lawrence Summers of the US Treasury beneath the banner “THE COMMITTEE TO SAVE THE WORLD.”49 Conjured up here was an image of the American state as a global “executive committee of the bourgeoisie” (as Marx famously called the capitalist state).

The US Treasury now insisted, as a centerpiece of the IMF agreement, that the ceilings on foreign investment be lifted from 26 to 50 percent.49 Notably, the negotiations took place right in the midst of the country’s presidential election campaign—and all the candidates were required to assent to the conditions before the IMF would declare the rescue package was in place. Its success in this respect led the US economist Rudi Dornbusch to quip on a subsequent American television panel that “the positive side” of the Asian financial crisis was that South Korea “was now owned and operated by our Treasury.”50 The knowing chuckle he elicited from the other pundits may have had less to do with what this said about the extent of imperial power at the end of century than with what it implied about the shifting hierarchy of state apparatuses within Washington itself: after all, it used to be the State Department or Pentagon, rather than the Treasury, that could lay claim to the South Korean franchise.


pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

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3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, Clayton Christensen, cleantech, cognitive dissonance, commoditize, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, digital map, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, intangible asset, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marchetti’s constant, Marshall McLuhan, Masdar, mass immigration, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, Rubik’s Cube, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, white picket fence, Yogi Berra, zero-sum game

His ideas really worked, building a billion-dollar economy out of nothing. He tried to replicate its success in Thailand, at a former U.S. Air Force base named U-Tapao, and in China, near the border with Macau. Back in the United States, he was involved with airports in the Inland Empire of California, and in Fort Worth, advising H. Ross Perot, Jr. (the son of the presidential candidate). The pair abroad were never built, scuttled by the Asian financial crisis and the whims of party chairmen. The ones closer to home had better luck, sprouting new appendages from their surrounding cities and nudging Kasarda toward the aerotropolis. Back in Kinston, signs of trouble had begun to surface. In 1998, FedEx announced it would add a hub somewhere in the state. The Global TransPark’s boosters believed they were in line to get it. They were wrong. The TransPark lost to Greensboro’s airport, snug in the center of the Triad, and the competition wasn’t close.

He leveraged his new connections to take a second crack at building the Global TransPark—the next node in what he imagined would be a worldwide web of just-in-time airstrips. The Thais already had a plan on the shelf for converting a Vietnam-era American bomber base to civilian use. Given the chance to get it right this time, Kasarda spent the next six years drafting blueprints and wooing Thailand’s prime minister at the time, until the whole thing was scuttled in the chaos of the Asian financial crisis. From 1985 until 1996, Thailand’s really was the fastest-growing economy in the world, surging 9 percent annually—faster even than China or India today. Reforms had slashed tariffs and opened the door to foreign investors like Toyota, which moved there for cheap labor, followed by the Big Three. They touched off an industrial boom during which real per capita income doubled, spawning joint ventures and an entrepreneurial class tapping overseas loans.

But a team of American architects, developers, technologists, and engineers are convinced they’ve cracked the code, creating a template for cities that are green, humane, dense, smart, and able to be cloned. Their prototype is Stan Gale’s $35 billion aerotropolis rising from the Yellow Sea: New Songdo City. Instant Cities New Songdo didn’t set out to be green. Its original purpose was one John Kasarda would have applauded: a weapon for fighting trade wars. In the aftermath of the Asian financial crisis, the International Monetary Fund handed South Korea a $58 billion bailout, with conditions. One was a command to seek foreign investment. By then, however, its manufacturing base was decamping to China—70 percent of its factories left over the next decade. Trade between the two countries didn’t exist in 1980, but twenty-five years later China would be its largest trading partner. Eager to follow the flying geese once more as its factories vanished into China, Korean leaders resolved to make Seoul the financial and creative hub of northeast Asia—a title for which there was no end of contenders.


pages: 632 words: 159,454

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt by Kwasi Kwarteng

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accounting loophole / creative accounting, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Big bang: deregulation of the City of London, Bretton Woods, British Empire, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Francisco Pizarro, full employment, German hyperinflation, hiring and firing, income inequality, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, liberal capitalism, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, oil shock, Plutocrats, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

The Chinese government had not developed a comprehensive system of public welfare provision, although it was often suggested that many of the most inefficient state companies, by supplying jobs and salaries to workers, offered a crude form of welfare provision. As a final tribute to the success of his programme of public spending, Zhu declared that he was ‘very proud’ of his adoption of an ‘expansionary fiscal policy’. This policy, in his opinion, had ensured that China ‘not only overcame the impact of the Asian financial crisis, but was able to use the opportunity to achieve unprecedented economic growth’.37 In a sense, the Chinese had acted more consistently with Keynesian principles than many other governments would in later crises. Keynes had been brought up in the late Victorian era. His basic assumption had been that governments would try to balance their budgets. He advocated the financing of public spending through borrowing only in exceptional circumstances, as a way of stimulating the economy whenever a downturn occurred.

Prescott, The 1990s in Japan: A Lost Decade, Working Papers 607, Federal Reserve Bank of Minneapolis, Minneapolis, MN, 2000, p. 1. 22Krugman, Depression Economics, pp. 94–6. 23Ibid., pp. 94–5. 24Matthew Bishop, Economics: An A–Z Guide, London, 2009, p. 67. 25Philip Coggan, Paper Promises: Money, Debt and the New World Order, London, 2011, p. 125. 26Krugman, Depression Economics, pp. 144, 141. 27Xiao-Ming Li, ‘China’s Macroeconomic Stabilization Policies Following the Asian Financial Crisis: Success or Failure?’, Asian Survey, vol. 40, no. 6 (November–December 2000), pp. 938–57, at p. 938. 28Economist, ‘East Asia’s Whirlwind Hits the Middle Kingdom’, 14 February 1998. 29Economist, ‘China’s Currency’, 12 August 1999. 30Business China, ‘Devaluing the renminbi’, 2 February 1998. 31New York Times, ‘China Won’t Reduce Value of Currency, Official Says’,1 December 1997. 32James Kynge, China Shakes the World: The Rise of a Hungry Nation, London, 2006, pp. 27–8. 33Economist, ‘China Pedals Harder’, 11 June 1998. 34Zhu Rongji, Zhu Rongji Meets the Press, Hong Kong, 2011, p. 172. 35Ibid., p. 241. 36Ibid., p. 259. 37Ibid., p. 262. 38New York Times, ‘U.S.

., ‘Chinese Foreign Trade’, China Quarterly, no. 131 (September 1992), pp. 691–720. Layton, W. T., ‘British Opinion on the Gold Standard’, Quarterly Journal for Economics, vol. 39, no. 2 (February 1925), pp. 184–95. Le Monde, ‘Réunion des ministres des finances à la Haye: Les Douze ont progressé vers l’union monétaire’, 1 December 1991. Li, Xiao-Ming, ‘China’s Macroeconomic Stabilization Policies Following the Asian Financial Crisis: Success or Failure?’, Asian Survey, vol. 40, no. 6 (November–December 2000), pp. 938–57. Los Angeles Times, ‘Fears of Dot-Com Crash, Version 2.0’, 16 July 2006. Martin Jr, William McChesney, ‘Toward a World Central Bank?’, Basle, Switzerland, Per Jacobsson Foundation Lecture, given 14 September 1970. Meadville Tribune, ‘Averting the Real Fiscal Cliff’, 31 January 2013 (article written by Glenn Thompson, Republican US Representative for Pennsylvania’s 5th District).


pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

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Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, labour mobility, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, uranium enrichment, Washington Consensus, working-age population, yield curve

Other examples of unrestricted warfare include cyberattacks that can ground aviation, open floodgates, cause blackouts, and shut down the Internet. Recently, financial attacks have been added to the list of asymmetric threats first articulated by Wang and others. Unrestricted Warfare spells this out in a chapter called “The War God’s Face Has Become Indistinct.” It was written not long after the 1997 Asian financial crisis, which cascaded into the global financial panic of 1998. Much of the distress in Asia was caused by Western bankers suddenly pulling hot money out of banks in emerging Asian markets; the distress was compounded by bad economic advice from the Western-dominated IMF. From an Asian perspective, the entire debacle looked like a Western plot to destabilize their economies. The instability was real enough, with riots and bloodshed from Indonesia to South Korea.

The fact that these policies favored free-market capitalism and promoted the expansion of U.S. banks and corporations in global markets did not go unnoticed. By the early 2000s, the Washington Consensus was in tatters due to the rise of emerging market economies that viewed dollar hegemony as favoring the United States at their expense. This view was highlighted by the IMF response to the Asian financial crisis of 1997–98, in which IMF austerity plans resulted in riots and bloodshed in the cities of Jakarta and Seoul. Washington’s failure over time to adhere to its own fiscal prescriptions, combined with the acceleration of Asian economic growth after 1999, gave rise to the Beijing Consensus as a policy alternative to the Washington Consensus. The Beijing Consensus comes in conflicting versions and lacks the intellectual consistency that Williamson gave to the Washington Consensus.

Abe, Shinzo, 160–61, 260–61 Abenomics, 261, 264, 297 Abraham, 217 Adenauer, Konrad, 116 Afghanistan, 55 Aid, Matthew, 53 AIG, 77 Air-Sea Battle, 44, 63 Akerlof, George, 83, 84, 87 Albania, 136 Aldrich, Nelson, 199 allocated gold transactions, 275 Alpert, Dan, 245 Al Qaeda, 19, 27 alternative funds, 299–300 Ambinder, Marc, 63 American Airlines, 18, 20, 21, 24, 25, 26, 27–28, 35, 36 Ames, Paul, 143 ANZ Bank, 227 Arab Spring, 3 Argentina, 261, 290 ARPANET, 174 Articles of Agreement, IMF, 199, 212–14, 235 Asian financial crisis, 45, 120 Åslund, Anders, 142 asset swaps, 80–81 Associated Press, 59 asymmetric markets, 83–88 Atta, Mohamed, 24–25 Australia, 281 autonomous agents, 266 Azerbaijan, 233 Aziz, Shaukat, 31 Backus, David K., 74 backwardation, of gold futures contracts, 285 Bahrain, 58, 152 Baker, James, 177 Balko, Radley, 294 bank deposit risk, 218–19 bank failure risk, 218 Bank for International Settlements (BIS), 213, 276–78 banking risk, 11–12 Bank of England (BOE), 159–60, 161–62, 223, 230 Bank of Japan (BOJ), 160, 161–62 Bank of the United States, 199 barter, 254–55 Bear Stearns, 77, 103 Beijing Consensus, 118, 120–21 BELLs (Bulgaria, Estonia, Latvia, Lithuania), 140–146 economic responses to 2008–9 crisis and subsequent recovery in, 142–46 euro peg/conversion in, 141, 144–45 Berlin Consensus, 121–27 cooperative labor-management relations pillar of, 123–24 efficient labor pillar of, 124–25 innovation and technology pillar of, 122 low-corporate-tax-rates pillar of, 122 low-inflation pillar of, 122–23 positive business climate pillar of, 125–26 Bernanke, Ben, 262 cheap-dollar policy of, 129, 157–59 deflation and, 76, 77 information’s role in efficient markets, analysis of, 84, 85–86, 87 London speech of, 158–59 Tokyo speech of, 129, 157–58 bin Laden, Osama, 19–20, 37 bitcoin, 254 Black Death, 115 Black Monday, 270 Blackstone Group, 51–52 Bloomberg, Michael, 294–95 Bloomberg News, 101, 145 Boeing Corporation, 58–59 Boesky, Ivan, 18 bond markets, 180 Bosnia, 136 Brazil, 139.


pages: 436 words: 114,278

Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally

American energy revolution, Asian financial crisis, banking crisis, barriers to entry, Bretton Woods, collective bargaining, credit crunch, energy security, energy transition, housing crisis, hydraulic fracturing, index fund, Induced demand, interchangeable parts, invisible hand, joint-stock company, market clearing, market fundamentalism, moral hazard, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, price discrimination, price stability, sovereign wealth fund, transfer pricing

Anticipating lower prices, those refiners ran down inventories ahead of a cold winter. Other factors included simmering tensions in Iraq and a potential shortage of heating oil in the United States. THE GHOST OF JAKARTA The unexpected price increase in 1996 and 1997 averted a full clash between Venezuela and other OPEC members.9 But later in 1997 the Asian financial crisis hit, abruptly hurting oil demand, and threw OPEC and other oil producers back into crisis mode. The Asian financial crisis had its origins in the aforementioned strong growth, which had attracted massive capital inflow that was channeled into a real estate bubble. In July 1997 the Thai currency (baht) collapsed, triggering other Asian currency and banking collapses that mushroomed by year-end into widespread economic downturn and bankruptcies.10 But as OPEC prepared to meet in Jakarta in November 1997, producers’ minds were less focused on the gathering Asian crisis than on the oil price spike that had preceded it.

Achnacarry Agreement, 86–88, 90, 94, 101 Adelman, Morris, 110, 111, 151, 264n69 administered price system, 121, 136–41, 146–47, 155 Ahn, Daniel, 238 airlines, 188, 191–92 Alaska, 125 Allegheny River, 12–14 American Petroleum Institute, 55 Anglo-American Petroleum Agreement, 94 Anglo-Persian Oil Company. See British Petroleum anticompetitive practices, 54 antitrust legislation, 36, 92 Arabian Light: as marker crude, 137; OPEC price increase of, 130–31; prices compared to U.S., 131 Arab Oil embargo of 1973, 112, 130–37, 139, 140 Aramco. See Saudi Aramco Asian financial crisis, 162–63 Asian “Tigers,” 161–62 As-Is Agreement, 87–88, 90, 94, 101 Athens, 180–81 automobiles, 176; post-World War II increase in, 106; U.S. early manufacturing of, 42–43 Badri, Abdalla Salem el-, 209–10, 211 Bahrain, 88, 257n89 Bakken region, 203, 217, 232, 275n41, 280n29 Barnett shale, 202 barrels, 245n20 Black Giant field, 75, 85, 201; martial law in Texas after, 74, 74; oil industry impact of, 72–74, 76, 107 Bodman, Samuel, 189 boom-bust cycles, 2, 6, 212; future responses to, 240; history of, 3, 17–18; nature of, 223, 223–24; oil prices during U.S., 4, 38, 54, 168; origin of, 16; overview of, 226; swing producer and, 228; Texas Era management and, 107, 108–9; in 2008, 190–92; U.S. economy impacted by oil’s, 152–53; after World War I, 50–56.

See production Oklahoma: conservation statutes in, 46–47; gushers in, 67; “hot” oil production in, 76; martial law in 1930s, 69–70, 70; oil boom beginnings in, 33; production in 1927, 67–68; quota law leadership of, 82 Oklahoma Corporation Commission (OCC), 46–47, 68–70, 254n9 OPEC. See Organization of the Petroleum Exporting Countries Oregon, 51–52 Organisation for Economic Co-operation and Development (OECD), 145–46, 146, 209, 266n3 Organization of the Petroleum Exporting Countries (OPEC), 1, 18, 84, 273n66, 276n51; in 1970s, 3; in 1990s, 160–61; administered price system by, 121, 136–41, 146–47, 155; Arabian Light price increase and, 130–31; Asian financial crisis reaction from, 162–63; basket price, 165–66, 173, 173, 269n37; cheating within, 150; conflict within, 121, 122, 149; demise of, 8; domination of, from 1970–1980, 122, 123–44; evolution of, in 1980s, 159; formation of, 103, 120; global spare capacity of, in 2003, 172; “Goldilocks” period for, 168–69; industry share of, 120, 147, 169; Iranian revolution and, 140–41; Jakarta debacle of 1997 and, 162–63, 172; market control in future for, 228–29; market upheaval in 1980s and, 145–47; nationalization response from, 137, 264n57; oil price control of, 2, 129, 174–75; oil prices during, era, 4; price war of 2014, 209–11; production cuts assumptions for, 206–7; production cuts for shale competition by, 208; production cuts in 2008 and 2009, 194; production cut strategy and, 121–22; production shares of, 120, 147, 167, 169, 208, 208–9; quota cooperation in 1960s of, 122; quotas in 2011, 198; quota system in 1980s, 148–49; quota system return in 2009, 193–94; Saudi Arabia in, after Gulf War, 159; Saudi Arabia power within, 197–98, 278n103; Saudi Aramco negotiations with, 129; Seven Sisters bargaining with, 127; Seven Sisters struggle with, 120; on shale production, 204–5; spare capacity of, in 2003, 172; supply and demand strategy of, 149; as swing producer, 229; TRC and Seven Sisters compared with, 155–56; U.S. relationship with, 125, 129–30, 154–55; Venezuela conflict with, 161 Pan-American, 86 Pan-Arabism, 117 Parra, Francisco, 89, 103, 122, 125, 156, 169, 269n37 “peak oil”: early fears of, 46; foreign oil supply and fears of, 84; predictions of, 178–80, 271n34; theories of, 177–78 Pennsylvania, 13–15, 44 Pennsylvania drillers, 25–26, 31, 44, 102, 181–82, 194 Pennsylvania Railroad, 23, 24, 246n59 Pennsylvania Rock Oil Company, 12 Pérez Alfonzo, Juan Pablo: Middle Eastern producers courted by, 118–19; as OPEC founder, 120; production cuts strategy of, 121–22; as quota system proponent, 1, 117–18; resignation of, 122 Persian Gulf, 95–96, 102–3, 106, 144, 159, 165, 258n111 petroleum.


pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bretton Woods, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial innovation, financial intermediation, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Hyman Minsky, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, liquidity trap, Long Term Capital Management, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

Such a high level of saving was exacerbated by the policy from 1980 of limiting most families to one child, making it difficult for parents to rely on their children to provide for them in retirement.19 Asian economies in general also saved more in order to accumulate large holdings of dollars as insurance in case their banking system ran short of foreign currency, as happened to Korea and other countries in the Asian financial crisis of the 1990s. In most of the advanced economies of the West, it was the desire to spend that gained the upper hand, as reflected in falling saving rates. Napoleon may (or may not) have described England as a nation of shopkeepers, but it would be more accurate to say that it is a nation that keeps on shopping. Keen though western consumers were on spending, their appetite was not strong enough to offset the even greater wish of emerging economies to save.

Even if the former could be imposed by the central authorities on countries in the euro area – and there are few signs that this would be a popular development – to extend the same degree of integration to countries outside the euro area would surely shatter the wider union. For the foreseeable future, the European Union will comprise two categories of member: those in and those not in the euro area. Arrangements for the evolution of the European Union need to reflect that fact. Such issues are a microcosm of broader challenges to the global order. The Asian financial crisis of the 1990s, when Thailand, South Korea and Indonesia borrowed tens of billions of dollars from western countries through the IMF to support their banks and currencies, showed how difficult it is to cope with sudden capital reversals resulting from a change in sentiment about the degree of currency or maturity mismatch in a nation’s balance sheet, and especially in that of its banking system.

Abe, Shinzo, 363 ABN Amro, 118 Acheson, Dean, 368 Ahmed, Liaquat, The Lords of Finance, 158 AIG, 142, 162 alchemy, financial, 5, 8, 10, 40, 50, 91, 191–2, 257, 261, 263–5, 367, 369; illusion of liquidity, 149–55, 253–5; maturity and risk transformation, 104–15, 117–19, 250–1, 254–5; pawnbroker for all seasons (PFAS) approach, 270–81, 288, 368 Ardant, Henri, 219 Arrow, Kenneth, 79–80, 295 Asian financial crisis (1990s), 28, 349, 350 Asian Infrastructure Investment Bank, 349–50 Australia, 74, 259, 275, 348 Austria, 340, 341 Austro-Hungarian Empire, 216 Bagehot, Walter, 212, 218, 335; Lombard Street (1873), 94–5, 114–15, 188, 189, 190, 191–2, 202, 208, 251, 269 Bank for International Settlements, 31, 255, 276, 324 Bank of America, 103–4, 257 Bank of England, 169, 217, 275, 280, 320–1; Bank Charter Act (1844), 160, 198; during crisis, 36, 37–8, 64, 65, 76, 118, 181–3, 184, 205, 206; Financial Policy Committee, 173; garden at, 73–4; gold reserves, 74, 75, 77, 198; governors of, 6, 12–13, 52–3, 175–6, 178; granting of independence to (1997), 7, 166, 186; history of, 92, 94, 156–7, 159, 160, 180–1, 186, 188–201, 206, 335; inflation targeting policy, 7, 167, 170, 322; Monetary Policy Committee (MPC), 173, 329–31; as Old Lady of Threadneedle Street, 75; weather vane on roof, 181 bank runs, 37–8, 93, 105–8, 187–92, 253–4, 262 Bankia (Spanish bank), 257–8 banking sector: balance sheets, 31, 103–4; capital requirements, 137–9, 255–6, 258, 280; commercial and investment separation, 23, 98, 256, 257; creation of money by, 8, 59–63, 86–7, 91, 161, 253, 263; as dangerous and fragile, 8, 23, 33, 34, 36–7, 91–2, 105, 111, 119, 323–4; deposit insurance, 62, 107–8, 137, 254–5, 328; European universal banks, 23–4; and ‘good collateral’, 188, 190, 202–3, 207, 269; history of, 4–5, 18–19, 59–60, 94–5, 187–202, 206–7; implicit taxpayer subsidy for, 96–7, 107, 116–17, 191–2, 207, 254–5, 263–4, 265–6, 267–8, 269–71, 277; interconnected functions of, 95–6, 111–12, 114–15; levels of equity finance, 103, 105, 109, 112, 137–9, 173, 202, 254–9, 263, 268, 280, 368 see also leverage ratios (total assets to equity capital); liquidity support stigma, 205–7; misconduct scandals, 91, 100, 118, 151, 256; narrow and wide banks, 263–5, 266–7, 279; political influence of, 3, 6, 288–9; recapitalisation of (October 2008), 37–8, 201; taxpayer bailouts during crisis, 4, 38, 41, 43, 93, 94, 106, 118, 162, 243, 247, 261, 267–8; ‘too important to fail’ (TITF), 96–7, 99, 116–17, 118, 254–5, 263–4, 279–80; vast expansion of, 23–4, 31–3, 92–4, 95, 96–9, 115–18; visibility of, 92–3, 94; see also alchemy, financial; central banks; liquidity; regulation Banque de France, 159 Barclays, 95 Barings Bank, 137, 193 ‘behavioural economics’, 132–4, 308, 310 Belgium, 201, 216, 340 Benes, Jaromir, 262 Bergsten, Fred, 234 Berlusconi, Silvio, 225 Bernanke, Ben, 28, 44, 91, 158, 175–6, 183, 188, 287 bills of exchange, 197–8, 199 bitcoins, 282–3 Black, Joseph, 56 Blackett, Basil, 195–6 Blair, Tony, 186 Blakey, Robert, The Political Pilgrim’s Progress (1839), 251–3 Blinder, Alan, 164 BNP Paribas, 35 Brazil, 38 Brecht, Bertolt, The Threepenny Opera (1928), 88, 93 Bremer, Paul, 241 Bretton Woods system, 20–1, 350, 352 British Empire, 216, 217 Bryan, William Jennings, 76, 86–7 Buffett, Warren, 102, 143 building societies, 98 Bunyan, John, Pilgrim’s Progress (1678), 251 Cabaret (film, 1972), 52, 83 Cambodia, 246 Cambridge University, 12, 83, 292–3, 302 Campbell, Mrs Patrick, 220 Campbell-Geddes, Sir Eric, 346 Canada, 116, 167, 170 capitalism, 2, 5, 8, 16–21, 42, 155, 366; as best way to create wealth, 17, 365–6, 369; and end of Cold War, 26–7, 365; money and banking as Achilles heel, 5, 16–17, 23–6, 32–9, 40–1, 50, 369–70; Schumpeter’s ‘creative destruction’, 152; see also market economy Carlyle, Thomas, 16 Carney, Mark, 176 Caruana, Jaime, 324 central banks, 156–9; accountability and transparency, 158, 168, 169–70, 175–6, 178–80, 186, 208; and ‘constrained discretion’, 169–70, 186; creation of ‘emergency money’, 48, 65–6, 71, 86, 172, 182–3, 189, 196–7, 201–7, 247, 275; during crisis, 36–9, 64, 65, 76, 113, 118, 158, 159, 162, 181–4, 205, 206, 335; and disequilibrium, 46–7, 171–2, 175, 208, 329–32; exclusive right to issue paper money, 160, 165, 283; and expectations, 28, 176–8, 304; forecasting by, 179–80, 304–5; future of, 207–10; gold reserves, 74–5, 77, 198; history of, 159–60, 161–2, 180–1; independence of, 5–6, 7, 22, 71, 165–7, 169–70, 185–6, 209–10, 357; industry of private sector watchers, 178; integrated policy framework, 187, 208–9, 288; as ‘lenders of last resort’ (LOLR), 94–5, 109–10, 163, 187–97, 202–7, 208, 259, 268, 269–70, 274–5, 288; and ‘macro-prudential policies’, 173–5, 187; monetary policy rules, 168–9; and money supply, 63, 65–6, 76, 86–7, 162, 163, 180–4, 192, 196–201; pawnbroker for all seasons (PFAS) approach, 270–81, 288, 368; in post-crisis period, 43–4, 63, 76, 162–3, 168–9, 173, 175, 179–80, 183–6; printing of electronic money by, 43, 52, 359; proper role of, 163, 172, 174–5, 287; and swap agreements, 353; see also Bank of England; European Central Bank (ECB); Federal Reserve central planning, 20, 27, 141 Chiang Mai Initiative, 349 ‘Chicago Plan’ (1933), 261–4, 268, 273, 274, 277–8 China, 2–3, 22, 34, 77, 306, 322, 338, 357, 362–3, 364; banking sector, 92, 93; export-led growth strategy, 27–8, 319, 321, 323–4, 356; falling growth rates, 43–4, 324, 363; medieval, 57, 68, 74; one child policy in, 28; problems in financial system, 43–4, 337, 362–3; savings levels in, 27–8, 29, 34; trade surpluses in, 27–8, 46, 49, 319, 321, 329, 364 Chou Enlai, 2 Churchill, Winston, 211, 366 Citigroup, 90, 99, 257 Clark, Kenneth, 193 Clinton, President Bill, 157 Cobbett, William, 71–2 Cochrane, John, 262 Coinage Act, US (1792), 215 Cold War, 26–7, 68, 81–2, 350, 365 Colley, Linda, 213–14 communism, 19, 20, 27 Confucius, 10 Cunliffe, Lord, 178, 193 currencies: break-up of sterling area, 216; dollarisation, 70, 246, 287; ‘fiat’, 57, 283; during government crises, 68–9; monetary unions, 212–18, 238–49 see also European Monetary Union (EMU, euro area); optimal currency areas, 212–13, 215, 217, 248; ‘sterlingisation’ and Scotland, 244–7, 248; US dollar-gold link abandoned (1971), 73; virtual/digital, 282–3; see also exchange rates cybercrime, 282 Cyprus, 363–4 Czech Republic, 216 Debreu, Gerard, 79–80, 295 debt, 140; bailouts as not only response, 343–4; as consequence not cause of crisis, 324–5; forgiveness, 339–40, 346–7; haircut on pledged collateral, 203, 204, 266, 269, 271–2, 275, 277–8, 280; household, 23, 31, 33–4, 35; importance of for real economy, 265–6; as likely trigger for future crisis, 337–8; and low interest rates, 337; quantitative controls on credit, 173, 174–5; rise in external imbalances, 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 306–7, 319–24, 329–30, 338, 364; and rising asset prices, 23, 24, 31–2; role of collateral, 266–7, 269–81; see also sovereign debt decolonisation process, 215 deflation, 66, 76, 159, 164, 165 demand, aggregate: ‘asymmetric shocks’ to, 213; disequilibrium, 45–9, 316, 319–24, 325–7, 329–32, 335, 358–9; in EMU, 221, 222–3, 229, 230, 236; during Great Stability, 319–24; and Keynesianism, 5, 20, 41, 293, 294–302, 315–16, 325–6, 327, 356; and monetary policy, 30, 41–9, 167, 184–5, 212–13, 221, 229–31, 291–2, 294–302, 319–24, 329–32, 335, 358; nature of, 45, 325; pessimism over future levels, 356, 357–60; price and wage rigidities, 167; and radical uncertainty, 316; rebalancing of, 357, 362–3, 364; saving as source of future demand, 11, 46, 84–5, 185, 325–6, 356; as weak post-crisis, 38–9, 41–2, 44–5, 184–5, 291–2, 337, 350, 356–60 democracy, 26–7, 168, 174, 210, 222, 318, 348, 351; and euro area crisis, 224–5, 231, 234–5, 237–8, 344; and paper money, 68, 77; rise of non-mainstream parties in Europe, 234–5, 238, 344, 352 demographic factors, 354, 355, 362 Denmark, 216–17, 335 derivative instruments, 32–3, 35–6, 90, 93–4, 97–8, 100, 101, 117, 141–5; desert island parable, 145–8 Dickens, Charles, 1, 13–14, 233 disequilibrium: and aggregate demand, 45–9, 316, 319–24, 325–7, 329–32, 335, 358–9; alternative strategies for pre-crisis period, 328–33; and central banks, 11–12, 46–7, 171–2, 175, 208, 329–32; continuing, 42, 45–8, 49, 171–2, 291, 334–5, 347, 353, 356–70; coordinated move to new equilibrium, 347, 357, 359–65; definition of, 8–9; euro area at heart of, 248, 337; and exchange rates, 319, 322–3, 329, 331, 364; high- and low-saving countries (external imbalances), 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 307, 319–24, 329–30, 338, 364; in internal saving and spending, 45–8, 49, 313–16, 319–21, 324, 325–6, 329–30, 356; and ‘New Keynesian’ models, 306; the next crisis, 334–5, 336–8, 353, 370; and paradox of policy, 48, 326, 328, 333, 357, 358; and stability heuristic, 312–14, 319–21, 323, 331, 332; suggested reform programme, 359–65 division of labour (specialisation), 18, 54–5 Doha Round, 361 Domesday Book, 54, 85 dotcom crash, 35 ‘double coincidence of wants’, 55, 80, 82 Douglas, Paul, 262 Draghi, Mario, 225, 227, 228 Dyson, Ben, 262 econometric modelling, 90, 125, 305–6 economic growth: conventional analysis, 44–5, 47; as low since crisis, 11, 43–4, 290–2, 293, 324, 348, 353–7; origins of, 17–21; pessimism over future levels, 353–7; in pre-crisis period, 329, 330–1, 351–2; slowing of in China, 43–4, 324, 362; stability in post-war period, 317–18 economic history, 4–5, 15–21, 54–62, 67–77, 107–9, 158–62, 180–1, 206–7, 215–17, 317–18; 1797 crisis in UK, 75; 1907 crisis in US, 159, 161, 196, 197, 198, 201; 1914 crisis, 192–201, 206, 307, 368; 1920-1 depression, 326–7; 1931 crisis, 41; ‘Black Monday’ (19 October 1987), 149; Finnish and Swedish crises (early 1990s), 279; German hyperinflation (early 1920s), 52, 68, 69, 86, 158–9, 190; Latin American debt crisis (1980s), 339; London banking crises (1825-66), 92, 188–90, 191–2, 198, 201; panic of 1792 in US, 188; see also Great Depression (early 1930s) The Economist magazine, 108–9 economists, 78–80, 128–31, 132–4, 212, 311; 1960s evolution of macroeconomics, 12, 16; forecasting models, 3–4, 7, 122–3, 179–80, 208, 305–6; Keynes on, 158, 289; see also Keynesian economics; neoclassical economics Ecuador, 246, 287 Egypt, ancient, 56, 72 Eliot, T.S., Four Quartets, 120, 290 emerging economies, 39, 43, 337, 338, 361; export-led growth strategy, 27–8, 30, 34, 319, 321, 324, 349, 356; new institutions in Asia, 349–50; savings levels in, 22–3, 27–8, 29, 30; ‘uphill’ flows of capital from, 30–1, 40, 319; US dollar reserves, 28, 34, 349 ‘emotional finance’ theory, 133–4 Engels, Friedrich, 19 Enron, 117 equity finance, 36, 102, 103, 140, 141, 143, 266, 280; and ‘bail-inable’ bonds, 112; in banking sector, 103, 105, 109, 112, 137–9, 173, 202, 254–9, 263, 268, 280, 368 see also leverage ratios (total assets to equity capital); and limited liability, 107, 108, 109 European Central Bank (ECB), 137, 162, 166, 232, 339; and euro area crisis, 203–4, 218, 224–5, 227–8, 229, 231, 322; and political decisions, 218, 224–5, 227–8, 231–2, 235, 344; sovereign debt purchases, 162, 190, 227–8, 231 European Monetary Union (EMU, euro area), 62, 217–38, 337–40, 342–9, 363–4; creditor and debtor split, 49, 222–3, 230–1, 232–7, 338, 339–40, 342–4, 363–4; crisis in (from 2009), 138, 203–4, 218, 223–31, 237–8, 276, 338, 339–40, 3512, 368; disillusionment with, 234–5, 236, 238, 3444; divergences in competitiveness, 221–3, 228, 231, 232–3, 234; fiscal union proposals (2015), 344; at heart of world disequilibrium, 248, 337; inflation, 70, 221–2, 232, 237; interest rate, 221–2, 232, 237, 335; launch of (1999), 22, 24–5, 218, 221, 306; main lessons from, 237; and political union issues, 218, 220, 235, 237–8, 248–9, 344, 348–9; ‘progress through crisis’ doctrine, 234; prospects for, 232–3, 345–6; sovereign debt in, 162, 190, 224, 226–8, 229–31, 258, 338, 339–40, 342–4; transfer union proposal, 224, 230, 231, 233, 234, 235, 237, 344; unemployment in, 45, 226, 228, 229–30, 232, 234, 345; value of euro, 43, 228–9, 231, 232, 322 European Stability Mechanism (ESM), 228 European Union, 40, 235–6, 237–8, 247, 248–9, 348–9; no-bailout clause in Treaty (Article 125), 228, 235–6; Stability and Growth Pact (SGP), 235, 236 Exchange Rate Mechanism (ERM), 219, 220 exchange rates: and disequilibrium, 319, 322–3, 329, 331, 364; and EMU, 222, 228–9, 338–9, 363–4; exchange controls, 21, 339; fixed, 20–1, 22–3, 24–5, 72–3, 75–6, 339, 352, 353, 361; floating, 21, 338, 353, 361–2; and ‘gold standard’, 72–3, 75–6; risk of ‘currency wars’, 348; and wage/price changes, 213 Federal Deposit Insurance Corporation (FDIC), 62, 137, 328 Federal Open Market Committee, 179 Federal Reserve, 45, 65, 74, 137, 157–8, 162, 168–70, 175, 178–9, 320; in 1920s/30s, 192, 326–7, 328, 349; during crisis, 39, 76, 107, 113, 183, 184; discount window, 206; dual mandate of, 167–8; opening of (1914), 60, 62, 159–60, 194–5, 196, 197 Ferrer, Gaspar, 193 Field, Alexander, 355 Financial Conduct Authority, UK, 260 financial crises, 11–12, 34; and demand for liquidity, 65–6, 76–7, 86, 106, 110, 119, 148, 182, 187–92, 194, 201–7, 253–4, 367; differing causes of, 307, 316–17, 327–8; frequency of, 2, 4, 20, 92, 111, 316–17; and ‘gold standard’, 75, 165, 195; and Minsky’s theory, 307–8, 323; narrative revision downturns, 328, 332–3, 356, 357, 58–9, 364; the next crisis, 334–5, 336–8, 353, 370; as test beds for new ideas, 49–50; see also economic history financial crisis (from 2007): articles and books, 1–2, 6; central banks during, 36–9, 64, 65, 76, 113, 118, 158, 159, 162, 181–4, 205, 206, 335; desire to blame individuals, 3, 89–90; effects on ordinary citizens, 6, 13, 41; the Great Panic, 37–8; interest rates during, 150–1, 181, 335; LIBOR during, 150–1; liquidity crisis (2007-8), 35–8, 64–5, 76, 110; money supply during, 181–3; parallels with earlier events, 90–2, 193; post-crisis output gap, 42, 291, 337; short-term Keynesian response, 39, 41, 48, 118–19, 326, 328, 356; ‘small’ event precipitating, 34–5, 323; unanswered questions, 39–43; underlying causes, 16–17, 24–5, 26–39, 40, 307, 319–26, 328; weak recovery from, 43–4, 48, 291–2, 293, 324, 337, 355, 364, 366 financial markets, 64–5, 113, 117–18, 141–5, 149, 184, 199–200, 314–15; basic financial contracts, 140–1; desert island parable, 145–8; and radical uncertainty, 140, 143, 144–5, 149–55; ‘real-time’ trading, 153–4, 284; see also derivative instruments; financial products and instruments; trading, financial financial products and instruments, 24, 35–6, 64, 99–100, 114, 117, 136–7, 258, 278, 288; see also derivative instruments Finland, 159, 279 First World War, 88–9, 153, 164, 178, 200–2, 307; financial crisis on outbreak of, 192–201; reparations after, 340–2, 343, 345–6 fiscal policy, 45, 184, 347–8, 352, 358; and Keynesianism, 78, 181, 292, 300, 356; in monetary unions, 222–3, 235; short-term stimulus during crisis, 39, 118–19, 356 Fisher, Irving, 163, 261 fractional reserve banking, 261 France, 93, 201, 216, 219, 221, 236, 248, 348, 364; and euro area crisis, 228–9, 231, 236, 322; occupation of Ruhr (1923), 340; overseas territories during WW2, 242; revolutionary period, 68, 75, 159 Franklin, Benjamin, 58, 127 Friedman, Milton, 78, 130, 163, 182, 192, 262, 328 Fuld, Dick, 89 futures contracts, 142, 240–1, 295–6 G20 group, 39, 255, 256, 351 G7 group, 37–8, 351 Garrett, Scott, 168–9 Geithner, Timothy, 267 George, Eddie, 176, 330 Germany, 93, 161, 162, 184, 219, 322, 341, 357; Bundesbank, 166, 219, 228, 232; and EMU, 219–22, 224, 227, 228, 230, 231–2, 234–6, 248, 338, 340, 342–3, 345; export-led growth strategy, 222, 319, 363–4; hyperinflation (early 1920s), 52, 68, 69, 86, 158–9, 190; Notgeld in, 201–2, 287; reunification, 219, 342; trade surpluses in, 46, 49, 222, 236, 319, 321, 356, 363–4; WW1 reparations, 340–2, 343, 346 Gibbon, Edward, 63, 164 Gigerenzer, Professor Gerd, 123, 135 Gillray, James, 75 global economy, 349–54, 361; capital flows, 20–1, 22, 28, 29, 30–1, 40, 319, 323; rise in external imbalances, 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 307, 319–24, 329–30, 338, 364; see also currencies; exchange rates; trade surpluses and deficits Goethe, Johann Wolfgang von, Faust, 85–6 ‘gold standard’, 72–3, 75–6, 86, 165, 195, 200–1, 216–17, 348, 352 Goldman Sachs, 98, 109, 123, 257 Goodwin, Fred, 37, 89 Grant, James, 327 Great Depression (early 1930s), 5, 16, 20, 158, 160, 226, 348, 355; dramatic effect on politics and economics, 41; Friedman and Schwartz on, 78, 192, 328; and ‘gold standard’, 73, 76; US banking crisis during, 90–1, 108, 116, 201 Great Recession (from 2008), 6, 38–9, 163, 290–2, 326 Great Stability (or Great Moderation), 6, 22, 45–7, 71, 162, 208, 305, 313–14, 318–24, 325–6; alternative strategies for pre-crisis period, 328–33; monetary policies during, 22, 25, 46–7, 315 Greece, 216, 221, 222, 225–31, 338–40, 364; agreement with creditors (13 July 2015), 230–1, 346; crisis in euro area, 223–4, 225–7, 229, 230–1, 236, 258, 338–40; debt restructured (2012), 226–7, 229, 236, 339, 343–4, 346; national referendum (July 2015), 230; sovereign debt, 224, 226–7, 339–40, 342–4, 346–7; Syriza led government, 229, 235 Greenspan, Alan, 157–8, 164, 175, 317 Gulf War, First (1991), 238 Hahn, Frank, 79 Halifax Bank of Scotland (HBoS), 37, 118, 206, 243 Halley, Edmund, 122 Hamilton, Alexander, 188, 202, 215 Hankey, Thomas, 191–2 Hansen, Alvin, Full Recovery or Stagnation?


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

Book titles like The Borderless World, The World Is Flat and One World, Ready or Not summed up the essence of this new discourse. The beginning of the end: the Asian financial crisis The euphoria of the late 1980s and the early 1990s didn’t last. The first sign that not everything was fine with the ‘brave new world’ came with the financial crisis in Mexico in 1995. Too many people had invested in Mexican financial assets with the unrealistic expectation that, having fully embraced free-market policies and having signed the NAFTA, the country was going to be the next miracle economy. Mexico was bailed out by the US and the Canadian governments (who didn’t want a collapse in their new free-trade partner) as well as by the IMF. In 1997, a bigger shock came about with the Asian financial crisis. A number of hitherto successful Asian economies – the so-called ‘MIT economies’ (Malaysia, Indonesia and Thailand) and South Korea – got into financial troubles.

Allowing workers to bargain as a group, rather than as individuals who may compete against each other, trade unions help workers extract higher wages and better working conditions from their employers.3 In some countries, trade unions are considered counter- productive, blocking the necessary changes in technologies and work organization. In others, they are seen as natural partners in any business. When Volvo, the Swedish vehicle manufacturer, bought the heavy construction equipment arm of Samsung in the aftermath of the 1997 Asian financial crisis, it is said to have asked the workers to set up a trade union (Samsung had – and still has – an infamous ‘no-union’ policy). The Swedish managers didn’t know how to manage a company without a trade union to talk to! Like cooperatives, trade unions are membership organizations, in which decisions are made according to the one-member-one-vote rule. These decisions by enterprise-level unions are usually aggregated by national-level unions, such as South Africa’s COSATU (Congress of South African Trade Unions) and the UK’s TUC (Trades Union Congress).


pages: 159 words: 45,073

GDP: A Brief but Affectionate History by Diane Coyle

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Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, BRICs, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, en.wikipedia.org, endogenous growth, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, income inequality, income per capita, informal economy, John von Neumann, Kevin Kelly, Long Term Capital Management, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, purchasing power parity, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

On one side of the Atlantic, there was a good deal of agonizing among economic policymakers: computers were available for any business in any country to use, so why did the productivity benefits of the computer revolution appear to be confined to the United States? On the American side of the Atlantic, there was a sense of triumphalism about the superiority of the U.S. economy and its “New Paradigm,” with its Silicon Valley heroes and soaring stock market. Shocks like the 1995 Mexican near-default, the 1997–1998 Asian financial crisis and the collapse of Long Term Capital Management, and even the technology stock crash of 2001 and the horrors of 9/11 that year, were shrugged off after brief periods of crisis management. The economy appeared to be strong enough to weather anything, and GDP continued to expand for years to come, after a mild and brief downturn in 2001. The questions about GDP raised by the New Economy episode still stand.

Above all, the loss of perspective about the purpose of business, which is not at all the maximization of short-term profit or even shareholder value, but rather delivering goods and services to customers (in ways they might not even know they want), in a mutually beneficial transaction. Profit and share price increases are a side effect, not a goal.3 Finally, the tragic downfall, the nemesis. By the mid-2000s, despite the turmoil of the earlier Asian financial crisis and dot-com bust (in 2001), so-called Anglo-Saxon capitalism appeared triumphant. Its dominance was trumpeted by popular authors such as Thomas Friedman in his books The Lexus and the Olive Tree and The World Is Flat. The message was: this is an uncomfortable ride but deal with it because global capitalism is sweeping the whole world before it. Yet some doubts started to emerge even before the onset of the financial crisis in late 2007.


pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

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Andrew Wiles, Asian financial crisis, Berlin Wall, bonus culture, British Empire, business process, Cass Sunstein, computer age, corporate raider, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, Long Term Capital Management, Louis Pasteur, market fundamentalism, Myron Scholes, Nash equilibrium, pattern recognition, Paul Samuelson, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

The reputation of financial economics has never recovered from the blow of the virtual collapse of Long-Term Capital Management, a sophisticated practitioner of the risk models outlined in chapter twelve, and the involvement of two Nobel Prize winners, Robert C. Merton and Myron Scholes. The fund built huge positions on the basis of estimated mispricings, relying on its models to control its exposures. When the Asian financial crisis blew up in 1997, the fund managers extended their positions. They believed their own models. Their failure was a precursor of the much larger failures that would follow a decade or so later. At the banks a decade later, as in Iraq, evidence and models were used to confirm what was already asserted to be true rather than to challenge the validity of prior assumptions. And in both cases a superficial appearance of considered rationality concealed the crude directness of what was really being done.

Abacha, Sani ABB accounting acquisitions and mergers adaptation aggregates agriculture Airbus Airbus 380 Allen, Bill ambulance response times analgesics anesthetics Ansoff, H. Igor anthologies, literary anthropomorphization anti-inflammatory drugs Apple Apprentice, The arbitrage Archimedes architecture Aristotle Arrow, Kenneth art Art of the Deal, The (Trump) art experts artificial intelligence Asian financial crisis (1997) aspirin assets authority Autobiography (Mill) aviation industry Balboa, Vasco de Bankers Trust banking industry Barnevik, Percy Basel agreements (1987) basic goals Bear Stearns Beckham, David Bell, Alexander Graham bell curve Bengal Bentonville, Ark. Berlin, Isaiah Berlin Wall beta-blockers Black, James “blind watchmaker” Boeing Boeing 737 airliner Boeing 747 airliner Boeing 777 airliner Boesky, Ivan bonuses Borges, Jorge Luis Borodino, Battle of Boston Consulting Group brain damage brain teasers Brando, Marlon Brasília Brave New World (Huxley) Brin, Sergey British empire brokerage firms Bruck, Connie Brunelleschi, Filippo Buffett, Warren Built to Last (Collins and Porras) Burke, Edmund Burns, Robert Bush, George W.


pages: 234 words: 53,078

The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer by Dean Baker

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, Bretton Woods, corporate governance, declining real wages, full employment, index fund, Jeff Bezos, medical malpractice, medical residency, money market fund, offshore financial centre, price discrimination, risk tolerance, spread of share-ownership

The market response should have been that the banks that judged risk poorly take a financial hit, and the particular individuals who exercised bad judgment on loans should perhaps lose their jobs. In a free market, there is no place for a supranational institutional like the IMF to rewrite the rules to ensure that creditors are protected. The IMF provided the same sort of service in the East Asian financial crisis in the fall of 1997. In that situation, the IMF forced governments in the region to assume the responsibility to repay loans that banks made to private companies. The problem facing the foreign banks was that these countries had no well-developed bankruptcy laws, so there was no mechanism through which foreign banks could collect on loans made to companies that were essentially bankrupt at the time.

., J. Gruber, and P. Orszag. 2006. “Improving Opportunities and Incentives for Saving by Middle- and Low-Income Households,” Washington, DC: Brookings Institution. [http://www.brookings.edu/views/papers/200604hamilton_2.htm] Gill, I, T. Packard, and J. Yermo. 2005. Keeping the Promise of Social Security in Latin America, Stanford, CA: Stanford University Press. Goldstein, M. 1998. The Asian Financial Crisis: Causes, Cures, and Systematic Implications. Washington, DC: Institute for International Economics: 26-44. Hacker, J. 2002. The Divided Welfare State: The Battle Over Public and Private Social Benefits in the United States. New York: Cambridge University Press. Himmelstein, D., E. Warren, D. Thorne, and S. Woolhandler. 2005. “Illness and Injury as Contributors to Bankruptcy,” Health Affairs.


pages: 240 words: 60,660

Models. Behaving. Badly.: Why Confusing Illusion With Reality Can Lead to Disaster, on Wall Street and in Life by Emanuel Derman

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Albert Einstein, Asian financial crisis, Augustin-Louis Cauchy, Black-Scholes formula, British Empire, Brownian motion, capital asset pricing model, Cepheid variable, creative destruction, crony capitalism, diversified portfolio, Douglas Hofstadter, Emanuel Derman, Eugene Fama: efficient market hypothesis, fixed income, Henri Poincaré, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, Isaac Newton, law of one price, Mikhail Gorbachev, Myron Scholes, quantitative trading / quantitative finance, random walk, Richard Feynman, Richard Feynman, riskless arbitrage, savings glut, Schrödinger's Cat, Sharpe ratio, stochastic volatility, the scientific method, washing machines reduced drudgery, yield curve

Solid-to-vapor is an apt summary of the evanescence of value, financial and ethical, that has taken place throughout the great and ongoing financial crisis that commenced in 2007. The United States, the global evangelist for the benefits of creative destruction, has favored its own church. When governments of emerging markets complained that foreign investors were fearfully yanking capital from their markets during the Asian financial crisis of 1997, liberal democrats in the West told them that this was the way free markets worked. Now we prop up our own markets because it suits us to do so. The great financial crisis has been marked by the failure of models both qualitative and quantitative. During the past two decades the United States has suffered the decline of manufacturing; the ballooning of the financial sector; that sector’s capture of the regulatory system; ceaseless stimulus whenever the economy has wavered; taxpayer-funded bailouts of large capitalist corporations; crony capitalism; private profits and public losses; the redemption of the rich and powerful by the poor and weak; companies that shorted stock for a living being legally protected from the shorting of their own stock; compromised yet unpunished ratings agencies; government policies that tried to cure insolvency by branding it as illiquidity; and, on the quantitative side, the widespread use of obviously poor quantitative security valuation models for the purpose of marketing.

Index absence as presence absolutes: and Derman’s four questions fiat money example and irreducible nonmetaphor and love and desperation and nature of theories and passions and perfection and and Spinoza’s answers to Derman’s questions Spinoza’s emotions theory and Tetragrammaton and abstractions accuracy: of economic/financial models of theories action: at a distance freedom of understanding and adequate causes Adonai, African Resistance Movement airplane models Akiva, Rabbi algebra: fundamental theorem of aliyah, aliyah register alpha: CAPM and Amichai, Yehuda Ampère, André-Marie analogies analytic continuation Anderson, Carl antiparticles apartheid apartments: valuing of Apple stock arithmetic: fundamental theorem of artists’ models Asian financial crisis assumptions: in financial models Modelers’ Hippocratic Oath and rules for using models and types of models and unconscious Atlas Shrugged (Rand) atomic physics axioms/axiomatization bad. See evil bailouts bare electrons Barfield, Owen Bedazzled (film) Begin, Menachem behavior, human: adequate knowledge and EMM as assumption about explanations for and humans as responsible for their actions and idolatry of models Law of One Price and laws of pragmamorphism and Ben-Gurion, David Bernoulli, Daniel Bernstein, Jeremy beta: CAPM and Betar (Brit Yosef Trumpeldor) binocular diplopia birds Black, Fischer Black-Scholes Model Merton and Blake, William Bnei Akiva (Sons of Akiva) Bnei Zion (Sons of Zion) body-mind relationship Bohr, Aage Bohr, Niels bonds: financial models and See also type of bond Boyle’s Law Brahe, Tycho brain Brave New World (Huxley) Brownian motion bundling of complex products cage: moth in perfect calibration Cape Flats Development Association (South Africa) Capital Asset Pricing Model (CAPM) capitalism caricatures: models as cash.

State-Building: Governance and World Order in the 21st Century by Francis Fukuyama

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Asian financial crisis, Berlin Wall, Bretton Woods, centre right, corporate governance, demand response, Doha Development Round, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, George Akerlof, Hernando de Soto, information asymmetry, liberal world order, Live Aid, Nick Leeson, Pareto efficiency, Potemkin village, price stability, principal–agent problem, rent-seeking, road to serfdom, Ronald Coase, structural adjustment programs, technology bubble, The Market for Lemons, The Nature of the Firm, transaction costs, Washington Consensus, Westphalian system

Challenging the State: Crisis and Innovation in Latin America and Africa (New York: Cambridge University Press). ——. 1997. Getting Good Government: Capacity Building in the Public Sector of Developing Countries (Cambridge, MA: Harvard Institute For International Development). Gwartney, James, and Lawson, Robert et al. 2002. Economic Freedom of the World; 2002 Annual Report (Washington, DC: Cato Institute). Haggard, Stephan. 2000. The Political Economy of the Asian Financial Crisis (Washington, DC: Institute for International Economics). Haggard, Stephan, and Kaufman, Robert R. 1995. The Political Economy of Democratic Transitions (Princeton University Press). Haggard, Stephan, and McCubbins, Mathew D. 2001. Presidents, Parliaments, and Policy (Cambridge, England: Cambridge University Press). Harriss, John, and Hunter, Janet, et al. 1995. The New Institutional Economics and Third World Development (London: Routledge).

Political Economy of Policy Reform in Developing Countries (Cambridge, MA: MIT Press). ——. 1974. “The Political Economy of the Rent-Seeking Society,” The American Economic Review 64(3): 291–303. 128 bibliography Kupchan, Charles A. 2002. The End of the American Era: U.S. Foreign Policy and the Geopolitics of the Twenty-first Century (New York: Knopf). Lanyi, Anthony, and Lee, Young. 1999. Governance Aspects of the East Asian Financial Crisis (College Park, MD: IRIS Working Paper 226). Levitt, Barbara, and March, James G. “Chester I. Barnard and the Intelligence of Learning,” in Oliver Williamson, ed. 1990. Organization Theory from Chester Barnard to the Present (New York: Oxford University Press). Levy, Brian. 2002. Patterns of Governance in Africa (Washington, DC: World Bank). Lijphart, Arend 1996. “Constitutional Choices for New Democracies,” in Marc Plattner and Larry Diamond, eds., The Global Resurgence of Democracy (Baltimore: Johns Hopkins University Press).


pages: 76 words: 20,238

The Great Stagnation by Tyler Cowen

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Asian financial crisis, Bernie Madoff, en.wikipedia.org, endogenous growth, financial innovation, Flynn Effect, income inequality, indoor plumbing, life extension, liquidity trap, Long Term Capital Management, Mark Zuckerberg, meta analysis, meta-analysis, Peter Thiel, RAND corporation, school choice, Tyler Cowen: Great Stagnation, urban renewal

In the early 1980s, we had a lot of apparently bad events that actually didn’t work out so tragically, at least not for most Americans. Let me list a few:• The savings and loan crisis of the early 1980s • The failure of Continental Illinois (then a major U.S. bank) in 1984 • The stock market crash of 1987—Black Monday, a 22.5 percent drop in one day • The bursting of the real estate bubble in the late 1980s • The Mexican financial crisis of 1994 • The Asian financial crisis of 1997-1998 • The Long-Term Capital Management (a hedge fund) crisis of 1998 • The bursting of the dot.com bubble in 2001 In each case, it seemed initially that something really terrible was happening to the economy. When all was said and done, however, these events ended up looking like smaller problems. In most of these cases, we did patchwork rather than addressing the dilemmas of overleverage and excess risk at a more fundamental level.


pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, Y2K, zero-sum game

On the left, dependency theory gave this position some ideological cover, and today's debates are often filled with similar sentiments. Among NGOs and intellectuals working on development issues, there is talk of apartheid South Africa and Smith s Rhodesia as models of a possible autarkic dehnking from the world economy, and admiration for Mahathir's capital controls in Malaysia during the 1997-98 Asian financial crisis. It's often overlooked that Mahathir is a repressive bigot, and that the Southern African examples were part of strategies to sustain horrible societies. Any "progressive" alliance with national capitalism in the name of resistance to international capitaHsm can get very smelly. In the U.S., the Citizens Trade Campaign has taken support from the troglodytic textile tycoon Roger MiUiken.^ That's bad enough, but Na-derite trade rhetoric about how the World Trade Organization threatens U.S. sovereignty is pretty bad too; the world has sufiered from too much U.S. sovereignty and could do with a Uttle less.

Zuckerman, Gregory (2000). "Debtor Nation: Borrowing Levels Reach a Record, Sparking Debate," Wall Street Journal, ]u1y 5, p. CI. Aaron, David, 160 accounting. New Era, 17—22 Allen, Woody, 75 Aim, Richard, 114 Amazon.com, 30—31 Americanization of global finance, 217-225 Americans with Disabilities Act, 101 analysts, stock, 194-200 anriglobalization movement, 160,178,180, 229 AOL Time Warner, 229 Asian financial crisis (1997), 222, 225 Atwater, Wilbur, 107 AT Kearney, 153 Avalon, Frankie, 198 Badgett,M.V. Lee, 100 Balboa, Rocky, 198 Balibar, Etienne, 172-173, 239 bankruptcy, not in economists' models, 193 Barlow, Maude, 162 Bartiromo, Maria, 189-190 Baudrillard,Jean, 26 Becker, Gary, 94, 97 BeUo,Walden, 185 benefits, targeting of, 141-142 Berle,Adolph,212,213 bibhometrics "globahzarion," 145—146 "New Economy," 4 biotechnology, pubUc subsidy, 6 Biotic Baking Brigade, 239 birth weight, 81 Blodget, Henry, 195 Boesky, Ivan, 214 Bono, 177 book value, 232 border cultures, 172 Brady bonds, 221 brands, 17,18-19 Brand DNA, 18 Bretton Woods, 219 brokers productivity of, 64-66 salaries, 202 Brown & Co., 187 Buchanan, Pat, 151,173, 239 Burbach, Roger, 175 business, trust in, 32 Business Week cheerleading 1960s, 7-8 1990s, 32 New Economy poll, 31—32 California electricity crisis, 34,200 Silicon Valley income distribution, 105 Index California Public Employees Retirement System, 214 capital, measuring, 57 capitalism collective (Berle),213 as international, 167 periodizing, 175-176 capital account liberalization, 218 capital flight, 220 capital gains, 89,203 Cappelli, Peter, 76 caring professions, discrimination and, 96 Carrying Capacity Network, 162 Casarini, Luca, 160 Casey Bill, 232 Castells, Manuel, 26,147 Catholic social teaching, 140 Cavanagh,John, 162 cellular phone industry, 198 Center on Budget and Policy Priorities, 89-90 central banks.


pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

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airline deregulation, Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Gordon Gekko, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low skilled workers, Mark Zuckerberg, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Upton Sinclair, We are the 99%, working poor, Works Progress Administration

My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades. —Robert Lucas, presidential address to the American Economic Association, 2003 GIVEN WHAT WE know now, Robert Lucas’s confident assertion that depressions were a thing of the past sounds very much like famous last words. Actually, to some of us they sounded like famous last words even at the time: the Asian financial crisis of 1997–98 and the persistent troubles of Japan bore a clear resemblance to what happened in the 1930s, raising real questions about whether things were anywhere near being under control. I wrote a book about those doubts, The Return of Depression Economics, originally published in 1999; I released a revised edition in 2008, when all of my nightmares came true. Yet Lucas, a Nobel laureate who was a towering, almost dominant figure in macroeconomics for much of the 1970s and 1980s, wasn’t wrong to say that economists had learned a lot since the 1930s.

academic sociology, 92, 96, 103 AIG, 55 airlines, deregulation of, 61 Alesina, Alberto, 196–99 American Airlines, 127 American Recovery and Reinvestment Act (ARRA): cost of, 121 inadequacy of, 108, 109–10, 116–19, 122–26, 130–31, 212, 213 Angle, Sharron, 6 anti-Keynesians, 26, 93–96, 102–3, 106–8, 110–11, 192 Ardagna, Silvia, 197–99 Argentina, 171 Arizona, housing bubble in, 111 Asian financial crisis of 1997–98, 91 asset-backed securities, 54, 55 auction rate securities, 63 Austerians, 188–207 creditors’ interests favored by, 206–7 supposed empirical evidence of, 196–99 austerity programs: alarmists and, 191–95, 224 arguments for, 191–99 economic contraction and, 237–38 in European debt crisis, 46, 144, 185, 186, 188 as ineffective in depressions, xi, 213 state and local governments and, 213–14, 220 unemployment and, xi, 189, 203–4, 207, 237–38 Austrian economics, 150 automobile sales, 47 babysitting co-op, 26–28, 29–30, 32–33, 34 Bakija, Jon, 78 balance of trade, 28 Ball, Laurence, 218 Bank for International Settlements (BIS), 190, 191 Bank of England, 59 Bank of Japan, 216, 218 bankruptcies, personal, 84 bankruptcy, 126–27 Chapter 11, 127 banks, banking industry: capital ratios in, 58–59 complacency in, 55 definition of, 62 deregulation of, see deregulation, financial European, bailouts of, 176 government debt and, 45 “haircuts” in, 114–15 incomes in, 79–80 lending by, 30 money supply and, 32 moral hazard in, 60, 68 1930s failures in, 56 origins of, 56–57 panics in, 4, 59 political influence of, 63 receivership in, 116 regulation of, 55–56, 59–60, 100 repo in, 62 reserves in, 151, 155, 156 revolving door in, 86, 87–88 risk taking in, see risk taking runs on, 57–58, 59, 60, 114–15, 155 separation of commercial and investment banks in, 60, 62, 63 shadow, 63, 111, 114–15 unregulated innovations in, 54–55, 62–63, 83 Barro, Robert, 106–7 Bebchuck, Lucian, 81 Being There (film), 3 Bernanke, Ben, 5, 10–11, 32, 76, 104, 106, 151, 157, 159–60, 210 recovery and, 216–19 on 2008–09 crisis, 3–4 “Bernanke Must End Era of Ultra-low Rates” (Rajan), 203–4 Black, Duncan, 190 Blanchard, Olivier, 161–63 Bloomberg, Michael, 64 BNP Paribas, 113 Boehner, John, 28 bond markets: interest rates in, 132–41, 133 investor confidence and, 132, 213 bonds, high-yield (junk bonds), 115, 115 bond vigilantes, 125, 132–34, 138, 139, 140 Bowles, Erskine, 192–93 Brazil, 171 breach of trust, 80 Bretton Woods, N.H., 41 Broder, David, 201 Brüning, Heinrich, 19 Buckley, William F., 93 Bureau of Labor Statistics, U.S.


pages: 236 words: 67,953

Brave New World of Work by Ulrich Beck

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affirmative action, Asian financial crisis, basic income, Berlin Wall, collective bargaining, conceptual framework, Fall of the Berlin Wall, feminist movement, full employment, future of work, Gunnar Myrdal, hiring and firing, illegal immigration, income inequality, informal economy, job automation, knowledge worker, labour market flexibility, labour mobility, low skilled workers, McJob, means of production, mini-job, postnationalism / post nation state, profit maximization, purchasing power parity, rising living standards, Silicon Valley, working poor, working-age population, zero-sum game

The dynamic of the knowledge society favours the concentration and globalization of capital, precisely because the decentralizing power of networks is brought into play, while ‘there is at the same time differentiation of work, segmentation of workers, and disaggregation of labour on a global scale … Labour loses its collective identity, becomes increasingly individualized in its capacities, in its working conditions, and in its interests and projects.’24 The fixed location of labour means that working people are losers in the struggle to distribute the global risks of globalization. The Asian financial crisis and its consequences shed a bright light upon the previously darkened side of the economic world risk society. Not only do they provide a most striking example of organized irresponsibility; they have also made it clear that whole countries and groups of countries can become victims of global ‘casino capitalism’. The Asian middle classes have been cut to the quick and are threatened in the very basis of their existence.

The neoliberal paradigm of politics may be said to involve an immanent contradiction: the power of the state and its institutions is supposed to be meticulously captured and applied to the breaking of that power. This is in a world where the collapse of national institutions in the 1990s has led to truly devastating human tragedies and civil wars in Somalia, East Africa, Yugoslavia, Albania and parts of the former Soviet Union, and now to the threat of turmoil resulting from the South-East Asian financial crisis. Even if the weakening of central state power cannot be solely or primarily attributed to the new influence of global markets, it nevertheless appears that under their pressure a hidden vacuum of state power and legitimacy may suddenly and brutally become apparent. At a more detailed level too, one can study how the neoliberal revolution undermines its own foundations. Wherever it has been ‘successful’ – in the United States and the United Kingdom, for example – its effects have caused the political coalitions at its head to break apart and to hand over power to the opposition.92 Evidently the neoliberals have not yet realized that the world has become democratic, and that electorates are not prepared to vote in politicians who have inscribed social decline or decomposition on their party banners.

Economic Gangsters: Corruption, Violence, and the Poverty of Nations by Raymond Fisman, Edward Miguel

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, barriers to entry, blood diamonds, clean water, colonial rule, congestion charging, crossover SUV, Donald Davies, European colonialism, failed state, feminist movement, George Akerlof, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Live Aid, mass immigration, megacity, oil rush, prediction markets, random walk, Scramble for Africa, selection bias, Silicon Valley, South China Sea, unemployed young men

The market has told us that Indonesia’s connected business elite were making fistfuls of cash under Suharto’s system of political patronage. Those who were best positioned to change a corrupt system liked it fine just the way it was. Given the system’s benefits to Indonesia’s insiders, it should come as no surprise that political and economic reform had stalled and that serious reform attempts materialized only at 39 CH A PTER TW O the end of Suharto’s rule. As the Asian financial crisis erupted in late 1997 and Suharto still clung to power, the IMF tried to impose some discipline on Suharto’s cronies. As a condition of the IMF relief package, state-sanctioned monopolies were supposed to be dismantled and government-owned banks were to stop funneling money into well-connected businesses. But Suharto effectively killed these attempts at reform. Nor could the Indonesian people appeal to the democratic process.

As the new owner, he soon took an active role in planning and operations. Perhaps not impressed by his automotive and management expertise, a number of top executives soon quit, leaving a manage- 40 SU H A RTO , I N C. ment vacuum at the company. Nonetheless, the Wall Street Journal reported in 1998 that Tommy’s stake in Lamborghini was sold at a significant profit, even under the distressed circumstance facing Tommy after the Asian financial crisis. So, was the Lamborghini purchase a frivolous investment financed by Daddy’s money? Or a calculated purchase by a savvy investor with expertise in fast cars? Based on our findings, it appears that Indonesian investors thought much of Tommy's value came more from connections rather than business smarts. Is All Corruption Created Equal? The story of Suharto’s rule in Indonesia also raises the uneasy question of whether outsiders should do anything about corruption at all.


pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

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airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, Doha Development Round, energy security, European colonialism, financial deregulation, financial independence, full employment, global village, high net worth, land reform, large denomination, liberal capitalism, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, statistical model, structural adjustment programs, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

Cheap imported tires came in because of trade liberalization. We lost market share, and we couldn’t raise our prices as much as we should have. Even without the imports, the market was already very competitive here. There were many tire retreading companies—a few big ones, and many small ones. Especially after we joined the WTO in 1995–96, the industry started to have real problems. “Then with the Asian financial crisis of 1997, there was devaluation, and the price of imported goods went up. At first we thought that devaluation would help us, that imported tires would become expensive, but that never happened. The prices of imported tires remained low—and our costs went up! We got caught in operating losses that accumulated over the years, and the business failed. In fact, the whole industry failed—many retreading companies closed shop.

As activists increasingly combined their efforts across nations to shine light on the negotiating process, elected officials felt the pressure and were ultimately convinced to reject the MAI at the OECD conference in 1998. Its defeat marked one of the first and most important successful global movements of people and governments against an international trade or investment agreement. At the same time, the devastating reality of these investment rules was on full display as the East Asian financial crisis took hold and began to spread. From 1998 to 1999, nations that had once been characterized as the “East Asian tigers” because of their thriving economies suddenly crashed when the IMF restricted the ability of their governments to regulate which sectors of their economies received foreign investments and how long and in what quantities the investments had to stay. When foreign investors started playing with these nations’ currencies as if they were in a global casino, the governments were powerless to act.

One reason for its demise is the increasing number of developing countries whose leaders are now opposed to corporate globalization. Electoral Victories Across the globe, peoples’ movements for global justice have swept in elected officials representing their views. These officials have then brought resistance into the institutions of corporate globalization. Walden Bello of Thailand’s Focus on the Global South describes how, in the midst of the East Asian financial crisis, public pressure led Prime Minister Mohamad Mahathir of Malaysia to break with the IMF and impose capital controls, saving the country from the worst effects of the crisis. According to Bello, Mahathir’s defiance of the IMF was not lost on Thaksin Shinawatra, who ran for prime minister of Thailand on an anti-IMF platform and won. He went on to push for large government expenditures, which stimulated the consumer demand that brought Thailand out of recession.

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

., Castle House, 75/76 Wells Street, London WIT 3QT 1 2 3 4 5 6 7 8 9 0 For Anya, forever CONTENTS Preface ix Acknowledgments CHAPTER I xix Another World Is Possible 3 The Promise of Development CHAPTER 2 CHAPTER 3 Making Trade Fair 61 CHAPTER 4 Patents, Profits, and People 103 CHAPTER 5 Lifting the Resource Curse 133 CHAPTER 6 Saving the Planet 161 25 CHAPTER 7 The Multinational Corporation CHAPTER 8 The Burden of Debt 187 211 CHAPTER 9 Reforming the Global Reserve System CHAPTER I0 Democratizing Globalization 269 Notes 293 Index 339 PREFACE M y book Globalization and Its Discontents was written just after I left the World Bank, where I served as senior vice president and chief economist from 1997 to 2000. That book chronicled much of what I had seen during the time I was at the Bank and in the White House, where I served from 1993 to 1997 as a member and then chairman of the Council of Economic Advisers under President William Jefferson Clinton. Those were tumultuous years; the 1997-98 East Asian financial crisis pushed some of the most successful of the developing countries into unprecedented recessions and depressions. In the former Soviet Union, the transition from communism to the market, which was supposed to bring new prosperity, instead brought a drop in income and living standards by as much as 70 percent. The world, in the best of circumstances, marked by intense competition, uncertainty, and instability, is not an easy place, and the developing countries were not always doing the most they could to advance their own well-being.

., 246, 248 declining value of, 254, 255-56, 257 increase volatility of, 255-56 Dominican Republic, 214, 308n dot-com bubble, 5 Dow Chemical, 195, 196 Drago, Luis Maria, 213-14, 220, 230 Drago Doctrine, 213-14, 215 drugs: Central American prices of, 309n corporate interest and, 132 cost of, 105, 120, 139 generic, 78, 104, 120-22, 315n-16n lifestyle vs. disease related, 122-23 from rainforests, 179 research into, 122-24 subsidies for developing countries supply of, 120 taxes levied on, 123 dumping, 65, 73, 309n duties against, 91-94, 95, 284, 305n, 328n "Dutch disease," 147-49 see also specific countries development, 84 access to capital and, 47 challenges for, 54-56 complexity of, xii comprehensive approach to, 44 49 conditions on economic aid as hindrance to, 57 debate over strategies for, 47-48 failure of one-size-fits-all strategy for, 119 foreign aid and, 14-15, 47 "Grand Bargain" and, 77 East Asia, xiii, 30-35, 72 bail-outs in, 217 borrowing trouble of, 238 central banks in, 34 democratization of, 56 as development success, 48, 277 foreign investment in, 33-34 government managed development in, 45-46 hard currency reserves in, 245, 247-48, 254-56 international market access of, 30-31 local industries development, 32 market liberalization debate in, 34-35 market management in, 32-33 poverty reduction in, 36, 45 savings rate in, 32-33, 34 see also Asia East Asian financial crisis, 208, 218, 219-20, 221, 231, 233, 260, 264 calls for greater transparency after, 208-9 as exacerbated by IMF, ix, 34-35, 231, 248, 261 Eastern Europe, 37 IMF "shock therapy" recommendations for, 38-39, 40 regional development banks in, 236 East Timor, 53 Ebadi, Shirin, 3 Ebbers, Bernard, 193 economic aid, 331n conditionality of, 12, 14-15, 57, 146-47 foreign, 14-15, 57 Economic Consequences of the Peace (Keynes), 239 economic decision making, xiii, xv, xvii, xviii, 28 economic efficiencies, 29, 107-8 Economic Report of the President, xii, 296n economics of information, x, xii, xiv economic theory: advances in, 29 major schools of, 26-27 market failures identified by, 190 of Smith, 189-90 Economist, 296n economists, xiv as fixated on GDP, 45 economy, see global economy; specific countries Ecuador, 134, 146-47 education, 26, 37, 44, 46, 47, 69, 146, 150, 246, 320n Asian expansion of, 32 brain drain and, 51 in East Asia, 31 in Eastern Europe, 39 as factor in development, 50-51 investment in, 28, 49, 118 efficiency, 70 separation of equity from, xiv elective tariff rates, 88 El Salvador, 307n eminent domain, 311n Empagran, 328n-29n 345 employment, 17, 28, 49, 301n in East Asia, 45 in Latin America, 146 in Mexico, 65 see also unemployment enclosure movement, 109 England, 109, 162 Enron, 192, 194 environment, xv, xvii, 7, 17, 28, 266, 323n corporate interests and, 131, 196-97, 199 corporate responsibility for, 190-91, 286 global greenbacks as part of solution for, 261, 266 as growing concern of development, 46 limiting damage to, 158 mining and, 141 regulations for protection of, 197 social vs. private costs in care of, 190 and sustainable development, 130 trade agreements as damaging to, 58, 130, 131 using education to promote, 50 see also global warming equity, 17, 27 efficiency vs., xiv government's role in promoting, 27-28 sustainable growth and, 46 Washington Consensus and, 27 Eritrea, 41 Estonia, 319n Ethiopia, 41, 331n agricultural education in, 50 anti-corruption practice in, 55 debt of, 229 euro, 254, 255-56, 334n Eurobond, 216 Europe, 18, 22, 63, 71, 77, 78-79, 274, 324n agricultural subsidies in, 84, 85, 130 energy companies in, 179 global warming's effect on, 166-67 intellectual requirements of, 117 Kyoto Protocol and, 169, 173, 177, 180, 185 Moldovan money flow to, 225 objection to genetically modified foods by, 129 in Paris Club, 234 Russian gas imports to, 289, 290 service-based economy of, 270-72 unemployment in, 67 unskilled labor in, 271, 272 U.S.'

-Canada Agreement on Air Quality (1991), 164 Venezuela, 36, 37, 134, 144, 145, 148, 213, 220 Venter, Craig, 113-14 Versailles Treaty, 239 Vietnam, 31, 91, 198, 216, 324n, 330n entrance into WTO of, 304n income rates in, 40 transition to market economy in, 39-40 vitamins, 200 Voices of the Poor, 11-12, 295n wages, 24, 62, 67 in China, 45-46, 301n disparity in, 46 real, 10, 272 trade liberalization and, 68 see also income, income inequality Wal-Mart, 188, 192, 326n Wal-Mart: The High Cost of Low Prices (film), 187 war on terrorism, xviii, 5 see also Iraq War Washington Consensus, 16-17, 27, 41, 47, 48, 277, 296n, 298n, 319n Argentina and, 221 assumptions at core of, 28-29 debate over, 29-30 and East Asian financial crisis, 35 for Iraq, 234 lack of confidence in democracy of, 28 waning global support for, 44 water, water supply, 130, 299n-300n access to, 14 mining industry damaged by, 195 subsidies and, 85 Wealth of Nations, The (Smith), 189 i ss INDEX welfare, subsidies as corporate, 86 welfare programs, in developing countries, 146 Williamson, John, 296n Wilson, Charles, 279, 337n Wilson, Woodrow, 98 Windows Media Player, 202, 312n Wolfensohn, Jim, 48 Wolfowitz, Paul, 13 women, empowerment of, 51-53 workers, see labor World Bank, ix, x-xi, xii, 11, 13-14, 16-17, 36, 38, 41, 47, 85, 157, 158, 226, 228, 233, 242, 277, 293n, 305n, 308n, 335n Argentina's debt to, 212 bribery and, 208 Chad and, 321n-22n changes in voting structure at, 281-82 community involvement program of, 53 comprehensive approach endorsed by, 48 conditions on aid from, 15, 57 debt relief by, 15 democratic deficit in, 18, 276 educational focus of, 50 establishment of, 236 Ex_xonMobil and, 321n implementation by, 54 improved accountability for, 283-84 Indonesia and, 243 loans from, 41, 216, 226 on NAFTA, 300n nationalization insurance of, 236-37 poverty definition of, 10 power plants and, 218 Voices of the Poor project at, 11-12, 295n WorldCorn, 193, 204 World Commission on the Social Dimension of Globalization, 7-8 World Economic Forum (2004), 4-5 World Health Organization, 267, 318n World Intellectual Property Organization (WIPO), 117, 118, 128, 315n World Is Flat, The (Friedman), 56, 300n World Meteorological Organization and United Nations Environment Programme, 322n World Social Forum (2004), 3-5, 6-7, 275 World Trade Organization (WTO), ix, 75, 77, 116, 121, 283, 284, 311n, 316n, 328n Byrd amendment and, 309n democratic deficit and, 276 "development round" meetings of, 79-81 enforcement mechanism of, 76 entrance into, 304n establishment of, 7 genetically modified food regulations of, 129 Mexico's joining of, 301n Seattle riots and, 7, 16, 76-77, 79 trade sanctions and, 176-77, 185 U.S. steel tariffs overturned by, 303n World War I, xviii, 18, 110, 239, 291 World War II, xviii, 18, 23, 74, 246, 254 Wright brothers, 110 Wyoming, 171 Yeltsin, Boris, 143, 242 yen, value relative to dollar of, 255 Yukos, 144 Zambia, 331n Zantac, 313n Zenawi, Meles, 41, 50 Zimbabwe, 93 Zoellick, Robert, 103-4


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Second World: Empires and Influence in the New Global Order by Parag Khanna

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Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, continuation of politics by other means, crony capitalism, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Edward Glaeser, energy security, European colonialism, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, Gini coefficient, global reserve currency, global supply chain, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, Khyber Pass, knowledge economy, land reform, low skilled workers, mass immigration, means of production, megacity, Monroe Doctrine, oil shale / tar sands, oil shock, open borders, open economy, Parag Khanna, Pax Mongolica, Pearl River Delta, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, rising living standards, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce

Because defiant militaries carried national legitimacy, ASEAN’s inauspicious beginnings saw it grappling with Sukarno’s aggressive Indonesian “Konfrontasi” policy toward Malaysia, followed by conflicts in Vietnam and Cambodia.1 For decades, it remained an anticolonial bloc in which the United States boosted military rule to counter agrarian Marxism (tripling the size of the Thai military, for example). Like the EU, ASEAN experienced its Bosnia-like moments after the Cold War: the Asian financial crisis, Indonesian forest-fire haze, the East Timor intervention, and the SARS outbreak. Each tested the coherence and utilty of ASEAN, and spurred the rapid development of collective mechanisms for trade integration and combating terrorism, environmental decay, transnational crime, and disease. Mutual interference has become as much the norm as visa-free travel among its five hundred million citizens.2 Some ASEAN countries still have defense agreements with the United States, which now hopes to shape the multilateral bloc into an anti-China hedge.3 But the ASEAN club lies in China’s backyard.

To break free of America’s strategic encirclement, China is picking off ASEAN members one by one and pulling them into its neotribute system such that the individual ties each enjoys with China are now more powerful than the ties among themselves. “ASEAN countries kowtow to China not only to avoid being on China’s bad side,” a Thai diplomat and former ASEAN official explained, “but on the promise that China will not abandon them in times of need, as the U.S. did during the Asian financial crisis.” ASEAN is now synonymous with China’s multitiered periphery: Singapore, Malaysia, and Brunei as the wealthiest partners; Thailand, Indonesia, and Vietnam as economic and strategic assets; and Burma, Cambodia, Laos, and the Philippines as third-world clients. With all of them, China is granting greater market access and sustaining trade deficits (which have brought record profits to ASEAN businesses) in exchange for raw materials, defense agreements, and diplomatic pledges to lean its way.4 Like Europeans in the Maghreb, Chinese baby-boomers are buying retirement properties from Penang to Bali, enlarging a greater Chinese co-prosperity sphere for the twenty-first century.

The former spice route sultanate of Malacca now blends Portuguese colonial architecture with computer assembly plants, while Kuala Lumpur residents can purchase gourmet foods at Carrefour, the paragon brand of first-world grocery shopping. Leadership can make much of the difference anywhere in the world, and while Venezuelans are stuck with Hugo Chávez, Malaysians had Mahathir bin Mohamad. Mahathir and his advisers were convinced that globalization was dangerous unless it was steered. During the Asian financial crisis, they bucked the international strictures that ravaged the Thai and Indonesian economies, instead imposing capital controls to keep the Malay ringgit afloat. As second-world leaders increasingly realize that globalization requires strong management to avoid uncontrollably exacerbating existing disparities, they are more likely to emulate Malaysia than Argentina. “Dr. M,” as Mahathir’s supporters call him, is a Muslim Lee Kuan Yew, second only to Lee as a defender of Asian values, who argues that there are common virtues between Islam and Confucianism, such as reciprocity and loyalty.


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

Geithner’s notion of convening power states that, in a crisis, an ad hoc assembly of the right players could come together on short notice to address the problem. They set an agenda, assign tasks, utilize staff and reassemble after a suitable interval, which could be a day or month, depending on the urgency of the situation. Progress is reported and new goals are set, all without the normal accoutrements of established bureaucracies or rigid governance. This process was something Geithner learned in the depths of the Asian financial crisis in 1997. He saw it again when it was deployed successfully in the bailout of Long-Term Capital Management in 1998. In that crisis, the heads of the “fourteen families,” the major banks at the time, came together with no template, except possibly the Panic of 1907, and in seventy-two hours put together a $3.6 billion all-cash bailout to save capital markets from collapse. In 2008, Geithner, then president of the New York Fed, revived the use of convening power as the U.S. government employed ad hoc remedies to resolve the failures of Bear Stearns, Fannie Mae and Freddie Mac from March to July of that year.

The Commanding Heights: The Battle between Government and the Marketplace That Is Remaking the Modern World. New York: Simon and Schuster, 1998. INDEX adaptation, complex systems AIG Aldrich, Nelson W. Anatomy of an International Monetary Regime, The (Gallarotti) anchoring currency in economics Andrew, Abram Piatt Applied Physics Laboratory (APL), Washington, D.C., area, and financial war game Argentina Asian financial crisis, 1997 Atlantic theater, euro-dollar relationship Austria autonomous agents, in complex systems Bagehot, Walter bailouts, U.S., of 2008 Baker, James A. bancors bank bailouts, 2008 Bank for International Settlements bank holidays bank lending Bank of England Bank of the United States Banque de France Barro, Robert base money Bear Stearns beggar-thy-neighbor competitive devaluations behavioral economics Belgium Bernanke, Ben on gold and the Great Depression money policies of speech of 2002 Bernstein, Jared bilateral trade relations Black, Fischer black markets black swans (catastrophic events) Blair, Dennis C.


pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

Rajan, “Banks, Short-Term Debt and Financial Crises: Theory, Policy Implications and Applications,” Carnegie-Rochester Conference Series on Public Policy 54, no. 1 (June 2001): 37–71. 7 Tarun Khanna and Krishna Palepu, “Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups,” Journal of Finance 55, no. 2 (April 2000): 867–91. 8 The description of Alphatec is drawn from Mark L. Clifford and Peter Engardio, Meltdown: Asia’s Boom, Bust and Beyond (Paramus, NJ: Prentice-Hall, 2000), 136–38. 9 See Shalendra D. Sharma, The Asian Financial Crisis: Crisis, Reform, and Recovery (Manchester, U.K.: Manchester University Press, 2003), 42. 10 The photograph is widely accessible, for example on the website of the International Political Economy Zone, ipezone.blogspot.com/2007/09/flashback-camdessus-suharto-pic.html, accessed March 10, 2010. Chapter Four. A Weak Safety Net 1 I have concealed real names here. 2 The ideas in this chapter evolved out of an initial office conversation with Martin Wolf of the Financial Times, to whom I owe thanks. 3 Stacey Schreft, Aarti Singh, and Ashley Hodgson, “Jobless Recoveries and the Wait-and-See Hypothesis,” Economic Review, Federal Reserve Bank of Kansas City (4th quarter, 2005): 81–99. 4 R.

See income inequality infant-industry protection inflation: in asset prices expectations of Federal Reserve policies and, relationship to unemployment in United States innovation See also technological change institutional economics insurance: bond earthquake livelihood mortgage,See also health insurance; unemployment benefits interest rates: on bank deposits in China consequences of low effects of expectations hypothesis and increases to fight inflation in Japan long-term low levels of on mortgages on savings short-term, spreads of Taylor rule and International Monetary Fund (IMF): Asian financial crisis and conditionality of loans influence of Mexican loans (1994) policy coordination role of reforms in staff of, warnings about trade imbalances Internet: communicating with public through distance education use in hiring investment: bond holders boom in in China in East Asia housing incomes from in managed capitalist systems in physical capital relationship to saving, See also foreign investment investment banks See also banks investment managers, See also hedge funds Jackson Hole Conferences Japan: central bank of competition in consumption in economic growth of education in elevator ladies in employment in energy consumption in exchange-rate policies of export-led growth strategy of exports of, financial bubble and crisis in health care costs in keiretsus in managed capitalism in jobless recoveries: political pressure for economic stimulus during in United States jobs.


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

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Alvin Roth, Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, peer-to-peer, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game

These sorts of mutual assistance agreements are typical in many religions, including Christianity, Hinduism, Buddhism, and Islam. Gallup polls in 145 countries have found that people who attend religious services donate more to charity and perform more voluntary service than those who do not. When crises drive people into the arms of God, they embrace Him for the insurance as well as the spiritual solace. When the Asian financial crisis struck Indonesia in 1997, the rupiah lost 85 percent of its value, the price of food nearly tripled, real wages plummeted by almost half, and the study of the Koran soared. Indonesian Muslims study the Koran in communal events called “Pengajian,” in which a teacher lectures and leads the recitation of the religious text. At these gatherings substantial social pressure is brought upon believers to make charitable contributions for the needy.

Drunk on information technology’s promise, people poured retirement savings into companies like Pets.com, which achieved fame, though never profit, on the strength of a cute ad with a sock puppet. In 2000, AOL could use its pricey stock to take over media goliath Time Warner, which had more than five times its revenue. By October of 2002 the NASDAQ was back where it had been in 1996. In 2010, Time Warner quietly spun off AOL for a tiny fraction of its price a decade before. The dot-com crash was preceded by the Asian financial crisis, with subsidiary bubblettes from Russia to Brazil, when a surge of money into promising “emerging markets” abruptly went into reverse. Similar dynamics caused investors to pummel the Mexican peso during the tequila crisis a few years before. Japan’s Nikkei 225 stock index tripled in real terms between January 1985 and December 1989, only to fall 60 percent over the next two and a half years.


pages: 363 words: 101,082

Earth Wars: The Battle for Global Resources by Geoff Hiscock

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Admiral Zheng, Asian financial crisis, Bakken shale, Bernie Madoff, BRICs, butterfly effect, clean water, cleantech, corporate governance, demographic dividend, Deng Xiaoping, Edward Lorenz: Chaos theory, energy security, energy transition, eurozone crisis, Exxon Valdez, flex fuel, global rebalancing, global supply chain, hydraulic fracturing, Long Term Capital Management, Malacca Straits, Masdar, mass immigration, megacity, Menlo Park, Mohammed Bouazizi, new economy, oil shale / tar sands, oil shock, Panamax, Pearl River Delta, purchasing power parity, Ralph Waldo Emerson, RAND corporation, Shenzhen was a fishing village, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, spice trade, trade route, uranium enrichment, urban decay, working-age population, Yom Kippur War

Traders are not generally known for their generosity over a deal, but ITOCHU, for example, says it very much values the spirit of sampo yoshi, which it translates as “good for the seller, good for the buyer, and good for society.” Exhibit 3.2 Japanese general trading companies (sōgō shōsha) (turnover in FY ended March 2011) Source: Company reports. Exchange rate: US$ @ 80¥ The trading arms of the big South Korean family-run business groups (known as chaebol) sought to emulate the Japanese, but they, too, were forced to trim their sails after the Asian financial crisis of 1997–1998 and the chaebol restructuring that followed. Of those that remain, SK Networks is the biggest with turnover of $22 billion, followed by Samsung C&T, LG International, Hyundai Corp., and Hanwha Corp. Like the Japanese trading houses, they invest in overseas resources projects. SK Networks, for example, paid $700 million in 2010 for a 14 percent stake in MMX, a Brazilian iron ore miner set up by billionaire Eike Batista’s EBX Group.

Aburizal Bakrie stepped down as group chairman in 2004, but retains influence as head of the family. His younger brothers Indra and Nirwan have taken larger roles in recent years. Aburizal, now chairman of the Golkar political party, has seen his family’s business come close to ruin on more than one occasion over the last 20 years, most recently in 2008 after the global financial crisis, and in 1997–1998 when the Asian financial crisis rocked Indonesia’s currency and brought down the Suharto regime. Bakrie continues to carry a heavy long-term debt load, with China Investment Corp. among its creditors. Aburizal Bakrie was an unsuccessful contender to be Golkar’s candidate for the presidency in 2004, and may seek to run again in 2014. In 2010, UK financier Nathaniel Rothschild joined forces with the Bakrie family and Indonesian private equity investor Rosan Roeslani to form London-listed Bumi Plc as a vehicle to hold stakes in Bumi Resources and Roeslani’s own big thermal coal producer in Kalimantan, Berau Coal Energy.


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

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affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

Bradsher, ‘Chinese Builders Buy Abroad’, New York Times, 2 Dec. 2003, W1 and W7; T. Fishman, ‘The Chinese Century’, New York Times Magazine, 4 July 2004, 24–51. 18. H. French, ‘New Boomtowns Change Path of China’s Growth’, New York Times, 28 July 2004, A1 and A8. 19. K. Bradsher, ‘Big China Trade Brings Port War’, International Herald Tribune, 27 Jan. 2003, 12. 20. S. Sharma, ‘Stability Amidst Turmoil: China and the Asian Financial Crisis’, Asia Quarterly (Winter 2000), www.fas.harvard.edu/~asiactr/haq/2000001/0001a006.htm. 21. Hale and Hale, ‘China Takes Off’, 40. 22. H. Liu, ‘China: Banking on Bank Reform’, Asia Times Online, atimes. com, 1 June 2002. 23. K. Bradsher, ‘A Heated Chinese Economy Piles up Debt’, New York Times, 4 Sept. 2003, A1 and C4; K. Bradsher, ‘China Announces New Bailout of Big Banks’, New York Times, 7 Jan. 2004, C1. 24.

., ‘Workers Plight Brings New Militancy in China’, New York Times, 10 Mar. 2003, A8. Salerno, J., ‘Confiscatory Deflation: The Case of Argentina’, Ludwig von Mise Institute, http://www.mises.org? fullstory.aspx? control=890. Sharapura, S., ‘What Happened in Argentina?’, Chicago Business Online, 28 May 2002, http://www.chibus.com/news/2002/05/28/Worldview. Sharma, S., ‘Stability Amidst Turmoil: China and the Asian Financial Crisis, Asia Quarterly (Winter 2000), www.fas.harvard.edu/~asiactr/haq/2000001/0001a006.htm. Shi, L., ‘Current Conditions of China’s Working Class’, China Study Group, 3 Nov. 2003, http://www.chinastudygroup.org/index.php? action=article& type. Sommer, J., ‘A Dragon Let Loose on the Land: And Shanghai is at the Epicenter of China’s Economic Boom’, Japan Times, 26 Oct. 1994, 3. Stevenson, C., Reforming State-Owned Enterprises: Past Lessons for Current Problems (Washington, DC: George Washington University), http:www.gwu.edu/~ylowrey/stevensonc.httml.


pages: 403 words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

3D printing, Asian financial crisis, bank run, basic income, battle of ideas, Berlin Wall, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, dematerialisation, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, energy transition, Erik Brynjolfsson, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, land value tax, Landlord’s Game, loss aversion, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, mobile money, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, Richard Thaler, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, South Sea Bubble, statistical model, Steve Ballmer, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

But it can also result in domestic job losses that decimate whole communities – as experienced in America’s ‘rust belt’, the nation’s former industrial heartland. Likewise, financial inflows may boost an emerging economy’s fledgling stock market but when international finance exits even faster than it entered, it can induce a near collapse of the currency, as Thailand, Indonesia and South Korea discovered the hard way during the Asian financial crisis of the late 1990s. Cross-border flows are always double-edged and so need to be managed. Ricardo was right in thinking that very different nations may be able to trade to mutual gain, but comparative advantage is not only what you are blessed with: it is something you can build. As Ha-Joon Chang puts it, however, today’s high-income countries are ‘kicking away the ladder’ that they once climbed, recommending that low- and middle-income countries open their borders to follow a trade strategy that they strategically avoided themselves.

Page numbers in italics denote illustrations A Aalborg, Denmark, 290 Abbott, Anthony ‘Tony’, 31 ABCD group, 148 Abramovitz, Moses, 262 absolute decoupling, 260–61 Acemoglu, Daron, 86 advertising, 58, 106–7, 112, 281 Agbodjinou, Sénamé, 231 agriculture, 5, 46, 72–3, 148, 155, 178, 181, 183 Alaska, 9 Alaska Permanent Fund, 194 Alperovitz, Gar, 177 alternative enterprise designs, 190–91 altruism, 100, 104 Amazon, 192, 196, 276 Amazon rainforest, 105–6, 253 American Economic Association, 3 American Enterprise Institute, 67 American Tobacco Corporation, 107 Andes, 54 animal spirits, 110 Anthropocene epoch, 48, 253 anthropocentrism, 115 Apertuso, 230 Apple, 85, 192 Archer Daniels Midland (ADM), 148 Arendt, Hannah, 115–16 Argentina, 55, 274 Aristotle, 32, 272 Arrow, Kenneth, 134 Articles of Association and Memoranda, 233 Arusha, Tanzania, 202 Asia Wage Floor Alliance, 177 Asian financial crisis (1997), 90 Asknature.org, 232 Athens, 57 austerity, 163 Australia, 31, 103, 177, 180, 211, 224–6, 255, 260 Austria, 263, 274 availability bias, 112 AXIOM, 230 Axtell, Robert, 150 Ayres, Robert, 263 B B Corp, 241 Babylon, 13 Baker, Josephine, 157 balancing feedback loops, 138–41, 155, 271 Ballmer, Steve, 231 Bangla Pesa, 185–6, 293 Bangladesh, 10, 226 Bank for International Settlements, 256 Bank of America, 149 Bank of England, 145, 147, 256 banking, see under finance Barnes, Peter, 201 Barroso, José Manuel, 41 Bartlett, Albert Allen ‘Al’, 247 basic income, 177, 194, 199–201 basic personal values, 107–9 Basle, Switzerland, 80 Bauwens, Michel, 197 Beckerman, Wilfred, 258 Beckham, David, 171 Beech-Nut Packing Company, 107 behavioural economics, 11, 111–14 behavioural psychology, 103, 128 Beinhocker, Eric, 158 Belgium, 236, 252 Bentham, Jeremy, 98 Benyus, Janine, 116, 218, 223–4, 227, 232, 237, 241 Berger, John, 12, 281 Berlin Wall, 141 Bermuda, 277 Bernanke, Ben, 146 Bernays, Edward, 107, 112, 281–3 Bhopal gas disaster (1984), 9 Bible, 19, 114, 151 Big Bang (1986), 87 billionaires, 171, 200, 289 biodiversity, 10, 46, 48–9, 52, 85, 115, 155, 208, 210, 242, 299 as common pool resource, 201 and land conversion, 49 and inequality, 172 and reforesting, 50 biomass, 73, 118, 210, 212, 221 biomimicry, 116, 218, 227, 229 bioplastic, 224, 293 Birmingham, West Midlands, 10 Black, Fischer, 100–101 Blair, Anthony ‘Tony’, 171 Blockchain, 187, 192 blood donation, 104, 118 Body Shop, The, 232–4 Bogotá, Colombia, 119 Bolivia, 54 Boston, Massachusetts, 3 Bowen, Alex, 261 Bowles, Sam, 104 Box, George, 22 Boyce, James, 209 Brasselberg, Jacob, 187 Brazil, 124, 226, 281, 290 bread riots, 89 Brisbane, Australia, 31 Brown, Gordon, 146 Brynjolfsson, Erik, 193, 194, 258 Buddhism, 54 buen vivir, 54 Bullitt Center, Seattle, 217 Bunge, 148 Burkina Faso, 89 Burmark, Lynell, 13 business, 36, 43, 68, 88–9 automation, 191–5, 237, 258, 278 boom and bust, 246 and circular economy, 212, 215–19, 220, 224, 227–30, 232–4, 292 and complementary currencies, 184–5, 292 and core economy, 80 and creative destruction, 142 and feedback loops, 148 and finance, 183, 184 and green growth, 261, 265, 269 and households, 63, 68 living metrics, 241 and market, 68, 88 micro-businesses, 9 and neoliberalism, 67, 87 ownership, 190–91 and political funding, 91–2, 171–2 and taxation, 23, 276–7 workers’ rights, 88, 91, 269 butterfly economy, 220–42 C C–ROADS (Climate Rapid Overview and Decision Support), 153 C40 network, 280 calculating man, 98 California, United States, 213, 224, 293 Cambodia, 254 Cameron, David, 41 Canada, 196, 255, 260, 281, 282 cancer, 124, 159, 196 Capital Institute, 236 carbon emissions, 49–50, 59, 75 and decoupling, 260, 266 and forests, 50, 52 and inequality, 58 reduction of, 184, 201, 213, 216–18, 223–7, 239–41, 260, 266 stock–flow dynamics, 152–4 taxation, 201, 213 Cargill, 148 Carney, Mark, 256 Caterpillar, 228 Catholic Church, 15, 19 Cato Institute, 67 Celts, 54 central banks, 6, 87, 145, 146, 147, 183, 184, 256 Chang, Ha-Joon, 82, 86, 90 Chaplin, Charlie, 157 Chiapas, Mexico, 121–2 Chicago Board Options Exchange (CBOE), 100–101 Chicago School, 34, 99 Chile, 7, 42 China, 1, 7, 48, 154, 289–90 automation, 193 billionaires, 200, 289 greenhouse gas emissions, 153 inequality, 164 Lake Erhai doughnut analysis, 56 open-source design, 196 poverty reduction, 151, 198 renewable energy, 239 tiered pricing, 213 Chinese Development Bank, 239 chrematistics, 32, 273 Christianity, 15, 19, 114, 151 cigarettes, 107, 124 circular economy, 220–42, 257 Circular Flow diagram, 19–20, 28, 62–7, 64, 70, 78, 87, 91, 92, 93, 262 Citigroup, 149 Citizen Reaction Study, 102 civil rights movement, 77 Cleveland, Ohio, 190 climate change, 1, 3, 5, 29, 41, 45–53, 63, 74, 75–6, 91, 141, 144, 201 circular economy, 239, 241–2 dynamics of, 152–5 and G20, 31 and GDP growth, 255, 256, 260, 280 and heuristics, 114 and human rights, 10 and values, 126 climate positive cities, 239 closed systems, 74 coffee, 221 cognitive bias, 112–14 Colander, David, 137 Colombia, 119 common-pool resources, 82–3, 181, 201–2 commons, 69, 82–4, 287 collaborative, 78, 83, 191, 195, 196, 264, 292 cultural, 83 digital, 82, 83, 192, 197, 281 and distribution, 164, 180, 181–2, 205, 267 Embedded Economy, 71, 73, 77–8, 82–4, 85, 92 knowledge, 197, 201–2, 204, 229, 231, 292 commons and money creation, see complementary currencies natural, 82, 83, 180, 181–2, 201, 265 and regeneration, 229, 242, 267, 292 and state, 85, 93, 197, 237 and systems, 160 tragedy of, 28, 62, 69, 82, 181 triumph of, 83 and values, 106, 108 Commons Trusts, 201 complementary currencies, 158, 182–8, 236, 292 complex systems, 28, 129–62 complexity science, 136–7 Consumer Reaction Study, 102 consumerism, 58, 102, 121, 280–84 cooking, 45, 80, 186 Coote, Anna, 278 Copenhagen, Denmark, 124 Copernicus, Nicolaus, 14–15 copyright, 195, 197, 204 core economy, 79–80 Corporate To Do List, 215–19 Costa Rica, 172 Council of Economic Advisers, US, 6, 37 Cox, Jo, 117 cradle to cradle, 224 creative destruction, 142 Cree, 282 Crompton, Tom, 125–6 cross-border flows, 89–90 crowdsourcing, 204 cuckoos, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 currencies, 182–8, 236, 274, 292 D da Vinci, Leonardo, 13, 94–5 Dallas, Texas, 120 Daly, Herman, 74, 143, 271 Danish Nudging Network, 124 Darwin, Charles, 14 Debreu, Gerard, 134 debt, 37, 146–7, 172–3, 182–5, 247, 255, 269 decoupling, 193, 210, 258–62, 273 defeat device software, 216 deforestation, 49–50, 74, 208, 210 degenerative linear economy, 211–19, 222–3, 237 degrowth, 244 DeMartino, George, 161 democracy, 77, 171–2, 258 demurrage, 274 Denmark, 180, 275, 290 deregulation, 82, 87, 269 derivatives, 100–101, 149 Devas, Charles Stanton, 97 Dey, Suchitra, 178 Diamond, Jared, 154 diarrhoea, 5 differential calculus, 131, 132 digital revolution, 191–2, 264 diversify–select–amplify, 158 double spiral, 54 Doughnut model, 10–11, 11, 23–5, 44, 51 and aspiration, 58–9, 280–84 big picture, 28, 42, 61–93 distribution, 29, 52, 57, 58, 76, 93, 158, 163–205 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 goal, 25–8, 31–60 and governance, 57, 59 growth agnosticism, 29–30, 243–85 human nature, 28–9, 94–128 and population, 57–8 regeneration, 29, 158, 206–42 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 systems, 28, 129–62 and technology, 57, 59 Douglas, Margaret, 78–9 Dreyfus, Louis, 148 ‘Dumb and Dumber in Macroeconomics’ (Solow), 135 Durban, South Africa, 214 E Earning by Learning, 120 Earth-system science, 44–53, 115, 216, 288, 298 Easter Island, 154 Easterlin, Richard, 265–6 eBay, 105, 192 eco-literacy, 115 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 Ecological Performance Standards, 241 Econ 101 course, 8, 77 Economics (Lewis), 114 Economics (Samuelson), 19–20, 63–7, 70, 74, 78, 86, 91, 92, 93, 262 Economy for the Common Good, 241 ecosystem services, 7, 116, 269 Ecuador, 54 education, 9, 43, 45, 50–52, 85, 169–70, 176, 200, 249, 279 economic, 8, 11, 18, 22, 24, 36, 287–93 environmental, 115, 239–40 girls’, 57, 124, 178, 198 online, 83, 197, 264, 290 pricing, 118–19 efficient market hypothesis, 28, 62, 68, 87 Egypt, 48, 89 Eisenstein, Charles, 116 electricity, 9, 45, 236, 240 and Bangla Pesa, 186 cars, 231 Ethereum, 187–8 and MONIAC, 75, 262 pricing, 118, 213 see also renewable energy Elizabeth II, Queen of the United Kingdom, 145 Ellen MacArthur Foundation, 220 Embedded Economy, 71–93, 263 business, 88–9 commons, 82–4 Earth, 72–6 economy, 77–8 finance, 86–8 household, 78–81 market, 81–2 power, 91–92 society, 76–7 state, 84–6 trade, 89–90 employment, 36, 37, 51, 142, 176 automation, 191–5, 237, 258, 278 labour ownership, 188–91 workers’ rights, 88, 90, 269 Empty World, 74 Engels, Friedrich, 88 environment and circular economy, 220–42, 257 conservation, 121–2 and degenerative linear economy, 211–19, 222–3 degradation, 5, 9, 10, 29, 44–53, 74, 154, 172, 196, 206–42 education on, 115, 239–40 externalities, 152 fair share, 216–17 and finance, 234–7 generosity, 218–19, 223–7 green growth, 41, 210, 243–85 nudging, 123–5 taxation and quotas, 213–14, 215 zero impact, 217–18, 238, 241 Environmental Dashboard, 240–41 environmental economics, 7, 11, 114–16 Environmental Kuznets Curve, 207–11, 241 environmental space, 54 Epstein, Joshua, 150 equilibrium theory, 134–62 Ethereum, 187–8 ethics, 160–62 Ethiopia, 9, 226, 254 Etsy, 105 Euclid, 13, 15 European Central Bank, 145, 275 European Commission, 41 European Union (EU), 92, 153, 210, 222, 255, 258 Evergreen Cooperatives, 190 Evergreen Direct Investing (EDI), 273 exogenous shocks, 141 exponential growth, 39, 246–85 externalities, 143, 152, 213 Exxon Valdez oil spill (1989), 9 F Facebook, 192 fair share, 216–17 Fama, Eugene, 68, 87 fascism, 234, 277 Federal Reserve, US, 87, 145, 146, 271, 282 feedback loops, 138–41, 143, 148, 155, 250, 271 feminist economics, 11, 78–81, 160 Ferguson, Thomas, 91–2 finance animal spirits, 110 bank runs, 139 Black–Scholes model, 100–101 boom and bust, 28–9, 110, 144–7 and Circular Flow, 63–4, 87 and complex systems, 134, 138, 139, 140, 141, 145–7 cross-border flows, 89 deregulation, 87 derivatives, 100–101, 149 and distribution, 169, 170, 173, 182–4, 198–9, 201 and efficient market hypothesis, 63, 68 and Embedded Economy, 71, 86–8 and financial-instability hypothesis, 87, 146 and GDP growth, 38 and media, 7–8 mobile banking, 199–200 and money creation, 87, 182–5 and regeneration, 227, 229, 234–7 in service to life, 159, 234–7 stakeholder finance, 190 and sustainability, 216, 235–6, 239 financial crisis (2008), 1–4, 5, 40, 63, 86, 141, 144, 278, 290 and efficient market hypothesis, 87 and equilibrium theory, 134, 145 and financial-instability hypothesis, 87 and inequality, 90, 170, 172, 175 and money creation, 182 and worker’s rights, 278 financial flows, 89 Financial Times, 183, 266, 289 financial-instability hypothesis, 87, 146 First Green Bank, 236 First World War (1914–18), 166, 170 Fisher, Irving, 183 fluid values, 102, 106–9 food, 3, 43, 45, 50, 54, 58, 59, 89, 198 food banks, 165 food price crisis (2007–8), 89, 90, 180 Ford, 277–8 foreign direct investment, 89 forest conservation, 121–2 fossil fuels, 59, 73, 75, 92, 212, 260, 263 Foundations of Economic Analysis (Samuelson), 17–18 Foxconn, 193 framing, 22–3 France, 43, 165, 196, 238, 254, 256, 281, 290 Frank, Robert, 100 free market, 33, 37, 67, 68, 70, 81–2, 86, 90 free open-source hardware (FOSH), 196–7 free open-source software (FOSS), 196 free trade, 70, 90 Freeman, Ralph, 18–19 freshwater cycle, 48–9 Freud, Sigmund, 107, 281 Friedman, Benjamin, 258 Friedman, Milton, 34, 62, 66–9, 84–5, 88, 99, 183, 232 Friends of the Earth, 54 Full World, 75 Fuller, Buckminster, 4 Fullerton, John, 234–6, 273 G G20, 31, 56, 276, 279–80 G77, 55 Gal, Orit, 141 Gandhi, Mohandas, 42, 293 Gangnam Style, 145 Gardens of Democracy, The (Liu & Hanauer), 158 gender equality, 45, 51–2, 57, 78–9, 85, 88, 118–19, 124, 171, 198 generosity, 218–19, 223–9 geometry, 13, 15 George, Henry, 149, 179 Georgescu-Roegen, Nicholas, 252 geothermal energy, 221 Gerhardt, Sue, 283 Germany, 2, 41, 100, 118, 165, 189, 211, 213, 254, 256, 260, 274 Gessel, Silvio, 274 Ghent, Belgium, 236 Gift Relationship, The (Titmuss), 118–19 Gigerenzer, Gerd, 112–14 Gintis, Herb, 104 GiveDirectly, 200 Glass–Steagall Act (1933), 87 Glennon, Roger, 214 Global Alliance for Tax Justice, 277 global material footprints, 210–11 Global Village Construction Set, 196 globalisation, 89 Goerner, Sally, 175–6 Goffmann, Erving, 22 Going for Growth, 255 golden rule, 91 Goldman Sachs, 149, 170 Gómez-Baggethun, Erik, 122 Goodall, Chris, 211 Goodwin, Neva, 79 Goody, Jade, 124 Google, 192 Gore, Albert ‘Al’, 172 Gorgons, 244, 256, 257, 266 graffiti, 15, 25, 287 Great Acceleration, 46, 253–4 Great Depression (1929–39), 37, 70, 170, 173, 183, 275, 277, 278 Great Moderation, 146 Greece, Ancient, 4, 13, 32, 48, 54, 56–7, 160, 244 green growth, 41, 210, 243–85 Greenham, Tony, 185 greenhouse gas emissions, 31, 46, 50, 75–6, 141, 152–4 and decoupling, 260, 266 and Environmental Kuznets Curve, 208, 210 and forests, 50, 52 and G20, 31 and inequality, 58 reduction of, 184, 201–2, 213, 216–18, 223–7, 239–41, 256, 259–60, 266, 298 stock–flow dynamics, 152–4 and taxation, 201, 213 Greenland, 141, 154 Greenpeace, 9 Greenspan, Alan, 87 Greenwich, London, 290 Grenoble, France, 281 Griffiths, Brian, 170 gross domestic product (GDP), 25, 31–2, 35–43, 57, 60, 84, 164 as cuckoo, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 and Environmental Kuznets Curve, 207–11 and exponential growth, 39, 53, 246–85 and growth agnosticism, 29–30, 240, 243–85 and inequality, 173 and Kuznets Curve, 167, 173, 188–9 gross national product (GNP), 36–40 Gross World Product, 248 Grossman, Gene, 207–8, 210 ‘grow now, clean up later’, 207 Guatemala, 196 H Haifa, Israel, 120 Haldane, Andrew, 146 Han Dynasty, 154 Hanauer, Nick, 158 Hansen, Pelle, 124 Happy Planet Index, 280 Hardin, Garrett, 69, 83, 181 Harvard University, 2, 271, 290 von Hayek, Friedrich, 7–8, 62, 66, 67, 143, 156, 158 healthcare, 43, 50, 57, 85, 123, 125, 170, 176, 200, 269, 279 Heilbroner, Robert, 53 Henry VIII, King of England and Ireland, 180 Hepburn, Cameron, 261 Herbert Simon, 111 heuristics, 113–14, 118, 123 high-income countries growth, 30, 244–5, 254–72, 282 inequality, 165, 168, 169, 171 labour, 177, 188–9, 278 overseas development assistance (ODA), 198–9 resource intensive lifestyles, 46, 210–11 trade, 90 Hippocrates, 160 History of Economic Analysis (Schumpeter), 21 HIV/AIDS, 123 Holocene epoch, 46–8, 75, 115, 253 Homo economicus, 94–103, 109, 127–8 Homo sapiens, 38, 104, 130 Hong Kong, 180 household, 78 housing, 45, 59, 176, 182–3, 269 Howe, Geoffrey, 67 Hudson, Michael, 183 Human Development Index, 9, 279 human nature, 28 human rights, 10, 25, 45, 49, 50, 95, 214, 233 humanistic economics, 42 hydropower, 118, 260, 263 I Illinois, United States, 179–80 Imago Mundi, 13 immigration, 82, 199, 236, 266 In Defense of Economic Growth (Beckerman), 258 Inclusive Wealth Index, 280 income, 51, 79–80, 82, 88, 176–8, 188–91, 194, 199–201 India, 2, 9, 10, 42, 124, 164, 178, 196, 206–7, 242, 290 Indonesia, 90, 105–6, 164, 168, 200 Indus Valley civilisation, 48 inequality, 1, 5, 25, 41, 63, 81, 88, 91, 148–52, 209 and consumerism, 111 and democracy, 171 and digital revolution, 191–5 and distribution, 163–205 and environmental degradation, 172 and GDP growth, 173 and greenhouse gas emissions, 58 and intellectual property, 195–8 and Kuznets Curve, 29, 166–70, 173–4 and labour ownership, 188–91 and land ownership, 178–82 and money creation, 182–8 and social welfare, 171 Success to the Successful, 148, 149, 151, 166 inflation, 36, 248, 256, 275 insect pollination services, 7 Institute of Economic Affairs, 67 institutional economics, 11 intellectual property rights, 195–8, 204 interest, 36, 177, 182, 184, 275–6 Intergovernmental Panel on Climate Change, 25 International Monetary Fund (IMF), 170, 172, 173, 183, 255, 258, 271 Internet, 83–4, 89, 105, 192, 202, 264 Ireland, 277 Iroquois Onondaga Nation, 116 Israel, 100, 103, 120 Italy, 165, 196, 254 J Jackson, Tim, 58 Jakubowski, Marcin, 196 Jalisco, Mexico, 217 Japan, 168, 180, 211, 222, 254, 256, 263, 275 Jevons, William Stanley, 16, 97–8, 131, 132, 137, 142 John Lewis Partnership, 190 Johnson, Lyndon Baines, 37 Johnson, Mark, 38 Johnson, Todd, 191 JPMorgan Chase, 149, 234 K Kahneman, Daniel, 111 Kamkwamba, William, 202, 204 Kasser, Tim, 125–6 Keen, Steve, 146, 147 Kelly, Marjorie, 190–91, 233 Kennedy, John Fitzgerald, 37, 250 Kennedy, Paul, 279 Kenya, 118, 123, 180, 185–6, 199–200, 226, 292 Keynes, John Maynard, 7–8, 22, 66, 69, 134, 184, 251, 277–8, 284, 288 Kick It Over movement, 3, 289 Kingston, London, 290 Knight, Frank, 66, 99 knowledge commons, 202–4, 229, 292 Kokstad, South Africa, 56 Kondratieff waves, 246 Korzybski, Alfred, 22 Krueger, Alan, 207–8, 210 Kuhn, Thomas, 22 Kumhof, Michael, 172 Kuwait, 255 Kuznets, Simon, 29, 36, 39–40, 166–70, 173, 174, 175, 204, 207 KwaZulu Natal, South Africa, 56 L labour ownership, 188–91 Lake Erhai, Yunnan, 56 Lakoff, George, 23, 38, 276 Lamelara, Indonesia, 105–6 land conversion, 49, 52, 299 land ownership, 178–82 land-value tax, 73, 149, 180 Landesa, 178 Landlord’s Game, The, 149 law of demand, 16 laws of motion, 13, 16–17, 34, 129, 131 Lehman Brothers, 141 Leopold, Aldo, 115 Lesotho, 118, 199 leverage points, 159 Lewis, Fay, 178 Lewis, Justin, 102 Lewis, William Arthur, 114, 167 Lietaer, Bernard, 175, 236 Limits to Growth, 40, 154, 258 Linux, 231 Liu, Eric, 158 living metrics, 240–42 living purpose, 233–4 Lomé, Togo, 231 London School of Economics (LSE), 2, 34, 65, 290 London Underground, 12 loss aversion, 112 low-income countries, 90, 164–5, 168, 173, 180, 199, 201, 209, 226, 254, 259 Lucas, Robert, 171 Lula da Silva, Luiz Inácio, 124 Luxembourg, 277 Lyle, John Tillman, 214 Lyons, Oren, 116 M M–PESA, 199–200 MacDonald, Tim, 273 Machiguenga, 105–6 MacKenzie, Donald, 101 macroeconomics, 36, 62–6, 76, 80, 134–5, 145, 147, 150, 244, 280 Magie, Elizabeth, 149, 153 Malala effect, 124 malaria, 5 Malawi, 118, 202, 204 Malaysia, 168 Mali, Taylor, 243 Malthus, Thomas, 252 Mamsera Rural Cooperative, 190 Manhattan, New York, 9, 41 Mani, Muthukumara, 206 Manitoba, 282 Mankiw, Gregory, 2, 34 Mannheim, Karl, 22 Maoris, 54 market, 81–2 and business, 88 circular flow, 64 and commons, 83, 93, 181, 200–201 efficiency of, 28, 62, 68, 87, 148, 181 and equilibrium theory, 131–5, 137, 143–7, 155, 156 free market, 33, 37, 67–70, 90, 208 and households, 63, 69, 78, 79 and maxi-max rule, 161 and pricing, 117–23, 131, 160 and rational economic man, 96, 100–101, 103, 104 and reciprocity, 105, 106 reflexivity of, 144–7 and society, 69–70 and state, 84–6, 200, 281 Marshall, Alfred, 17, 98, 133, 165, 253, 282 Marx, Karl, 88, 142, 165, 272 Massachusetts Institute of Technology (MIT), 17–20, 152–5 massive open online courses (MOOCs), 290 Matthew Effect, 151 Max-Neef, Manfred, 42 maxi-max rule, 161 maximum wage, 177 Maya civilisation, 48, 154 Mazzucato, Mariana, 85, 195, 238 McAfee, Andrew, 194, 258 McDonough, William, 217 Meadows, Donella, 40, 141, 159, 271, 292 Medusa, 244, 257, 266 Merkel, Angela, 41 Messerli, Elspeth, 187 Metaphors We Live By (Lakoff & Johnson), 38 Mexico, 121–2, 217 Michaels, Flora S., 6 micro-businesses, 9, 173, 178 microeconomics, 132–4 microgrids, 187–8 Micronesia, 153 Microsoft, 231 middle class, 6, 46, 58 middle-income countries, 90, 164, 168, 173, 180, 226, 254 migration, 82, 89–90, 166, 195, 199, 236, 266, 286 Milanovic, Branko, 171 Mill, John Stuart, 33–4, 73, 97, 250, 251, 283, 284, 288 Millo, Yuval, 101 minimum wage, 82, 88, 176 Minsky, Hyman, 87, 146 Mises, Ludwig von, 66 mission zero, 217 mobile banking, 199–200 mobile phones, 222 Model T revolution, 277–8 Moldova, 199 Mombasa, Kenya, 185–6 Mona Lisa (da Vinci), 94 money creation, 87, 164, 177, 182–8, 205 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 Monoculture (Michaels), 6 Monopoly, 149 Mont Pelerin Society, 67, 93 Moral Consequences of Economic Growth, The (Friedman), 258 moral vacancy, 41 Morgan, Mary, 99 Morogoro, Tanzania, 121 Moyo, Dambisa, 258 Muirhead, Sam, 230, 231 MultiCapital Scorecard, 241 Murphy, David, 264 Murphy, Richard, 185 musical tastes, 110 Myriad Genetics, 196 N national basic income, 177 Native Americans, 115, 116, 282 natural capital, 7, 116, 269 Natural Economic Order, The (Gessel), 274 Nedbank, 216 negative externalities, 213 negative interest rates, 275–6 neoclassical economics, 134, 135 neoliberalism, 7, 62–3, 67–70, 81, 83, 84, 88, 93, 143, 170, 176 Nepal, 181, 199 Nestlé, 217 Netherlands, 211, 235, 224, 226, 238, 277 networks, 110–11, 117, 118, 123, 124–6, 174–6 neuroscience, 12–13 New Deal, 37 New Economics Foundation, 278, 283 New Year’s Day, 124 New York, United States, 9, 41, 55 Newlight Technologies, 224, 226, 293 Newton, Isaac, 13, 15–17, 32–3, 95, 97, 129, 131, 135–7, 142, 145, 162 Nicaragua, 196 Nigeria, 164 nitrogen, 49, 52, 212–13, 216, 218, 221, 226, 298 ‘no pain, no gain’, 163, 167, 173, 204, 209 Nobel Prize, 6–7, 43, 83, 101, 167 Norway, 281 nudging, 112, 113, 114, 123–6 O Obama, Barack, 41, 92 Oberlin, Ohio, 239, 240–41 Occupy movement, 40, 91 ocean acidification, 45, 46, 52, 155, 242, 298 Ohio, United States, 190, 239 Okun, Arthur, 37 onwards and upwards, 53 Open Building Institute, 196 Open Source Circular Economy (OSCE), 229–32 open systems, 74 open-source design, 158, 196–8, 265 open-source licensing, 204 Organisation for Economic Co-operation and Development (OECD), 38, 210, 255–6, 258 Origin of Species, The (Darwin), 14 Ormerod, Paul, 110, 111 Orr, David, 239 Ostrom, Elinor, 83, 84, 158, 160, 181–2 Ostry, Jonathan, 173 OSVehicle, 231 overseas development assistance (ODA), 198–200 ownership of wealth, 177–82 Oxfam, 9, 44 Oxford University, 1, 36 ozone layer, 9, 50, 115 P Pachamama, 54, 55 Pakistan, 124 Pareto, Vilfredo, 165–6, 175 Paris, France, 290 Park 20|20, Netherlands, 224, 226 Parker Brothers, 149 Patagonia, 56 patents, 195–6, 197, 204 patient capital, 235 Paypal, 192 Pearce, Joshua, 197, 203–4 peer-to-peer networks, 187, 192, 198, 203, 292 People’s QE, 184–5 Perseus, 244 Persia, 13 Peru, 2, 105–6 Phillips, Adam, 283 Phillips, William ‘Bill’, 64–6, 75, 142, 262 phosphorus, 49, 52, 212–13, 218, 298 Physiocrats, 73 Pickett, Kate, 171 pictures, 12–25 Piketty, Thomas, 169 Playfair, William, 16 Poincaré, Henri, 109, 127–8 Polanyi, Karl, 82, 272 political economy, 33–4, 42 political funding, 91–2, 171–2 political voice, 43, 45, 51–2, 77, 117 pollution, 29, 45, 52, 85, 143, 155, 206–17, 226, 238, 242, 254, 298 population, 5, 46, 57, 155, 199, 250, 252, 254 Portugal, 211 post-growth society, 250 poverty, 5, 9, 37, 41, 50, 88, 118, 148, 151 emotional, 283 and inequality, 164–5, 168–9, 178 and overseas development assistance (ODA), 198–200 and taxation, 277 power, 91–92 pre-analytic vision, 21–2 prescription medicines, 123 price-takers, 132 prices, 81, 118–23, 131, 160 Principles of Economics (Mankiw), 34 Principles of Economics (Marshall), 17, 98 Principles of Political Economy (Mill), 288 ProComposto, 226 Propaganda (Bernays), 107 public relations, 107, 281 public spending v. investment, 276 public–private patents, 195 Putnam, Robert, 76–7 Q quantitative easing (QE), 184–5 Quebec, 281 Quesnay, François, 16, 73 R Rabot, Ghent, 236 Rancière, Romain, 172 rating and review systems, 105 rational economic man, 94–103, 109, 111, 112, 126, 282 Reagan, Ronald, 67 reciprocity, 103–6, 117, 118, 123 reflexivity of markets, 144 reinforcing feedback loops, 138–41, 148, 250, 271 relative decoupling, 259 renewable energy biomass energy, 118, 221 and circular economy, 221, 224, 226, 235, 238–9, 274 and commons, 83, 85, 185, 187–8, 192, 203, 264 geothermal energy, 221 and green growth, 257, 260, 263, 264, 267 hydropower, 118, 260, 263 pricing, 118 solar energy, see solar energy wave energy, 221 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 rentier sector, 180, 183, 184 reregulation, 82, 87, 269 resource flows, 175 resource-intensive lifestyles, 46 Rethinking Economics, 289 Reynebeau, Guy, 237 Ricardo, David, 67, 68, 73, 89, 250 Richardson, Katherine, 53 Rifkin, Jeremy, 83, 264–5 Rise and Fall of the Great Powers, The (Kennedy), 279 risk, 112, 113–14 Robbins, Lionel, 34 Robinson, James, 86 Robinson, Joan, 142 robots, 191–5, 237, 258, 278 Rockefeller Foundation, 135 Rockford, Illinois, 179–80 Rockström, Johan, 48, 55 Roddick, Anita, 232–4 Rogoff, Kenneth, 271, 280 Roman Catholic Church, 15, 19 Rombo, Tanzania, 190 Rome, Ancient, 13, 48, 154 Romney, Mitt, 92 Roosevelt, Franklin Delano, 37 rooted membership, 190 Rostow, Walt, 248–50, 254, 257, 267–70, 284 Ruddick, Will, 185 rule of thumb, 113–14 Ruskin, John, 42, 223 Russia, 200 rust belt, 90, 239 S S curve, 251–6 Sainsbury’s, 56 Samuelson, Paul, 17–21, 24–5, 38, 62–7, 70, 74, 84, 91, 92, 93, 262, 290–91 Sandel, Michael, 41, 120–21 Sanergy, 226 sanitation, 5, 51, 59 Santa Fe, California, 213 Santinagar, West Bengal, 178 São Paolo, Brazil, 281 Sarkozy, Nicolas, 43 Saumweder, Philipp, 226 Scharmer, Otto, 115 Scholes, Myron, 100–101 Schumacher, Ernst Friedrich, 42, 142 Schumpeter, Joseph, 21 Schwartz, Shalom, 107–9 Schwarzenegger, Arnold, 163, 167, 204 ‘Science and Complexity’ (Weaver), 136 Scotland, 57 Seaman, David, 187 Seattle, Washington, 217 second machine age, 258 Second World War (1939–45), 18, 37, 70, 170 secular stagnation, 256 self-interest, 28, 68, 96–7, 99–100, 102–3 Selfish Society, The (Gerhardt), 283 Sen, Amartya, 43 Shakespeare, William, 61–3, 67, 93 shale gas, 264, 269 Shang Dynasty, 48 shareholders, 82, 88, 189, 191, 227, 234, 273, 292 sharing economy, 264 Sheraton Hotel, Boston, 3 Siegen, Germany, 290 Silicon Valley, 231 Simon, Julian, 70 Sinclair, Upton, 255 Sismondi, Jean, 42 slavery, 33, 77, 161 Slovenia, 177 Small Is Beautiful (Schumacher), 42 smart phones, 85 Smith, Adam, 33, 57, 67, 68, 73, 78–9, 81, 96–7, 103–4, 128, 133, 160, 181, 250 social capital, 76–7, 122, 125, 172 social contract, 120, 125 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 social media, 83, 281 Social Progress Index, 280 social pyramid, 166 society, 76–7 solar energy, 59, 75, 111, 118, 187–8, 190 circular economy, 221, 222, 223, 224, 226–7, 239 commons, 203 zero-energy buildings, 217 zero-marginal-cost revolution, 84 Solow, Robert, 135, 150, 262–3 Soros, George, 144 South Africa, 56, 177, 214, 216 South Korea, 90, 168 South Sea Bubble (1720), 145 Soviet Union (1922–91), 37, 67, 161, 279 Spain, 211, 238, 256 Spirit Level, The (Wilkinson & Pickett), 171 Sraffa, Piero, 148 St Gallen, Switzerland, 186 Stages of Economic Growth, The (Rostow), 248–50, 254 stakeholder finance, 190 Standish, Russell, 147 state, 28, 33, 69–70, 78, 82, 160, 176, 180, 182–4, 188 and commons, 85, 93, 197, 237 and market, 84–6, 200, 281 partner state, 197, 237–9 and robots, 195 stationary state, 250 Steffen, Will, 46, 48 Sterman, John, 66, 143, 152–4 Steuart, James, 33 Stiglitz, Joseph, 43, 111, 196 stocks and flows, 138–41, 143, 144, 152 sub-prime mortgages, 141 Success to the Successful, 148, 149, 151, 166 Sugarscape, 150–51 Summers, Larry, 256 Sumner, Andy, 165 Sundrop Farms, 224–6 Sunstein, Cass, 112 supply and demand, 28, 132–6, 143, 253 supply chains, 10 Sweden, 6, 255, 275, 281 swishing, 264 Switzerland, 42, 66, 80, 131, 186–7, 275 T Tableau économique (Quesnay), 16 tabula rasa, 20, 25, 63, 291 takarangi, 54 Tanzania, 121, 190, 202 tar sands, 264, 269 taxation, 78, 111, 165, 170, 176, 177, 237–8, 276–9 annual wealth tax, 200 environment, 213–14, 215 global carbon tax, 201 global financial transactions tax, 201, 235 land-value tax, 73, 149, 180 non-renewable resources, 193, 237–8, 278–9 People’s QE, 185 tax relief v. tax justice, 23, 276–7 TED (Technology, Entertainment, Design), 202, 258 Tempest, The (Shakespeare), 61, 63, 93 Texas, United States, 120 Thailand, 90, 200 Thaler, Richard, 112 Thatcher, Margaret, 67, 69, 76 Theory of Moral Sentiments (Smith), 96 Thompson, Edward Palmer, 180 3D printing, 83–4, 192, 198, 231, 264 thriving-in-balance, 54–7, 62 tiered pricing, 213–14 Tigray, Ethiopia, 226 time banking, 186 Titmuss, Richard, 118–19 Toffler, Alvin, 12, 80 Togo, 231, 292 Torekes, 236–7 Torras, Mariano, 209 Torvalds, Linus, 231 trade, 62, 68–9, 70, 89–90 trade unions, 82, 176, 189 trademarks, 195, 204 Transatlantic Trade and Investment Partnership (TTIP), 92 transport, 59 trickle-down economics, 111, 170 Triodos, 235 Turkey, 200 Tversky, Amos, 111 Twain, Mark, 178–9 U Uganda, 118, 125 Ulanowicz, Robert, 175 Ultimatum Game, 105, 117 unemployment, 36, 37, 276, 277–9 United Kingdom Big Bang (1986), 87 blood donation, 118 carbon dioxide emissions, 260 free trade, 90 global material footprints, 211 money creation, 182 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 New Economics Foundation, 278, 283 poverty, 165, 166 prescription medicines, 123 wages, 188 United Nations, 55, 198, 204, 255, 258, 279 G77 bloc, 55 Human Development Index, 9, 279 Sustainable Development Goals, 24, 45 United States American Economic Association meeting (2015), 3 blood donation, 118 carbon dioxide emissions, 260 Congress, 36 Council of Economic Advisers, 6, 37 Earning by Learning, 120 Econ 101 course, 8, 77 Exxon Valdez oil spill (1989), 9 Federal Reserve, 87, 145, 146, 271, 282 free trade, 90 Glass–Steagall Act (1933), 87 greenhouse gas emissions, 153 global material footprint, 211 gross national product (GNP), 36–40 inequality, 170, 171 land-value tax, 73, 149, 180 political funding, 91–2, 171 poverty, 165, 166 productivity and employment, 193 rust belt, 90, 239 Transatlantic Trade and Investment Partnership (TTIP), 92 wages, 188 universal basic income, 200 University of Berkeley, 116 University of Denver, 160 urbanisation, 58–9 utility, 35, 98, 133 V values, 6, 23, 34, 35, 42, 117, 118, 121, 123–6 altruism, 100, 104 anthropocentric, 115 extrinsic, 115 fluid, 28, 102, 106–9 and networks, 110–11, 117, 118, 123, 124–6 and nudging, 112, 113, 114, 123–6 and pricing, 81, 120–23 Veblen, Thorstein, 82, 109, 111, 142 Venice, 195 verbal framing, 23 Verhulst, Pierre, 252 Victor, Peter, 270 Viner, Jacob, 34 virtuous cycles, 138, 148 visual framing, 23 Vitruvian Man, 13–14 Volkswagen, 215–16 W Wacharia, John, 186 Wall Street, 149, 234, 273 Wallich, Henry, 282 Walras, Léon, 131, 132, 133–4, 137 Ward, Barbara, 53 Warr, Benjamin, 263 water, 5, 9, 45, 46, 51, 54, 59, 79, 213–14 wave energy, 221 Ways of Seeing (Berger), 12, 281 Wealth of Nations, The (Smith), 74, 78, 96, 104 wealth ownership, 177–82 Weaver, Warren, 135–6 weightless economy, 261–2 WEIRD (Western, educated, industrialised, rich, democratic), 103–5, 110, 112, 115, 117, 282 West Bengal, India, 124, 178 West, Darrell, 171–2 wetlands, 7 whale hunting, 106 Wiedmann, Tommy, 210 Wikipedia, 82, 223 Wilkinson, Richard, 171 win–win trade, 62, 68, 89 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 Wizard of Oz, The, 241 Woelab, 231, 293 Wolf, Martin, 183, 266 women’s rights, 33, 57, 107, 160, 201 and core economy, 69, 79–81 education, 57, 124, 178, 198 and land ownership, 178 see also gender equality workers’ rights, 88, 91, 269 World 3 model, 154–5 World Bank, 6, 41, 119, 164, 168, 171, 206, 255, 258 World No Tobacco Day, 124 World Trade Organization, 6, 89 worldview, 22, 54, 115 X xenophobia, 266, 277, 286 Xenophon, 4, 32, 56–7, 160 Y Yandle, Bruce, 208 Yang, Yuan, 1–3, 289–90 yin yang, 54 Yousafzai, Malala, 124 YouTube, 192 Yunnan, China, 56 Z Zambia, 10 Zanzibar, 9 Zara, 276 Zeitvorsoge, 186–7 zero environmental impact, 217–18, 238, 241 zero-hour contracts, 88 zero-humans-required production, 192 zero-interest loans, 183 zero-marginal-cost revolution, 84, 191, 264 zero-waste manufacturing, 227 Zinn, Howard, 77 PICTURE ACKNOWLEDGEMENTS Illustrations are reproduced by kind permission of: archive.org


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

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1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, collateralized debt obligation, collective bargaining, Columbian Exchange, commoditize, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, fixed income, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Parag Khanna, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

China’s Mixture of Investment Capital China’s banking system is a mixture of four giant state-owned banks, derivative of the socialist economy; joint-stock commercial banks founded for development purposes in 1994; and city banks. The government owns a majority interest in almost all state banks. Direct foreign investment is large and comprised mainly of long-term commitments. Termed “patient capital,” these commitments allowed China to survive the Asian financial crisis of 1997–1998 much better than most countries in the region. The Chinese are great savers, so interest rates have continued to be low. Private and public savings in China have formed America’s great piggy bank in its twenty-first century spending spree. Corporations in China still have far to go in creating sound organizations. State banks are plagued with insider favoritism. The security of Chinese investments is going to depend upon putting in place financial accountability, better laws, and transparency.

Amelia Gentleman, “Sex Selection by Abortion Is Denounced in New Delhi,” New York Times, April 29, 2008. 46. Choe Sang-Hun, “South Korea, Where Boys Were Kings, Revalues Its Girls,” New York Times, October 23, 2007. 47. Robert W. Crandall and Kenneth Flamm, “Overview,” in Crandall and Flamm, eds., Changing the Rules, 114–29; Tony A. Freyer, Antitrust and Global Capitalism (New York, 2006), 6–7. 48. Dick K. Nanto, “The 1997–98 Asian Financial Crisis,” CRS Report for Congress, February 6, 1998 (www.fas.org/man/crs/crs-asia2), 5. 49. “The Time 100,” New York (2000). 50. Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-first Century (New York, 2005), 128–39; Nelson Lichtenstein, “Why Working at Wal-Mart Is Different,” Connecticut Law Review, 39 (2007): 1649–84; “How Wal-Mart Fights Unions,” Minnesota Law Review, 92 (2008): 1462–1501. 51.

Friedman, The World Is Flat: A Brief History of the Twenty-first Century (New York, 2005); Jeffrey A. Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century (New York, 2006 [paperback ed., 2007]), 293ff; Robert W. Crandall and Kenneth Ramm, eds., Changing the Rules: Technological Change, International Competition, and Regulation in Communications (Washington, 1989), 10. 17. New York Times, November 17, 2008. 18. Dick K. Nanto, “The 1997–98 Asian Financial Crisis,” CRS Report for Congress, February 6, 1998 (www.fas.org/man/crs/crs-asia2): 5. 19. Claire Berlinski, “What the Free Market Needs,” Los Angeles Times, October 21, 2008. 20. “Modern Market Thought Has Devalued a Deadly Sin,” New York Times, September 27, 2008; Steven Greenhouse and David Leonhardt, “Real Wages Fail to Match a Rise in Productivity,” New York Times, August 28, 2006. 21.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

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affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

A remarkable thing happens to money when it passes through Mr. Soros; it emerges multiplied, but otherwise unchanged. With other inputs the results are more disappointing—to be blunt, more in line with biology. Mr. Soros gorged on chopped philosophy, mashed economics, and facts and figures swimming in grease. It was too much. Before he knew what was happening out rushed this book.26 During the Asian financial crisis of 1997/8, Mahathir Mohammed, prime minister of Malaysia, also a less benign view of Soros: “All these countries [in East Asia] have spent 40 years trying to build up their economies and a moron like Soros comes along with a lot of money to speculate and ruin things.”27 The Prime Minister made no mention of his own Pharaonic projects funded by borrowings from foreigners. Slovenian philosopher Slavoj Žižek captured the essence of Soros: “Half the day he engages in the most ruthless financial exploitations, ruining the lives of hundreds of thousands, even millions.

On their only day off, the women meet to picnic on pieces of cardboard, read books, and write letters to the families they left behind. Poorly paid, often abused, they work long hours to support extended families back in the Philippines. In the hustle and bustle of Hong Kong’s financial center, they are the only people who smile and laugh. Among them, there is a rare sense of community. Talking about the human effects of the crisis, a friend tells me a story about Indonesia during the Asian financial crisis more than a decade ago. Fluent in Bahasa Indonesia, he overheard a conversation one night outside the hotel where he was staying. A mother and her two daughters were discussing who would sell herself that night to feed the family. The crisis has led to cutbacks in the number of Filipino maids in Hong Kong. They face competition from women from mainland China. On the street, an older woman comforts her younger companion.

“The Turner Review: A regulatory response to the global banking crisis” (March 2009), Financial Services Authority: 49. 7. Alan Greenspan “Banking in the global marketplace” (18 November 1996), Speech to Federation of Bankers Association of Japan, Tokyo. 8. Greenspan, The Age of Turbulence: 360. 9. Alan Greenspan “Do efficient financial markets mitigate financial crises?” (19 October 1999), Financial Markets Conference of the Federal Reserve Bank of Atlanta. 10. Robert Wade “The Asian financial crisis and the global economy” (November 1998) (www.wright.edu); Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 141. 11. Yves Smith “Covert nationalization of the banking system” (3 August 2008) (www.nakedcapitalism.com). 12. Martin Wolf “Why banking is an accident waiting to happen” (27 November 2007) Financial Times. 13. Roger Lowenstein (2000) When Genius Failed: The Rise and Fall of Long Term Capital Management, Fourth Estate, London: 230. 14.


pages: 543 words: 157,991

All the Devils Are Here by Bethany McLean

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Asian financial crisis, asset-backed security, bank run, Black-Scholes formula, break the buck, call centre, collateralized debt obligation, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Exxon Valdez, fear of failure, financial innovation, fixed income, high net worth, Home mortgage interest deduction, interest rate swap, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, market fundamentalism, Maui Hawaii, money market fund, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, shareholder value, short selling, South Sea Bubble, statistical model, telemarketer, too big to fail, value at risk, zero-sum game

Morgan that lured AIG into the credit default swap business. The bank’s initial 1994 swap deal—the one that insured against an Exxon default—had gone off without a hitch. Since then, J.P. Morgan had done a handful of similar deals, while at the same time using credit default swaps internally to better evaluate its loan portfolio. In 1997, after the bank lost millions in bad loans during the Asian financial crisis, the credit derivatives team was put in charge of the bank’s commercial lending department, much to the horror of the old-time commercial lenders. They began using swaps to perform risk analysis on the loan portfolio. Credit default swaps were truly becoming central to the way the bank did business. As for the regulators, once they began to understand what credit default swaps did, they warmed up to them.

Born, for her part, said that CFTC was a long way from trying to regulate derivatives; all it was trying to do was ask some useful questions and glean some useful answers. “Greenspan thought even asking the questions was dangerous,” recalls Born. And where was Rubin? Given his history of concerns about derivatives, you might have expected him to be Born’s one ally in the room. During the Asian financial crisis, Rubin had asked one of his aides to find out how much derivatives exposure U.S. financial institutions had to South Korea. “We couldn’t find out,” this aide recalled. Rubin was stunned. But in this meeting, Rubin sided, without hesitation, with his fellow regulators. His reaction to Born’s arguments was almost visceral—a far cry from the man who was so admired for his ability to listen and ask questions.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

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Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, British Empire, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, Long Term Capital Management, margin call, market bubble, McMansion, Menlo Park, money market fund, mortgage debt, Myron Scholes, new economy, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, rolodex, Ronald Reagan, Sand Hill Road, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

.: Princeton University Press, 2001): Thomas Laubach and Adam S. Posen. 34 Kevin Warsh, “Hedge Funds and Systemic Risk: Perspectives on the President’s Working Group on Financial Markets,” Hearing of the House Financial Services Committee, July 11, 2007. 35 Ibid. 36 Randall S. Kroszner, “Analyzing and Assessing Banking Crises,” speech at the Federal Reserve Bank of San Francisco Conference on the Asian Financial Crisis Revisited, San Francisco (via videoconference), September 6, 2007. 37The Fed followed with a surprising announcement. It would “continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets.” This was an extraordinary change on the part of the Fed. Elsewhere in Washington, Secretary of the Treasury Hank Paulson told Fortune in July 2007: “This is far and away the strongest global economy I’ve seen in my business lifetime.”39 In August 2007, Paulson said that the subprime mortgage fallout remained “largely contained.”40 (By February 2008, Paulson admitted: “In terms of subprime and the resets, the worst isn’t over, the worst is just beginning.

Shaw & Company, 323 DeConcini, Dennis, 85 Deflation, 287–288, 359 de la Renta, Françoise, 75 de la Renta, Oscar, 75 Dell Computer Corporation, 130, 207, 216 Depression, deflation and, 285–286 Deregulation of banking, 99–100, 102 Derivatives, 111, 190 in 2007, 303 Congressional hearings on, 131 credit default swaps, 314 and fed funds rate, 130 Greenspan’s understanding of, 189–190, 343 held by commercial banks, 312 in late 1990s, 164–165 and LTCM failure, 183 mortgage securities, 273 and recession of early 1990s, 124–125 risk of, 131 synthetic CDOs, 313 Deutsche Bank, 300, 345 Dillon, Douglas, 26, 77 Dingell, John, 115 Discount rate, 1987 stock market crash and, 112–113 DJIA (see Dow Jones Industrial Average) Dollar(s): in 1980s, 72 and Asian financial crisis, 172–173 and gold standard, 22, 38, 41 and positive inflation, 288 recycled into Treasury securities, 309 shorting, 316–317 value of, 1–2, 5 as world’s reserve currency, 49 Dow 36,000 (James K. Glassman and Kevin A. Hassett), 198 Dow Jones Industrial Average (DJIA), 19, 29, 72 and 1987 stock market crash, 110–112 in 1999, 198 in 2000, 219 in 2009, 257 in mid–1970s, 43 Drexel Burnham, 80, 116, 117 Drexel Burnham Lambert, 117 Dunbar, Nicholas, 186 E Earnings growth: analysts’ predictions of, 199–200 stock prices vs., 175, 177–178, 194, 216 Eccles, Marriner, 20 Eckstein, Otto, 42, 60 Econometrics, 17, 40 Economic forecasts (in general), 10, 43 in 1995, 133 by Greenspan, 3, 6, 13, 16–17, 25, 43, 54–55, 97–98, 119 (See also Stock market analysts) Economic growth: and recovery from 1990s recession, 127 and types of inflation, 166 Economic power, struggle for, 364 Economic stimulation, through monetary policy, 121 Economics, 11–12, 96 “New Economics,” 26–27, 39, 121, 350 supply-side, 68–69 Economist, 195, 286, 299 Education, verbal inflation in, 63–64 Efficient market hypothesis, 26, 81, 81n.37, 112, 187, 318 Ely, Bert, 138 Employment Act (1946), 23 Enron Corporation, 183, 247–248, 284 Ertergun, Mica, 75 Ertegun, Ahmet, 75 E*TRADE, 212 Eveillard, Jean-Marie, 140 Excite@Home, 232 Exxon, 112 F Faber, Marc, 38–39 Fannie Mae Corporation, 266–272, 275, 279, 309, 310 Fatbrain.com, 174 FDIC (Federal Deposit and Insurance Commission), 78–79, 294 Fed funds rate, 368 and 1987 stock market crash, 113 in 1993, 162 in 1994, 128–130 in 1995, 136–137, 139–141, 160, 162 in 1996, 160 in 1997, 161, 162 in 1998, 187–189, 192 in 1999, 208 in 2000, 225 in 2001, 238, 239, 245, 246, 249, 258, 259 in 2002, 258–260 in 2003, 287 in 2004, 293 in 2007 and 2008, 338 and global crisis, 338 over the past two decades, 359 and recession of early 1990s, 122, 123, 125 Federal budget deficit, 77, 84, 113, 126 Federal Deposit and Insurance Commission (FDIC), 78–79, 294 Federal Home Loan Bank (FHLB), 86–87, 91 Federal Housing Authority (FHA), 272–273 Federal (Reserve) Open Market Committee (FOMC), 40, 344 and 1990s stock market bubble, 161–162, 170–172, 174–178, 192–194, 196, 200, 205–206, 212, 225, 285 1995 decisions of, 136–143 and 1998 rate cuts, 187–189 and 2000–2001 economic slowdown, 231–234, 238–245, 249 composition of, 367 and consumer debt‘, 251–257 Greenspan’s control of, 137 and LTCM failure, 184–186 and margin requirements, 220 and productivity claims, 157–160 rate changes by, 368 and recession of early 1990s, 122, 123, 128–130 and subprime market of 1990s, 166 Y2K discussions in, 210–211 Federal Reserve Act (1913), 367 Federal Reserve Board: and 1987 stock market crash, 112 Burns as chairman of, 13, 40, 66n.25 chairmen of, 362 and changes in CPI, 50 diminished influence of, 104 dissolution of, 359 Eccles, as chairman of, 20 economic growth mandate for, 23–24 and “the Great Impoverishment,” 358–359 Greenspan as chairman of, 104–107 Greenspan’s control of, 137–139 Greenspan’s early views of, 14, 28, 66n.25 Greenspan’s nomination hearing for, 95–102 and inflation of 1970s, 48–49 and inflation of late 1960s, 39–40 interest rates set by, 66 (See also Fed funds rate) and margin requirements (stock market), 104, 105, 161, 175, 219–220, 223, 286 Martin, as chairman of, 20, 40 McCabe, as chairman of, 20n.5 Miller, as chairman of, 66n.25 at mid-century, 20–22 and monetary base, 134, 216, 248 and money supply, 4, 351, 352, 362 Patman’s threats against, 65 power and prestige of, 115–116 and recession of early 1990s, 122–126, 128–132 Volcker as chairman of, 66, 82, 95 and Wall street collapse of 2008, 345 Federal Reserve System, 224, 367–368 Feldstein, Martin, 239 FHA (Federal Housing Authority), 272–273 FHA mortgages, 273, 277 FHLB (see Federal Home Loan Bank) Fidelity Investments, 130 15 Central Park West, 356–357 Financial activities: in the 1980s, 71–72 and commercial bank bailouts, 78–79 during conglomerate years, 33–36 innovation in, 124 junk bonds, 80–81 leveraged buyouts, 80 profits from, 3 Financial concentration, in banking industry, 100–101 Financial derivatives, description of, 109–112, 130–131, 276, 313–314 Financial institutions, Fed bailouts of, 115 The Financial Services Modernization Act (see GrammLeach-Bliley Act (1999)) Financial system: in the 1980s, 7 1994 deleveraging of, 128–129 1995 inflation of, 136–137 Proxmire’s fears for, 6 Financial Times, 192, 217, 242, 244, 313, 322, 328, 332, 345, 347 First Alliance Corporation, 274 Fixed-rate mortgages, 292 Fleet Financial, 130 FLEX-ARM mortgages, 289 FOMC (see Federal (Reserve) Open Market Committee) Forbes, Malcolm, 74 Ford, Gerald, 5, 47, 52–54, 69, 70 Ford Motor Company, 51, 246 Foreign buying: dollar supported by, 308–310 of mortgagebacked securities, 272 Fortune magazine, 3, 4, 13, 23, 24, 29, 34, 37, 51, 144, 191, 334, 349, 351 Frank, Barney, 268 Freddie Mac Corporation, 266–269, 272, 279, 309, 310, 347n.48 Freemarket economics, 15 Friedman, Milton, 21, 37, 42, 68, 288–289, 299, 354 Fritts, Steve, 294 FTSE (Financial Times Stock Exchange), 246 Fuld, Richard “Dick,” 274, 354 Futures Industry Association, 189–190 G Galbraith, James K., 327 Galbraith, John Kenneth, 66n.25, 361 Garment, Leonard, 31–32 Gates Commission, 36, 37 GDP (see Gross domestic product) Geithner, Timothy, 79, 277, 361 General Electric Corporation, 183, 364–365, 306 General Motors Corporation, 51, 112, 123, 127, 246 General Motors Acceptance Corporation, 306 GeoCities, 174 George Washington High School, 10 German central bank (Bundesbank), 49, 308–309, 351 Getz, Stan, 10 Glassman, James K., 198, 207, 243, 284–285 Glass-Steagall Act (1933), 101, 102, 275–276 Glenn, John, 85 Global Crossing, 248 “Global savings glut,” 310 TheGlobe.com, 191–192 Goebbels, Joseph, 218n.11 “Gold and Economic Freedom” (Alan Greenspan), 28–29, 45–46, 47, 115, 205, 286, 352, 362 Gold prices, 41, 66 Gold standard, 1, 5, 21–22, 27, 28–29, 38, 41, 47, 62, 115, 124, 305–306, 362–363, “gold exchange standard” (see also Bretton Woods), 22, 38, 41, 47, 49, 305–306, 362n.5 Goldberger, Paul, 357 Goldman Sachs, ix, 96, 174, 232, 272, 276, 283, 310, 321, 322, 347n.48, 354, 356 Gone with the Wind (Margaret Mitchell), 315 González, Henry, 115 Gordon, Robert J., 230 Gore, Al, 323 Government agency securities, 309–310 Gramlich, Edward “‘Ned,” 178, 188, 259–260 Gramm, Phil, 163, 217, 245, 322 GrammLeach-Bliley Act (1999), 275–277 Grant, Cary, 47, 57 Grant, James, 118, 125, 195, 314 Gray, Edwin, 91–93 Great Depression: Greenspan’s analysis of, 28–29, 205 and money supply, 352 “The Great Impoverishment,” 358–359 Greenspan, Alan: and 1987 stock market crash, 103–104, 112–114 and 1990s stock market bubble, 160–164, 170–178, 191–210, 219–225, 285–287 and 1990s subprime market, 164–166 and 1995 funds rate cuts, 139–141 and 1998 rate cuts, 187–189 and 2000–2001 economic slowdown, 224–225, 237–249 2007–2008 speaking tour of, 341–344 and analysts, consistent-bias theorem, 197, 199, 201 and analysts, upward bias of forecasts, 202, 203, 209, 232, 284 and (Wall Street) analysts, 29, 175, 177–178, 193, 194, 195, 196, 198, 199, 200, 201 n.35, 203, 204, 209, 218, 231n.16, 232, 233, 235, 239, 243, 244, 284 and asset inflation (vis-à-vis price inflation), 4, 16, 25, 28, 65, 106, 170, 171, 175, 176–177 awarded, American Hero of 2007, 329 awarded, Department of Defense Medal for Distinguished Public Service, 297 awarded, Enron Prize for Distinguished Service, 248, 284, 297 awarded, Knight Commander of the British Empire, 297 awarded, Order national de la Legion d’honneur, 297 awarded, Presidential Medal of Freedom 297 after retirement, 301–304 Americans’ feelings about, 104, 144, 164, 195, 203, 245, 243, 337–338 on asset inflation, 359 autobiography of, 154, 187, 303, 337–341, and bubbles, states he (and Federal Reserve) has and can pop bubbles, 128–129, 139–140, 161 and bubbles, states Federal Reserve cannot pop bubbles, 192–195, 203–205, 225, 228, 261, 285–286 on bubbles, 192, 203–204, 285, 349–350 campaign for Fed chairmanship, 82–83 debt, refers to as “wealth,” 2, 99, 107, 258, 260, 290 during Carter presidency, 60–67 character and personality of, 3, 14, 15, 27, 193, 211–213 and consumer debt, 254, 258, 261 and corporate management earnings bias, 235 control of FOMC/Federal Reserve by, 137–139 on Council of Economic Advisers, 5, 47, 50, 52–57 on credit default swaps, 315–316 and derivatives, 102–105, 110, 113, 128, 130–131, 182, 189–190, 206, 276, 312, 314, 343, 346 dissolution of Townsend Greenspan, 102 early life of, 2, 9–10 economic forecasts by, 3, 6, 13, 16–17, 25, 43, 54–55, 97–98, 119 education of, 3, 10–13, 59–60 and presidential election of 1980, 67–70 as Fed chairman, 6–7, 104–107 Fed nomination hearing for, 95–102 and financial institution bailouts, 115 “Gold and Economic Freedom,” 28–29, 205, 286, 352, (see additional pages under “Gold and Economic Freedom”) on gold standard, 362–363 and housing market, 254, 259–263 image presented by, 2, 52–53, 60, 61 infamous speeches of, 284–286, 289–299 on inflation, 4, 5, 45–46, 48 on investment, 350–352 legacy of, 365 and Lincoln Savings and Loan, 6–7, 85–93 on liquidity boom, 331 and LTCM failure, 181–187, 189 marriages of, 13, 57 and Mexico bailout, 135–136 Greenspan, Alan: (Cont.)


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Planet Ponzi by Mitch Feierstein

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Bernie Madoff, break the buck, centre right, collapse of Lehman Brothers, collateralized debt obligation, commoditize, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, disintermediation, diversification, Donald Trump, energy security, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, high net worth, High speed trading, illegal immigration, income inequality, interest rate swap, invention of agriculture, light touch regulation, Long Term Capital Management, mega-rich, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, obamacare, offshore financial centre, oil shock, pensions crisis, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, purchasing power parity, quantitative easing, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, too big to fail, trickle-down economics, value at risk, yield curve

It’s a shame the Fed doesn’t possess more Richard Fishers. Since the departure of Paul Volcker in 1987, the Federal Reserve has the unwelcome record of having gotten every single major decision wrong. Every time there has been a hint of a crisis, the Fed has acted like some senior court advisor to the Emperor of Planet Ponzi. The 1987 stock market crash, my liege? I’ll pump in liquidity. Asian financial crisis, sire? I’ll flood the place with dollars. A major hedge fund, LTCM, has gone bust, your majesty? I’ll organize a bailout. Dotcom bubble? Let’s watch it inflate. Even the September 11 terrorist attacks‌—‌surely a matter for the US security apparatus rather than its monetary authority‌—‌were taken as an excuse for monetary loosening. Little wonder that inflation has been racing away. Little wonder that the Washington establishment has been ever more anxious to manipulate the data.

The poster-child for irresponsible risk-taking was Long-Term Capital Management, which failed in 1998 under a senior management too impressed by its own academic excellence. Unfortunately, the real world is no respecter of academic reputations. The firm took on too much debt and bet the proceeds with too little thought for what might happen if things didn’t turn out as expected. When the Asian financial crisis was followed by a Russian one, LTCM found that its ‘safe’ bets had turned sour on a colossal scale. Given the scale of leverage at the firm‌—‌its capital represented just 3% of assets‌—‌there was no return from that misjudgment. A bailout, organized by the New York Fed, saw the firm’s creditors take control. The $1.9 billion which the firm’s principals had invested in it was wiped out.6 The story contains another moral.


pages: 475 words: 155,554

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge by Faisal Islam

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Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, British Empire, capital controls, carbon footprint, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, crony capitalism, dark matter, deindustrialization, Deng Xiaoping, disintermediation, energy security, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, financial repression, floating exchange rates, forensic accounting, forward guidance, full employment, G4S, ghettoisation, global rebalancing, global reserve currency, hiring and firing, inflation targeting, Irish property bubble, Just-in-time delivery, labour market flexibility, light touch regulation, London Whale, Long Term Capital Management, margin call, market clearing, megacity, Mikhail Gorbachev, mini-job, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, Pearl River Delta, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, Right to Buy, rising living standards, Ronald Reagan, savings glut, shareholder value, sovereign wealth fund, The Chicago School, the payments system, too big to fail, trade route, transaction costs, two tier labour market, unorthodox policies, uranium enrichment, urban planning, value at risk, working-age population, zero-sum game

For America, China is manipulating its currency artificially to prolong its export boom. The size of China’s foreign currency reserves, at one point half of China’s GDP, far outweighs its needs. For China, the reserves are a consequence of the efforts of its people, a sensible insurance policy against the speculative attacks made against the currencies of neighbouring countries during the East Asian financial crisis of 1997. China vowed that the agony, indignity and loss of sovereignty inflicted on its near neighbours then would not occur to it. China does not have a happy historic memory of how its large trade surpluses have been dealt with by more powerful nations. For centuries, China was not really interested in the goods the West was trying to sell it, as attested by a letter written in the late eighteenth century to George III by the Emperor Qianlong: ‘We possess all things and of the highest quality… I set no value on the strange and useless objects and have no use of your country’s manufactures.’

For anyone looking through an economic lens, however, Gangnam Style was far more interesting, an ironic critique of the absurdities of the crass consumerism that has emerged across South Korea over the past decade. In the 1980s and 1990s, South Korea had its own export-led manufacturing boom. A key feature of this was the thriftiness of Korean households. For thirteen consecutive years, Korean households were the number one savers in the rich man’s club of world nations, the OECD. Koreans saved around 25 per cent of their income. After the Asian financial crisis of the late 1990s, however, household saving collapsed, dropping as low as 0.4 per cent in 2002, and staying below 3 per cent in recent years. It was a spectacular fall to the bottom of that OECD savers’ league table. South Korea’s reputation for household thrift evaporated in an orgy of housing speculation, child tuition fees and credit-fuelled purchases of expensive Western brands. If the same happened in China – which could come about if the government allowed the renminbi to increase in value – China’s exporters could reorientate towards their massive domestic market.


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

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Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business process, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, Commodity Super-Cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, invisible hand, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, market microstructure, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, purchasing power parity, quantitative easing, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, survivorship bias, The Great Moderation, Thomas Bayes, time value of money, too big to fail, transaction costs, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Even if we are wrong on our underlying premises, we usually break even because we have entered at optimum pricing. And if the underlying hypotheses do not materialize, we get out, even if the trade is making money. Making money for the wrong reasons means you are rolling the dice, not trading. We are not here to gamble. Trades have to be making money for the reasons that we have identified and have the proper risk versus reward. The Asian financial crisis theme in 1998-1999 is a good example. The underlying premise was that a lack of transparency would stop the flow of funds into Asia, and we shorted the Hang Seng. The trade started working in our favor, but funds did not stop flowing into Asia, even though transparency did not increase, so we got out of the trade. With such a high hurdle for trades to get into your portfolio, do you sometimes find that you have a shortage of trades in the book?

There are a myriad of ways to express themes. We are very good at looking out at the periphery for trade ideas, not getting stuck at the center of a view or theme. You mentioned you have a one-year time horizon for trades. How far ahead do you look in developing your themes? Time horizons on themes vary considerably, from maybe six months to five years. We look at trends. For example, the Asian financial crisis theme lasted about six months, whereas the theme around commodity inelasticity of demand and supply has been on since inception. But the trades within a theme are all structured around a one-year investment horizon, both economically and technically. We look at valuations and targets based on one-year economic values, and our technical price model is also based on a one-year horizon. We might have two-, three-, five-year economic targets, but trades are one year.

The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly

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airport security, anti-communist, Asian financial crisis, bank run, banking crisis, Bob Geldof, Bretton Woods, British Empire, call centre, clean water, colonial exploitation, colonial rule, Edward Glaeser, end world poverty, European colonialism, failed state, farmers can use mobile phones to check market prices, George Akerlof, Gunnar Myrdal, Hernando de Soto, income inequality, income per capita, Indoor air pollution, invisible hand, Kenneth Rogoff, laissez-faire capitalism, land reform, land tenure, Live Aid, microcredit, moral hazard, Naomi Klein, publication bias, purchasing power parity, randomized controlled trial, Ronald Reagan, Scramble for Africa, structural adjustment programs, The Fortune at the Bottom of the Pyramid, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, War on Poverty, Xiaogang Anhui farmers

If your ne’er-do-well cousin asks for a loan, you may decide to give it only on condition that he change his behavior in a way that makes it likely that he will pay back the loan—that he stop drinking, that he get a job, etc. The IMF has had some notable successes. It helped South Korea and Thailand with financial squeezes in the 1980s, after which they had rapid growth. The IMF bailout of Mexico in 1994–1995, although much criticized at the time, worked well. The Mexican government repaid the loans in advance, and economic growth resumed. Most recently, the IMF handled the 1997–1998 East Asian financial crisis with some success, especially, again, in South Korea. The IMF recruits talented Ph.D.’s in economics, who observe strong norms of professional analysis. It has an outstanding research department, as well as other specialized departments that provide valuable technical advice to poor countries on their fiscal and financial systems. The IMF has been a good source of economic advice to countries on the wisdom of government solvency and the folly of excessive government debt and deficits.

Post-program inflation under the IMF was higher than the program targets on average in the 1990s for a worldwide sample of countries.13 Conversely, what if people holding domestic currency suddenly panicked and wanted to turn it in for the central bank’s dollars? It’s not always clear why they panic, but it happens. International reserves would drop precipitously for reasons unrelated to government budget deficits. Many economists think that this is a good description of the East Asian financial crisis of 1997–1998. East Asian countries were not running large government deficits, yet they suffered currency panics and disappearing foreign exchange reserves all the same. Another loophole in the relationship between budget deficits and foreign exchange reserves is that the government finances its deficit not only with central bank credit but also with foreign debt. The willingness of foreign investors and banks to buy government bonds is another unknown.


pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

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Asian financial crisis, banking crisis, Bernie Sanders, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Silicon Valley, too big to fail, transaction costs

The result is that we export more and import less, thereby reducing the trade deficit and possibly even turning it into a surplus. In the first half of the Clinton administration, to some extent, this process played out as the textbook would dictate, but the tables turned when Robert Rubin became Treasury Secretary in January 1995. Rubin was openly committed to a strong dollar. When he first took office this may have just been words, but in 1997, during the East Asian financial crisis, he had the opportunity to put some serious muscle behind them. The United States used its de-facto control of the International Monetary Fund (IMF) to impose harsh conditions on the crisis countries. The IMF effectively acted as an enforcement agent for the banks that had made loans to the companies and countries in the region. To repay these loans, the countries had to run massive trade surpluses, which required a sharp decline in the value of their currencies against the dollar in order to make their exports hypercompetitive and to discourage imports.


pages: 225 words: 61,388

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

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affirmative action, Asian financial crisis, Bob Geldof, Bretton Woods, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial innovation, financial intermediation, Hernando de Soto, income inequality, information asymmetry, invisible hand, Live Aid, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Ponzi scheme, rent-seeking, Ronald Reagan, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

Finally, to my parents, Steven and Orlean Moyo, for their unwavering belief in me (and our continent Africa) every step of the way, even when there have been many reasons not to believe. Index Acleda (Cambodia) 132 Afghanistan 132 Africa: Geography and Growth (Collier) 30 African Growth and Opportunity Act 2000 (US) 118, 149 Alesina, Alberto 52 Amin, Idi 23, 108 Angola 105, 108, 120, 133 Annan, Kofi 101 Argentina 77, 82, 84, 86, 95–6 Asian financial crisis 1997 84, 87 Association of Southeast Asian Nations 124 Bachelet, Michelle 43 Banco do Brasil 134 Banco do Nordeste (Brazil) 132 Bangladesh 126 Bauer, Peter Thomas 58, 67 Benguela railway 106 Benin 71–2, 94, 116 Beyond Aid (World Bank) 134 Biafra 26, 32 Black and Minority Ethnic Remittance Survey, The 133 Black Economic Empowerment regulations (SA) 111 Blue Orchard Finance 131 Blumenthal, Irwin 53 Bokassa, Jean-Bédel 23, 108 Bongo, President Omar 6 Bono 27 Boone, Peter 46, 66 Botswana abandoning foreign aid 144 and bond issues 89 and HIV–AIDS 71 IDA graduate success story 38, 40 market-oriented incentives 34 tribal groupings 32 wise use of aid 76, 78, 150 Bottom Billion, The (Collier) 67–8 BRAC (Bangladesh) 132 Brazil 77, 82, 84, 86, 93, 117, 132, 151 Bretton Woods conference 10–11, 13, 19 British Colonial Development and Welfare Act 1940 (UK) 10 Broadman, Harry G. 123 Burkina Faso 106, 116, 120, 145 Burnside, C. 40 Burundi 145 Bush, President George W. 27, 55, 75 Calvinism 31 Cambodia 132 Cameroon 100, 125 Central African Republic/Empire 23, 108 Cerqueira, José 108–9 Chad 116 Chicago School of Economics 20 Chile 42–3 Chiluba, President Frederick 53 China 24, 34, 56, 98–9, 103–12, 117–23, 145–7, 152 China–Africa Cooperation Forum 103, 106, 120 Citizens Economic Empowerment Commission (Zambia) 111 Clay, Sir Edward 48 Clemens, Michael A. 46 CNOOC (Chinese energy company) 105 Cold War 14, 23–4 Collier, Paul 30, 32–3, 60, 67–8 Colonial Development Act 1929 (US) 10 Commission for Africa 101 Common Agricultural Policy (CAP) 115 ‘conditional cash transfers’ 150–51 conditionalities of aid 38–9, 52 conflicts 59–60 Congo, Democratic Republic of 16, 48, 53, 71–2, 106, 108 Congo-Brazzaville 87, 106 Congo-Kinshasa see Congo, Democratic Republic of corruption 22–3, 35, 39, 48–50, 50–59 Corruption Perceptions Index (CPI) 51, 56 cotton production 116 CRISIL (ratings, risk, and research firm) 91 Darfur 108 Davies, Omar 136 de Soto, Hernando 137 Dead Aid proposals 75–6, 143–8, 150 debt capital markets 153 democracy 23–4, 39, 41–3 Denmark 73, 125 developing countries 18, 25, 29, 40, 52, 63, 72–4, 77, 85–6 Dexia Micro-Credit Fund 131 Diamond, Jared 29 Diamond, Larry 53–4 diaspora bonds 134, 153 Djankov, Simeon 101 ‘Do Corrupt Governments Receive Less Foreign Aid?’


pages: 222 words: 75,561

The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It by Paul Collier

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air freight, Asian financial crisis, Bob Geldof, British Empire, Doha Development Round, failed state, falling living standards, income inequality, mass immigration, out of africa, rent-seeking, Ronald Reagan, structural adjustment programs, trade liberalization, zero-sum game

Bangladesh is an example of a very gradual turnaround: there is no dramatic “event” worthy of particular notice, but over a quarter century policies and some institutions improved from abysmal to adequate (though governance did not, as you will recall). However, a large improvement is not enough; it must be sustained. We decided to define “sustained” as being at least five years. Had we chosen a very long period of sustained improvement, we would have excluded situations such as in Indonesia. The improvement in Indonesia began in 1967 and was broadly sustained until the collapse associated with the Asian financial crisis of 1998. It seemed to us unreasonable to attribute that collapse to failures in the original reforms. Having established what we meant by a turnaround in a failing state, we were at last ready to investigate what generated them. We first investigated the preconditions for a turnaround and then tried to find out what determined whether a turnaround, once it had started, progressed to a decisive escape from being a failing state.


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

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Asian financial crisis, big-box store, business climate, carbon footprint, cleantech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, ride hailing / ride sharing, Robert Shiller, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Zipcar

Global surpluses of labor, including vast numbers of former rural peasants in China, combined with the market power of chains such as Wal-Mart, have led to relentless downward pressure on apparel workers’ wages. Other contributors to low prices include artificially inexpensive global shipping, technological innovation in inventory control, and fierce competition among suppliers. In the late 1990s, the Asian financial crisis accelerated the downward price trend as exporting economies endured a severe contraction that further eroded wages. The cost of a dress, a pair of pants, or a coat declined sharply. The consumer price index for apparel, which stood at 127 in 1991, fell to a low of 117.9 in 2006. For twenty years, consumers have ratcheted up their purchases of apparel. Consider the category of outer- and underwear (which excludes socks and hosiery, but includes all other apparel, such as pajamas, swimsuits, and so on).

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity by Bernard Lietaer, Jacqui Dunne

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3D printing, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business process, butterfly effect, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, discounted cash flows, en.wikipedia.org, Fall of the Berlin Wall, fear of failure, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, happiness index / gross national happiness, job satisfaction, liberation theology, Marshall McLuhan, microcredit, mobile money, money: store of value / unit of account / medium of exchange, more computing power than Apollo, new economy, Occupy movement, price stability, reserve currency, Silicon Valley, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

Rui Izumi, associate professor at the School of Economics, Senshu University, in Tokyo, personal correspondence with Jacqui Dunne: “Major factors that have contributed to the growth of local currencies: First, and perhaps surprisingly, was a program on national television in the late 1990s called Michael Ende’s Last Message. This broadcast profiled complementary systems from the 1930s in Europe up [to] today’s WIR, LETS, and other popular systems. It touched a collective nerve. At that time, Japan was in deflationary depression after the East-Asian financial crisis happened in 1997 and a bubble economic collapse in 1991, and these caused many Japanese people to wonder about speculation and money. Second, Toshiharu Kato, a bureaucrat at Department of Trade and Industry, created the term ‘Eco-money.’ Many people felt an affinity with the term rather than the phrase ‘community or complementary currency,’ and many books with the title containing the term ‘Eco-money’ were published.” 13.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

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Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, Bob Geldof, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, commoditize, continuation of politics by other means, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, labour mobility, laissez-faire capitalism, Live Aid, Masdar, mass immigration, megacity, microcredit, mutually assured destruction, Naomi Klein, New Urbanism, off grid, offshore financial centre, oil shock, open economy, out of africa, Parag Khanna, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

All emergent sectors of the twenty-first-century manufacturing and services economy—clean technology, health care, education—require sensible public and private synergy to spur job creation and growth. Business and government can’t forever point to each other’s leaks. If the boat sinks, everyone is a victim. *With the inclusion of the European Union and eventually Russia, G-7 has actually been more a G-9; it is also referred to as the G-8. *The G-20 actually first convened in 1999 after the Asian financial crisis, but it did not gain momentum until 2008. The G-20 members are Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States. Part Two SAVING US FROM OURSELVES Chapter Four Peace Without War Diplomacy without power is like an orchestra without a score.


pages: 740 words: 217,139

The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, endogenous growth, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Right to Buy, Scramble for Africa, selective serotonin reuptake inhibitor (SSRI), spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus, zero-sum game

In 1954, following the Korean War, South Korea’s per capita GDP was lower than that of Nigeria, which was to win its independence from Britain in 1960. Over the following fifty years, Nigeria took in more than $300 billion in oil revenues, and yet its per capita income declined in the years between 1975 and 1995. In contrast, South Korea grew at rates ranging from 7 to 9 percent per year over this same period, to the point that it became the world’s twelfth-largest economy by the time of the Asian financial crisis in 1997. The reason for this difference in performance is almost entirely attributable to the far superior government that presided over South Korea compared to Nigeria. Between rule of law and growth In the academic literature, the rule of law is sometimes considered a component of governance and sometimes considered a separate dimension of development (as I am doing here). As noted in chapter 17, the key aspects of rule of law that are linked to growth are property rights and contract enforcement.

Following the delegitimization of the military government of General Chun Doo-Hwan after the Kwangju massacre in 1980, these new social groups began agitating for the military to step down from power. With some gentle nudging from its ally the United States, this happened in 1987, when the first democratic elections for president were announced (arrow 3). Both the country’s rapid economic growth and its transition to democracy helped strengthen the regime’s legitimacy, which in turn helped, among other things, to strengthen its ability to weather the severe Asian financial crisis of 1997–1998 (arrows 4 and 5). Finally, both economic growth and the advent of democracy helped to strengthen South Korea’s rule of law (arrows 6 and 7). In South Korea’s case, all of the different dimensions of development tended to fortify one another, as modernization theory suggested, though there was a definite sequencing of stages that delayed the onset of electoral democracy and rule of law until industrialization had occurred.


pages: 302 words: 86,614

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian

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activist fund / activist shareholder / activist investor, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Myron Scholes, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading, zero-sum game

But in credit you can express the same bullish view in so many ways because there are a variety of instruments to work with—companies generally issue dozens of bonds and loans with different maturity dates and in senior or junior parts of the capital structure. And that’s even before you get to the various types of credit derivatives.” And so this promising young man found himself at a moment of tremendous opportunity in an area that he loved, where there were essentially no veterans let alone experts. Interesting things began to happen. Just before Weinstein joined Deutsche, there was the 1997 Asian financial crisis, where Korean banks verged on collapse. Then Thailand couldn’t pay its debts. Then a few months later, Russia defaulted on its debt, indirectly leading to the collapse of the colossal hedge fund Long Term Capital Management, threatening American, European, and Japanese banks with catastrophe. Suddenly the availability of credit around the world was very limited. Having earlier bought credit derivatives on the cheap, Weinstein was able to monetize those positions as the crisis unfolded, rewarding Deutsche with significant profits.


pages: 369 words: 94,588

The Enigma of Capital: And the Crises of Capitalism by David Harvey

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accounting loophole / creative accounting, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, global reserve currency, Google Earth, Guggenheim Bilbao, Gunnar Myrdal, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, Pearl River Delta, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, sharing economy, Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, the built environment, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, too big to fail, trickle-down economics, urban renewal, urban sprawl, white flight, women in the workforce

This ‘unprecedented shift’ has reversed the long-standing drain of wealth from east, south-east and south Asia to Europe and North America that has been occurring since the eighteenth century – a drain that Adam Smith noted with regret in The Wealth of Nations. The rise of Japan in the 1960s, followed by South Korea, Taiwan, Singapore and Hong Kong in the 1970s, and then the rapid growth of China after 1980, later accompanied by industrialisation spurts in Indonesia, India, Vietnam, Thailand and Malaysia during the 1990s, has altered the centre of gravity of capitalist development, although it has not done so smoothly. The east and south-east Asian financial crisis of 1997–8 saw wealth flow briefly but strongly back towards Wall Street and the European and Japanese banks. If crises are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit-finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf States – suggests this may be the occasion for such a shift.


pages: 338 words: 106,936

The Physics of Wall Street: A Brief History of Predicting the Unpredictable by James Owen Weatherall

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Albert Einstein, algorithmic trading, Antoine Gombaud: Chevalier de Méré, Asian financial crisis, bank run, beat the dealer, Benoit Mandelbrot, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, Brownian motion, butterfly effect, capital asset pricing model, Carmen Reinhart, Claude Shannon: information theory, collateralized debt obligation, collective bargaining, dark matter, Edward Lorenz: Chaos theory, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, George Akerlof, Gerolamo Cardano, Henri Poincaré, invisible hand, Isaac Newton, iterative process, John Nash: game theory, Kenneth Rogoff, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, martingale, Myron Scholes, new economy, Paul Lévy, Paul Samuelson, prediction markets, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical arbitrage, statistical model, stochastic process, The Chicago School, The Myth of the Rational Market, tulip mania, V2 rocket, Vilfredo Pareto, volatility smile

New York: Hill and Wang. Poznanski, Renée. 2001. Jews in France During World War II, trans. Nathan Bracher. Hanover, NH: Brandeis University Press. Prigogine, I., and G. Nicolis. 1977. Self-Organization in Nonequilibrium Systems. New York: John Wiley and Sons. Pynchon, Thomas. 1973. Gravity’s Rainbow. New York: Viking Press. Radelet, Steven, and Jeffrey D. Sachs. 2000. “The Onset of the East Asian Financial Crisis.” In Currency Crises, ed. Paul Krugman, 105–62. Chicago: University of Chicago Press. Rajan, Raghuram G. 2010. Faultlines. Princeton, NJ: Princeton University Press. Reinhart, Carmen M., and Kenneth Rogoff. 2009. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press. Rhodes, Richard. 1995. The Making of the Atomic Bomb. New York: Simon & Schuster.


pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

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Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

Finance will have to be returned to its role as servant, not master, of the global economy, to dealing prudently with people’s savings and providing regular APPENDICES 169 capital for productive and sustainable investment. Regulation of finance, and the restoration of policy autonomy to democratic government, implies the reintroduction of capital controls. Governments need the freedom to use capital control as an active component of economic policy, to encourage certain types of capital flow and to discourage others. The Asian financial crisis of the late 1990s made it very clear that countries with capital controls were both insulated from the crisis and retained policy autonomy to pursue their national economic priorities. The current crisis drives the final nail in the coffin of the idea that countries should simply abandon all interference with international financial markets. The logic for doing so is that allowing completely open access would bring major economic benefits – there is no evidence at all that this is what has happened, but plenty of evidence that the opposite is true. 14 Make taxation work In the new period of public resources being enormously stretched by support given to the banks, it will be vital to minimize corporate tax evasion by clamping down on tax havens and corporate financial reporting.

Propaganda and the Public Mind by Noam Chomsky, David Barsamian

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Albert Einstein, Asian financial crisis, Bretton Woods, capital controls, deindustrialization, European colonialism, experimental subject, Howard Zinn, Hyman Minsky, interchangeable parts, labour market flexibility, labour mobility, liberation theology, Martin Wolf, one-state solution, Ralph Nader, RAND corporation, school vouchers, Silicon Valley, structural adjustment programs, Thomas L Friedman, Tobin tax, Washington Consensus

“Reforms” means liberalization and opening the country up to foreign investment, subordinating the country to the corporate-dominated globalization system. So naturally we’re in favor of that. India’s macroeconomic statistics are not bad, so there’s been growth and great praise for India, despite objections that it is moving too slowly. It didn’t liberalize finance, as South Korea did under U.S. pressure. This is part of the reason, it is widely assumed, that South Korea was hit so hard by the Asian financial crisis while India, like China, stayed more or less immune. There’s a fair amount of U.S. and other foreign investment coming in, a lot of buying up of the country. But there’s more to it, as usual. India, unlike the United States and like practically every other industrial country outside the U.S., keeps regular social statistics. The U.S. is maybe the only industrial country that doesn’t do this.


pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

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Asian financial crisis, capital controls, clean water, correlation does not imply causation, creative destruction, Deng Xiaoping, Edward Glaeser, Gini coefficient, half of the world's population has never made a phone call, Hernando de Soto, illegal immigration, income inequality, informal economy, Joseph Schumpeter, Kenneth Rogoff, land reform, Lao Tzu, liberal capitalism, manufacturing employment, market fundamentalism, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, open economy, profit motive, race to the bottom, rising living standards, school vouchers, Silicon Valley, Simon Kuznets, structural adjustment programs, The Wealth of Nations by Adam Smith, Tobin tax, trade liberalization, trade route, transaction costs, trickle-down economics, union organizing, zero-sum game

Sheila McNulty, ‘‘Investors Lose Faith in Malaysia’s Weak Reforms,’’ Financial Times, January 17, 2001. 5. Sebastian Edwards, ‘‘A Capital Idea? Reconsidering a Financial Quick Fix,’’ Foreign Affairs 78 (May/June 1999): 18–22. 6. John Micklethwait and Adrian Wooldridge, A Future Perfect (New York: Random House, 2000), p. 55. 7. Eichengreen and Mussa, p. 18. 8. Steven Radelet and Jeffrey Sachs, ‘‘What Have We Learned, So Far, From the Asian Financial Crisis,’’ CAER II Discussion Paper no. 37 (Cambridge, Mass.: Harvard Institute for International Development, 1999), http://www.hiid.harvard.edu/caer2/ htm/content/papers/paper37/paper37.htm; Tomas Larsson, ‘‘Asia’s Crisis of Corporatism,’’ in Va´ squez. 9. Yago and Goldman. 10. Klein, chap. 9; Elmbrant, p. 85f; World Bank World Development Report 2000/2001, p. 163. 11. Jagdish Bhagwati, ’’Why Free Capital Mobility May Be Hazardous to Your Health: Lessons from the Latest Financial Crisis, paper presented at the NBER conference on capital controls, Cambridge, Mass., November 7, 1998, http://www.columbia.edu/ jb38/papers/NBER_comments.pdf. 12.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, distributed ledger, Edward Snowden, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial exclusion, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

In financially liberalized advanced economies, the latter operation is normally the province of fiscal authorities, not a central bank acting in its narrow monetary policy capacity. Either by charter or by tradition, most advanced-country central banks are highly reluctant to get involved in operations that seem to favor particular markets. A dramatic and successful exception occurred during the Asian financial crisis of the late 1990s, when the Hong Kong Monetary Authority stunned the world by buying into its country’s stock market to fend off a currency attack. Back then, it was considered an unorthodox and highly successful maneuver. For advanced economies, this kind of intervention has been the exception, not the rule, at least before the 2008 crisis. That crisis changed everything. In the political paralysis that followed, central banks were forced to shoulder added burdens.

When the Money Runs Out: The End of Western Affluence by Stephen D. King

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Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, mass immigration, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

The ensuing collapse in the Indonesian economy simply ratcheted up the tension, with mob violence leading to brutal attacks on Chinese communities, some of which were seen as soft targets. Ultimately, though, the Indonesian people knew whom to blame. Suharto may have been re-­elected in March 1998 but everyone knew the outcome was rigged. Two months later he was gone, a victim of popular student-­led uprisings, economic meltdown and, ultimately, a nation’s refusal to accept ongoing political corruption. Suharto didn’t cause the Asian financial crisis but he was one of its most visible casualties. 197 4099.indd 197 29/03/13 2:23 PM When the Money Runs Out Malaysia: Mahathir Deflects Blame Mahathir Mohamad, Malaysia’s leader, adopted a rather different approach. He, too, had been in power for many years, first becoming Prime Minister in 1982. Yet he survived the Asian crisis. As with Indonesia, Malaysia had seen a fourfold increase in per capita incomes between the mid-­1960s and the mid-­1990s.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

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accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Markets worked in Indonesia because the state was able to control freelance corruption and thus limit the investment-deterring effects that corruption usually has. Given that corruption exists, it does less harm to markets if it is monopolized than if it is free for all. Indonesia’s system relied on the power of one man, and fell with him. Suharto resigned in 1998 after riots in which over a thousand people died. The end came partly because of the external shock of the 1997 Asian financial crisis, which was beyond the ability of Indonesia’s stunted political, legal, and regulatory institutions to cushion, and partly because of the people’s disgust at the Suharto government’s cronyism. Demonstrating students chanted “KKN,” for korupsi, kolusi, nepotisme. In the students’ opinion, corruption, collusion, and nepotism were the causes of the crisis. The economy plummeted, contracting in 1997–1998 by more than 16 percent.

Rogue States by Noam Chomsky

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anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, capital controls, collective bargaining, colonial rule, creative destruction, cuban missile crisis, declining real wages, deskilling, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, labour market flexibility, labour mobility, land reform, liberation theology, Mikhail Gorbachev, Monroe Doctrine, new economy, oil shock, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

Mexico was hailed as a free market triumph and a model for others until its economy collapsed in December 1994, with tragic consequences for most Mexicans, even beyond what they had suffered during the “triumph.” The cheers now resound once again, while wages have fallen more than 25 percent since 1994 (the first year of NAFTA), after a very severe decline from the early 1980s, when the liberal reforms were initiated; real minimum wages dropped more than 80 percent from 1981 to 1998.12 Just as the Asian financial crisis erupted, the World Bank and IMF published studies praising the “sound macroeconomic policies” and “enviable fiscal record” of Thailand and South Korea, singling out the “particularly intense” progress of “the most dynamic emerging [capital] markets,” namely “Korea, Malaysia, and Thailand, with Indonesia and the Philippines not far behind.” These models of free market success under IMF-World Bank guidance “stand out for the depth and liquidity” they have achieved, and other virtues.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional, zero-sum game

For an even better example of just how profound the changes associated with the rise of the rest will be, reread the coverage of the November 2008 G-20 summit in Washington, D.C., which took place during the tensest days of the global financial crisis. Every prior crisis had been handled by the IMF, the World Bank, or the G-7 (and, later, the G-8). In past crises, the West played the part of the stern schoolteacher rebuking a wayward classroom. The lessons the teachers imparted now seem discredited. Recall that during the Asian financial crisis the United States and other Western countries demanded that the Asians take three steps—let bad banks fail, keep spending under control, and keep interest rates high. In its own crisis, the West did exactly the opposite on all three fronts. Economics is not a zero-sum game—the rise of other players expands the pie, which is good for all—but geopolitics is a struggle for influence and control.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Political scientist Francis Fukuyama, in his 1992 book The End of History and the Last Man, made the case for the triumph of Western liberal democracy and market systems as the end point of ideological evolution. In reality, though, the period was punctuated by a series of rolling bubbles and crises: the 1987 stock market crash, the 1990 collapse of the junk bond market, the 1994 great bond market massacre, the 1994 Tequila economic crisis in Mexico, the 1997 Asian financial crisis, the 1998 collapse of the hedge fund Long-Term Capital Management, the 1998 default of Russia, and the 2000 dot-com crash. These one-in-ten-thousand-years events seemed to occur every year or so. In 1989, Japan, considered an economic poster child, fell into a prolonged recession following the collapse of a credit-fueled real estate and stock boom. Apologists for the new economic model argued that the experience of Japan confirmed the superiority of the more flexible, competitive, and dynamic market models of the US, and others like them, for delivering growth.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Plutocrats, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, Thomas Malthus, Thorstein Veblen, too big to fail, Uber and Lyft, Uber for X, Y Combinator, zero-sum game, Zipcar

The titans of finance became ‘masters of the universe’, in Tom Wolfe’s famous phrase in The Bonfire of the Vanities, his 1987 novel satirising Wall Street, as they mingled with heads of state and spent time in senior government posts before returning to make yet more money from speculation. The rise of finance was accompanied by more frequent and widespread financial crises, from the Latin American debt crisis in the 1980s to the worldwide banking collapse of 2007–08 and subsequent global recession. Little was done to prevent them, even after the Asian financial crisis of 1997–98 and the related collapse of Long-Term Capital Management, a US hedge fund that boasted two Nobel Prize-winning neo-liberal economists on its board. There was no political will to challenge the might of financial capital. At the heart of neo-liberalism is a contradiction. While its proponents profess a belief in free ‘unregulated’ markets, they favour regulations to prevent collective bodies from operating in favour of social solidarity.


pages: 351 words: 93,982

Leading From the Emerging Future: From Ego-System to Eco-System Economies by Otto Scharmer, Katrin Kaufer

Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Asian financial crisis, Basel III, Berlin Wall, Branko Milanovic, cloud computing, collaborative consumption, collapse of Lehman Brothers, colonial rule, Community Supported Agriculture, creative destruction, crowdsourcing, dematerialisation, Deng Xiaoping, en.wikipedia.org, European colonialism, Fractional reserve banking, global supply chain, happiness index / gross national happiness, high net worth, housing crisis, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Johann Wolfgang von Goethe, Joseph Schumpeter, market bubble, mass immigration, Mikhail Gorbachev, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, new economy, offshore financial centre, peak oil, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, smart grid, Steve Jobs, technology bubble, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Washington Consensus, working poor, Zipcar

Says Lawrence Lau, professor of economic development, emeritus, Stanford University, and chairman, CIC International (Hong Kong): “The overwhelming majority of foreign exchange transactions are thus purely speculative, in effect, pure gambles, and serve no useful social purposes.”3 This disconnect between the financial and the real economy produces the financial bubbles that keep plaguing the global economy: the Latin American debt crisis (1980s); the Asian financial crisis (1997); the dot-com bubble (2000); and the US housing crisis (2006–07), which was followed by the world financial crisis (2007–09) and the euro crisis (2010–). Such financial bubbles destabilize the real economy instead of serving it. 2. A disconnect between the infinite growth imperative and the finite resources of Planet Earth. The disconnect between the infinite growth that current economic logic demands and the finite resources of Planet Earth has produced a massive bubble: The overuse of scarce resources such as water and soil has led to the loss of a third of our agricultural land globally in roughly one generation’s time. 3.


pages: 354 words: 92,470

Grave New World: The End of Globalization, the Return of History by Stephen D. King

9 dash line, Admiral Zheng, air freight, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, Plutocrats, plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

The Transatlantic Trade and Investment Partnership faced severe resistance, notably in continental Europe. The European Union was blamed by many voters – not just in the UK, but also in increasing numbers elsewhere in Europe – for all manner of problems, ranging from austerity and unemployment to excessive immigration and an inability to deal with terrorism. Many countries in Asia looked upon the IMF with considerable scepticism given its controversial handling of the Asian financial crisis. All of this raises a critical question. Can globalization be healed or, instead, are we facing a world in which our international relationships – political, economic, financial – are beating a disorderly retreat? POPULISTS AND RENEGADES Some argue that the problem represents no more than a growing divide between the traditional right and left. Yet a simple ‘right/left’ narrative does not work terribly well.


pages: 337 words: 86,320

Everybody Lies: Big Data, New Data, and What the Internet Can Tell Us About Who We Really Are by Seth Stephens-Davidowitz

affirmative action, AltaVista, Amazon Mechanical Turk, Asian financial crisis, Bernie Sanders, big data - Walmart - Pop Tarts, Cass Sunstein, computer vision, correlation does not imply causation, crowdsourcing, Daniel Kahneman / Amos Tversky, desegregation, Donald Trump, Edward Glaeser, Filter Bubble, game design, happiness index / gross national happiness, income inequality, Jeff Bezos, John Snow's cholera map, Mark Zuckerberg, Nate Silver, peer-to-peer lending, Peter Thiel, price discrimination, quantitative hedge fund, Ronald Reagan, Rosa Parks, sentiment analysis, Silicon Valley, statistical model, Steve Jobs, Steven Levy, Steven Pinker, TaskRabbit, The Signal and the Noise by Nate Silver, working poor

Air Force satellite that circles the earth fourteen times per day. Why might light at night be a good measure of GDP? Well, in very poor parts of the world, people struggle to pay for electricity. And as a result, when economic conditions are bad, households and villages will dramatically reduce the amount of light they allow themselves at night. Night light dropped sharply in Indonesia during the 1998 Asian financial crisis. In South Korea, night light increased 72 percent from 1992 to 2008, corresponding to a remarkably strong economic performance over this period. In North Korea, over the same time, night light actually fell, corresponding to a dismal economic performance during this time. In 1998, in southern Madagascar, a large accumulation of rubies and sapphires was discovered. The town of Ilakaka went from little more than a truck stop to a major trading center.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Benoit Mandelbrot, Bretton Woods, central bank independence, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, energy security, equity premium, fiat currency, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, Kenneth Rogoff, Kitchen Debate, laissez-faire capitalism, Long Term Capital Management, low skilled workers, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon shock, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, rent-seeking, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, Saturday Night Live, savings glut, secular stagnation, short selling, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Greenspan kept up an active tennis and golf schedule during his years as Fed chairman. Pictured here with Treasury Secretary Lloyd Bentsen. Greenspan began dating Andrea Mitchell of NBC in 1984. Pictured here in 1996, after Mitchell completed the New York Marathon. Greenspan married Mitchell at a picturesque inn in Virginia. General Colin Powell, hero of the Gulf War, accused him of “sensual exuberance.” After the successful management of the Asian financial crisis of 1997, and despite Russia’s default in 1998, Time lauded Greenspan, Treasury Secretary Bob Rubin, and Deputy Secretary Lawrence Summers as “The Committee to Save the World.” Even though Greenspan had actually questioned the bailouts, he dominated Time’s cover. In January 2000, when Greenspan was nominated to his fourth term as Fed chairman by President Clinton, his star was higher than ever.

., 122–24 Albright, Madeleine, 517 Alcoa, 44–45, 73, 103, 292, 571–72 Alexander, Lewis, 643 Alexandria, Virginia, 277 Allen, Richard, 245–48 aluminum industry, 55, 73, 104, 332 American Bankers Association, 345–48, 558–59 American Creators’ Millennium Dinner, 564 American Enterprise Institute, 369, 503–5 American Finance Association, 151 American frontier, 31–32, 76–77 American International Group (AIG), 469, 661, 663, 665–66 American Statistical Association, 49, 71, 80, 331, 413, 548 American Stock Exchange, 346 Ameriquest, 616, 618–20, 627 Anderson, Martin, 102–4, 110, 113, 126, 131, 224–26, 237, 252–54, 256, 267–68, 368, 426 Ando, Albert, 220 Andrews Air Force Base, 357 Angell, Wayne, 332, 342, 360, 369, 440 antitrust laws, 72–75, 78, 88, 116, 123, 157–58, 160, 305, 323, 655–56 Apple, 3, 292 Arizona Biltmore, 557–59 Armey, Richard, 582 Arnold & Porter, 531 Ash, Roy, 169 Asia, 297, 530, 564. See also specific countries Asian financial crisis, 514–22, 536–37, 539–40, 547 assets bubbles, 51, 91, 227, 432, 435, 553–55, 578, 634, 681–82 changing value of, 209–10, 213, 496–97 and financial collapses, 539 markets, 53, 597, 682 prices, 49–51, 88, 212–13, 219, 331, 362, 413, 435–36, 438–39, 444, 448, 496–497, 500, 504, 506, 513, 553–54, 581, 593, 632, 635, 637–39, 644, 674, 681–84 Atlanta Federal Reserve, 606 Atlas Shrugged (Rand), 68–71, 81, 85, 90–94, 112, 203, 269, 490, 674 Augusta National, 415 austerity, 145, 156, 174, 257, 375, 420, 423 Australia, 504, 583 automobiles, 58–60, 63, 74, 79, 102, 297 bailouts, 6–7, 195–200, 205 of banks, 297–302, 404, 408–10, 467–68, 470, 476, 620, 660–64, 676 of Continental Illinois, 297–302, 312, 361, 472–73 of corporations, 140–44, 240, 6f601 cost of, 389–90 and the Fed, 238–39, 347, 389–90, 474–77, 479, 484 Greenspan in favor of, 301–4, 361–62, 379–80, 473, 659, 663 Greenspan opposed to, 239, 283, 659, 663, 676 of hedge funds, 546 of mortgage lenders, 659–60 of S&Ls, 379–82, 389–90, 429 of South Korea, 517–22, 537 See also Mexico: 1982 default of, 1994 default of; New York City: bailout of Baker, Howard, 310–11, 315, 352–53, 355–59 Baker, James, 252, 316–17, 377, 384, 397 and 1987 crash, 353, 358–59 on deregulating banks, 313 endorses Greenspan, 309–11, 314–15 and the Fed, 373–75 Greenspan meets with, 273, 279, 341, 345, 358, 369, 373–74 as Reagan chief of staff, 273, 285 runs Bush campaign, 372–73 as secretary of state, 375 on social security, 273, 275, 278–80 as Treasury secretary, 307, 309, 372–74 Washington residence of, 279, 310 Baker, Richard, 626–27 Ball, Robert M., 288 Banc One, 525–26 Bank of America, 526, 627–28, 661 Bank of England, 382–83, 615–16, 631, 649 Bank of Japan, 594 Bank of New England, 397 bank regulation, 294–95, 468, 681 and 2008 crisis, 670 and the Fed, 283–85, 543–44, 558–61, 620, 624–25, 627–28, 630–33, 670 Fed and Treasury battle over, 403–11 Geithner’s plans for, 630–33 Greenspan’s speech on, 345–46 Greenspan’s views of, 287, 302–4, 558–60, 627–29, 656–58, 663, 665, 678, 684 lack of, 663–64 and securities, 311, 313, 315, 403 and U.S.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, capital asset pricing model, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, financial innovation, illegal immigration, implied volatility, index fund, Long Term Capital Management, loss aversion, margin call, market clearing, market fundamentalism, market microstructure, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, pre–internet, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

Not just the one big disaster in 2007, but the many others: the Drexel Burnham bankruptcy, the Bankers Trust scandal, the Kidder Peabody crash, and Long-Term Capital Management’s failure, to name only four. These were among the most advanced firms in these techniques. I haven’t included the collateral damage from Wall Street abuses such as the Orange County bankruptcy, nor the non–Wall Street financial firms like Enron, nor the damage overseas as with the Asian financial crisis, nor the ones that entered more people’s homes like the Internet stock collapse and the mutual fund timing scandal. First, let me reiterate that the good from financial innovations far exceeds the damage. There were scandals and bankruptcies and disasters before quants came to Wall Street. Taking the good and bad together, the past 30 years have been the most extraordinarily good economic time for the globe in history.


pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

Indeed, there was arguably a Paris Consensus before there was a Washington Consensus (though in many ways it was building on a much earlier Bonn Consensus in favour of free capital markets).64 In London, too, Margaret Thatcher’s government pressed ahead with unilateral capital account liberalization without any prompting from the United States. Rather, it was the Reagan administration that followed Thatcher’s lead. Jaime Roldós Aguilera of Ecuador . . . . . . and Omar Torrijos of Panama: Allegedly victims of the ‘economic hit men’ Stiglitz’s biggest complaint against the IMF is that it responded the wrong way to the Asian financial crisis of 1997, lending a total of $95 billion to countries in difficulty, but attaching Washington Consensus-style conditions (higher interest rates, smaller government deficits) that actually served to worsen the crisis. It is a view that has been partially echoed by, among others, the economist and columnist Paul Krugman.65 There is no doubting the severity of the 1997-8 crisis. In countries such as Indonesia, Malaysia, South Korea and Thailand there was a very severe recession in 1998.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

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Asian financial crisis, asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, fixed income, high net worth, Hyman Minsky, interest rate derivative, invisible hand, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Thus, Geithner was a colleague of Ben Bernanke, but Dick Fuld sat on his board. Just as important, Geithner was a career public servant who did not instinctively recoil from the idea of government intervention. His mentor at the Treasury, Robert Rubin, had championed the American bailout of Mexico, and as undersecretary for international affairs in the late 1990s, Geithner himself was a key player in the government’s response to the pan-Asian financial crisis. Now he argued that the government had to save Bear Stearns or risk a systemic collapse—exactly what Paulson and Bernanke had been fearing. Since the Treasury couldn’t act without Congress’s authority, it had to be the Fed.14 Early Friday morning, the bankers and the bureaucrats reached a consensus. The New York Fed would loan money to Morgan, which would extend a secured line of credit to Bear.


pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

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accounting loophole / creative accounting, Albert Einstein, Asian financial crisis, asset-backed security, beat the dealer, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business process, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, commoditize, complexity theory, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, disintermediation, diversification, diversified portfolio, Edward Thorp, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, financial innovation, fixed income, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, John Meriwether, locking in a profit, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, mega-rich, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mutually assured destruction, Myron Scholes, new economy, New Journalism, Nick Leeson, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, Right to Buy, risk-adjusted returns, risk/return, Satyajit Das, shareholder value, short selling, South Sea Bubble, statistical model, technology bubble, the medium is the message, the new new thing, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

However, the text is different. 6 ‘What Worries Warren’ (3 March 2003) Fortune. 13_INDEX.QXD 17/2/06 4:44 pm Page 325 Index accounting rules 139, 221, 228, 257 Accounting Standards Board 33 accrual accounting 139 active fund management 111 actuaries 107–10, 205, 289 Advance Corporation Tax 242 agency business 123–4, 129 agency theory 117 airline profits 140–1 Alaska 319 Allen, Woody 20 Allied Irish Bank 143 Allied Lyons 98 alternative investment strategies 112, 308 American Express 291 analysts, role of 62–4 anchor effect 136 Anderson, Rolf 92–4 annuities 204–5 ANZ Bank 277 Aquinas, Thomas 137 arbitrage 33, 38–40, 99, 114, 137–8, 171–2, 245–8, 253–5, 290, 293–6 arbitration 307 Argentina 45 arithmophobia 177 ‘armpit theory’ 303 Armstrong World Industries 274 arrears assets 225 Ashanti Goldfields 97–8, 114 Asian financial crisis (1997) 4, 9, 44–5, 115, 144, 166, 172, 207, 235, 245, 252, 310, 319 asset consultants 115–17, 281 ‘asset growth’ strategy 255 asset swaps 230–2 assets under management (AUM) 113–4, 117 assignment of loans 267–8 AT&T 275 attribution of earnings 148 auditors 144 Australia 222–4, 254–5, 261–2 back office functions 65–6 back-to-back loans 35, 40 backwardation 96 Banca Popolare di Intra 298 Bank of America 298, 303 Bank of International Settlements 50–1, 281 Bank of Japan 220 Bankers’ Trust (BT) 59, 72, 101–2, 149, 217–18, 232, 268–71, 298, 301, 319 banking regulations 155, 159, 162, 164, 281, 286, 288 banking services 34; see also commercial banks; investment banks bankruptcy 276–7 Banque Paribas 37–8, 232 Barclays Bank 121–2, 297–8 13_INDEX.QXD 17/2/06 326 4:44 pm Page 326 Index Baring, Peter 151 Baring Brothers 51, 143, 151–2, 155 ‘Basel 2’ proposal 159 basis risk 28, 42, 274 Bear Stearns 173 bearer eurodollar collateralized securities (BECS) 231–3 ‘behavioural finance’ 136 Berkshire Hathaway 19 Bermudan options 205, 227 Bernstein, Peter 167 binomial option pricing model 196 Bismarck, Otto von 108 Black, Fischer 22, 42, 160, 185, 189–90, 193, 195, 197, 209, 215 Black–Scholes formula for option pricing 22, 185, 194–5 Black–Scholes–Merton model 160, 189–93, 196–7 ‘black swan’ hypothesis 130 Blair, Tony 223 Bogle, John 116 Bohr, Niels 122 Bond, Sir John 148 ‘bond floor’ concept 251–4 bonding 75–6, 168, 181 bonuses 146–51, 244, 262, 284–5 Brady Commission 203 brand awareness and brand equity 124, 236 Brazil 302 Bretton Woods system 33 bribery 80, 303 British Sky Broadcasting (BSB) 247–8 Brittain, Alfred 72 broad index secured trust offerings (BISTROs) 284–5 brokers 69, 309 Brown, Robert 161 bubbles 210, 310, 319 Buconero 299 Buffet, Warren 12, 19–20, 50, 110–11, 136, 173, 246, 316 business process reorganization 72 business risk 159 Business Week 130 buy-backs 249 ‘call’ options 25, 90, 99, 101, 131, 190, 196 callable bonds 227–9, 256 capital asset pricing model (CAPM) 111 capital flow 30 capital guarantees 257–8 capital structure arbitrage 296 Capote, Truman 87 carbon trading 320 ‘carry cost’ model 188 ‘carry’ trades 131–3, 171 cash accounting 139 catastrophe bonds 212, 320 caveat emptor principle 27, 272 Cayman Islands 233–4 Cazenove (company) 152 CDO2 292 Cemex 249–50 chaos theory 209, 312 Chase Manhattan Bank 143, 299 Chicago Board Options Exchange 195 Chicago Board of Trade (CBOT) 25–6, 34 chief risk officers 177 China 23–5, 276, 302–4 China Club, Hong Kong 318 Chinese walls 249, 261, 280 chrematophobia 177 Citibank and Citigroup 37–8, 43, 71, 79, 94, 134–5, 149, 174, 238–9 Citron, Robert 124–5, 212–17 client relationships 58–9 Clinton, Bill 223 Coats, Craig 168–9 collateral requirements 215–16 collateralized bond obligations (CBOs) 282 collateralized debt obligations (CDOs) 45, 282–99 13_INDEX.QXD 17/2/06 4:44 pm Page 327 Index collateralized fund obligations (CFOs) 292 collateralized loan obligations (CLOs) 283–5, 288 commercial banks 265–7 commoditization 236 commodity collateralized obligations (CCOs) 292 commodity prices 304 Commonwealth Bank of Australia 255 compliance officers 65 computer systems 54, 155, 197–8 concentration risk 271, 287 conferences with clients 59 confidence levels 164 confidentiality 226 Conseco 279–80 contagion crises 291 contango 96 contingent conversion convertibles (co-cos) 257 contingent payment convertibles (co-pays) 257 Continental Illinois 34 ‘convergence’ trading 170 convertible bonds 250–60 correlations 163–6, 294–5; see also default correlations corruption 303 CORVUS 297 Cox, John 196–7 credit cycle 291 credit default swaps (CDSs) 271–84, 293, 299 credit derivatives 129, 150, 265–72, 282, 295, 299–300 Credit Derivatives Market Practices Committee 273, 275, 280–1 credit models 294, 296 credit ratings 256–7, 270, 287–8, 297–8, 304 credit reserves 140 credit risk 158, 265–74, 281–95, 299 327 credit spreads 114, 172–5, 296 Credit Suisse 70, 106, 167 credit trading 293–5 CRH Capital 309 critical events 164–6 Croesus 137 cross-ruffing 142 cubic splines 189 currency options 98, 218, 319 custom repackaged asset vehicles (CRAVEs) 233 daily earning at risk (DEAR) concept 160 Daiwa Bank 142 Daiwa Europe 277 Danish Oil and Natural Gas 296 data scrubbing 142 dealers, work of 87–8, 124–8, 133, 167, 206, 229–37, 262, 295–6; see also traders ‘death swap’ strategy 110 decentralization 72 decision-making, scientific 182 default correlations 270–1 defaults 277–9, 287, 291, 293, 296, 299 DEFCON scale 156–7 ‘Delta 1’ options 243 delta hedging 42, 200 Deming, W.E. 98, 101 Denmark 38 deregulation, financial 34 derivatives trading 5–6, 12–14, 18–72, 79, 88–9, 99–115, 123–31, 139–41, 150, 153, 155, 175, 184–9, 206–8, 211–14, 217–19, 230, 233, 257, 262–3, 307, 316, 319–20; see also equity derivatives Derman, Emmanuel 185, 198–9 Deutsche Bank 70, 104, 150, 247–8, 274, 277 devaluations 80–1, 89, 203–4, 319 13_INDEX.QXD 17/2/06 4:44 pm Page 328 328 Index dilution of share capital 241 DINKs 313 Disney Corporation 91–8 diversification 72, 110–11, 166, 299 dividend yield 243 ‘Dr Evil’ trade 135 dollar premium 35 downsizing 73 Drexel Burnham Lambert (DBL) 282 dual currency bonds 220–3; see also reverse dual currency bonds earthquakes, bonds linked to 212 efficient markets hypothesis 22, 31, 111, 203 electronic trading 126–30, 134 ‘embeddos’ 218 emerging markets 3–4, 44, 115, 132–3, 142, 212, 226, 297 Enron 54, 142, 250, 298 enterprise risk management (ERM) 176 equity capital management 249 equity collateralized obligations (ECOs) 292 equity derivatives 241–2, 246–9, 257–62 equity index 137–8 equity investment, retail market in 258–9 equity investors’ risk 286–8 equity options 253–4 equity swaps 247–8 euro currency 171, 206, 237 European Bank for Reconstruction and Development 297 European currency units 93 European Union 247–8 Exchange Rate Mechanism, European 204 exchangeable bonds 260 expatriate postings 81–2 expert witnesses 310–12 extrapolation 189, 205 extreme value theory 166 fads of management science 72–4 ‘fairway bonds’ 225 Fama, Eugene 22, 111, 194 ‘fat tail’ events 163–4 Federal Accounting Standards Board 266 Federal Home Loans Bank 213 Federal National Mortgage Association 213 Federal Reserve Bank 20, 173 Federal Reserve Board 132 ‘Ferraris’ 232 financial engineering 228, 230, 233, 249–50, 262, 269 Financial Services Authority (FSA), Japan 106, 238 Financial Services Authority (FSA), UK 15, 135 firewalls 235–6 firing of staff 84–5 First Interstate Ltd 34–5 ‘flat’ organizations 72 ‘flat’ positions 159 floaters 231–2; see also inverse floaters ‘flow’ trading 60–1, 129 Ford Motors 282, 296 forecasting 135–6, 190 forward contracts 24–33, 90, 97, 124, 131, 188 fugu fish 239 fund management 109–17, 286, 300 futures see forward contracts Galbraith, John Kenneth 121 gamma risk 200–2, 294 Gauss, Carl Friedrich 160–2 General Motors 279, 296 General Reinsurance 20 geometric Brownian motion (GBM) 161 Ghana 98 Gibson Greeting Cards 44 Glass-Steagall Act 34 gold borrowings 132 13_INDEX.QXD 17/2/06 4:44 pm Page 329 Index gold sales 97, 137 Goldman Sachs 34, 71, 93, 150, 173, 185 ‘golfing holiday bonds’ 224 Greenspan, Alan 6, 9, 19–21, 29, 43, 47, 50, 53, 62, 132, 159, 170, 215, 223, 308 Greenwich NatWest 298 Gross, Bill 19 Guangdong International Trust and Investment Corporation (GITIC) 276–7 guaranteed annuity option (GAO) contracts 204–5 Gutenfreund, John 168–9 gyosei shido 106 Haghani, Victor 168 Hamanaka, Yasuo 142 Hamburgische Landesbank 297 Hammersmith and Fulham, London Borough of 66–7 ‘hara-kiri’ swaps 39 Hartley, L.P. 163 Hawkins, Greg 168 ‘heaven and hell’ bonds 218 hedge funds 44, 88–9, 113–14, 167, 170–5, 200–2, 206, 253–4, 262–3, 282, 292, 296, 300, 308–9 hedge ratio 264 hedging 24–8, 31, 38–42, 60, 87–100, 184, 195–200, 205–7, 214, 221, 229, 252, 269, 281, 293–4, 310 Heisenberg, Werner 122 ‘hell bonds’ 218 Herman, Clement (‘Crem’) 45–9, 77, 84, 309 Herodotus 137, 178 high net worth individuals (HNWIs) 237–8, 286 Hilibrand, Lawrence 168 Hill Samuel 231–2 329 The Hitchhiker’s Guide to the Galaxy 189 Homer, Sidney 184 Hong Kong 9, 303–4 ‘hot tubbing’ 311–12 HSBC Bank 148 HSH Nordbank 297–8 Hudson, Kevin 102 Hufschmid, Hans 77–8 IBM 36, 218, 260 ICI 34 Iguchi, Toshihude 142 incubators 309 independent valuation 142 indexed currency option notes (ICONs) 218 India 302 Indonesia 5, 9, 19, 26, 55, 80–2, 105, 146, 219–20, 252, 305 initial public offerings 33, 64, 261 inside information and insider trading 133, 241, 248–9 insurance companies 107–10, 117, 119, 150, 192–3, 204–5, 221, 223, 282, 286, 300; see also reinsurance companies insurance law 272 Intel 260 intellectual property in financial products 226 Intercontinental Hotels Group (IHG) 285–6 International Accounting Standards 33 International Securities Market Association 106 International Swap Dealers Association (ISDA) 273, 275, 279, 281 Internet stock and the Internet boom 64, 112, 259, 261, 310, 319 interpolation of interest rates 141–2, 189 inverse floaters 46–51, 213–16, 225, 232–3 13_INDEX.QXD 17/2/06 4:44 pm Page 330 330 Index investment banks 34–8, 62, 64, 67, 71, 127–8, 172, 198, 206, 216–17, 234, 265–7, 298, 309 investment managers 43–4 investment styles 111–14 irrational decisions 136 Italy 106–7 Ito’s Lemma 194 Japan 39, 43, 82–3, 92, 94, 98–9, 101, 106, 132, 142, 145–6, 157, 212, 217–25, 228, 269–70 Jensen, Michael 117 Jett, Joseph 143 JP Morgan (company) 72, 150, 152, 160, 162, 249–50, 268–9, 284–5, 299; see also Morgan Guaranty junk bonds 231, 279, 282, 291, 296–7 JWM Associates 175 Kahneman, Daniel 136 Kaplanis, Costas 174 Kassouf, Sheen 253 Kaufman, Henry 62 Kerkorian, Kirk 296 Keynes, J.M. 167, 175, 198 Keynesianism 5 Kidder Peabody 143 Kleinwort Benson 40 Korea 9, 226, 278 Kozeny, Viktor 121 Krasker, William 168 Kreiger, Andy 319 Kyoto Protocol 320 Lavin, Jack 102 law of large numbers 192 Leeson, Nick 51, 131, 143, 151 legal opinions 47, 219–20, 235, 273–4 Leibowitz, Martin 184 Leland, Hayne 42, 202 Lend Lease Corporation 261–2 leptokurtic conditions 163 leverage 31–2, 48–50, 54, 99, 102–3, 114, 131–2, 171–5, 213–14, 247, 270–3, 291, 295, 305, 308 Lewis, Kenneth 303 Lewis, Michael 77–8 life insurance 204–5 Lintner, John 111 liquidity options 175 liquidity risk 158, 173 litigation 297–8 Ljunggren, Bernt 38–40 London Inter-Bank Offered Rate (LIBOR) 6, 37 ‘long first coupon’ strategy 39 Long Term Capital Management (LTCM) 44, 51, 62, 77–8, 84, 114, 166–75, 187, 206, 210, 215–18, 263–4, 309–10 Long Term Credit Bank of Japan 94 LOR (company) 202 Louisiana Purchase 319 low exercise price options (LEPOs) 261 Maastricht Treaty and criteria 106–7 McLuhan, Marshall 134 McNamara, Robert 182 macro-economic indicators, derivatives linked to 319 Mahathir Mohammed 31 Malaysia 9 management consultants 72–3 Manchester United 152 mandatory convertibles 255 Marakanond, Rerngchai 302 margin calls 97–8, 175 ‘market neutral’ investment strategy 114 market risk 158, 173, 265 marketable eurodollar collateralized securities (MECS) 232 Markowitz, Harry 110 mark-to-market accounting 10, 100, 139–41, 145, 150, 174, 215–16, 228, 244, 266, 292, 295, 298 Marx, Groucho 24, 57, 67, 117, 308 13_INDEX.QXD 17/2/06 4:44 pm Page 331 Index mathematics applied to financial instruments 209–10; see also ‘quants’ matrix structures 72 Meckling, Herbert 117 Melamed, Leo 34, 211 merchant banks 38 Meriwether, John 167–9, 172–5 Merrill Lynch 124, 150, 217, 232 Merton, Robert 22, 42, 168–70, 175, 185, 189–90, 193–7, 210 Messier, Marie 247 Metallgesellschaft 95–7 Mexico 44 mezzanine finance 285–8, 291–7 MG Refining and Marketing 95–8, 114 Microsoft 53 Mill, Stuart 130 Miller, Merton 22, 101, 194 Milliken, Michael 282 Ministry of Finance, Japan 222 misogyny 75–7 mis-selling 238, 297–8 Mitchell, Edison 70 Mitchell & Butler 275–6 models financial 42–3, 141–2, 163–4, 173–5, 181–4, 189, 198–9, 205–10 of business processes 73–5 see also credit models Modest, David 168 momentum investment 111 monetization 260–1 monopolies in financial trading 124 moral hazard 151, 280, 291 Morgan Guaranty 37–8, 221, 232 Morgan Stanley 76, 150 mortgage-backed securities (MBSs) 282–3 Moscow, City of 277 moves of staff between firms 150, 244 Mozer, Paul 169 Mullins, David 168–70 multi-skilling 73 331 Mumbai 3 Murdoch, Rupert 247 Nabisco 220 Napoleon 113 NASDAQ index 64, 112 Nash, Ogden 306 National Australia Bank 144, 178 National Rifle Association 29 NatWest Bank 144–5, 198 Niederhoffer, Victor 130 ‘Nero’ 7, 31, 45–9, 60, 77, 82–3, 88–9, 110, 118–19, 125, 128, 292 NERVA 297 New Zealand 319 Newman, Frank 104 news, financial 133–4 News Corporation 247 Newton, Isaac 162, 210 Nippon Credit Bank 106, 271 Nixon, Richard 33 Nomura Securities 218 normal distribution 160–3, 193, 199 Northern Electric 248 O’Brien, John 202 Occam, William 188 off-balance sheet transactions 32–3, 99, 234, 273, 282 ‘offsites’ 74–5 oil prices 30, 33, 89–90, 95–7 ‘omitted variable’ bias 209–10 operational risk 158, 176 opinion shopping 47 options 9, 21–2, 25–6, 32, 42, 90, 98, 124, 197, 229 pricing 185, 189–98, 202 Orange County 16, 44, 50, 124–57, 212–17, 232–3 orphan subsidiaries 234 over-the-counter (OTC) market 26, 34, 53, 95, 124, 126 overvaluation 64 13_INDEX.QXD 17/2/06 4:44 pm Page 332 332 Index ‘overwhelming force’ strategy 134–5 Owen, Martin 145 ownership, ‘legal’ and ‘economic’ 247 parallel loans 35 pari-mutuel auction system 319 Parkinson’s Law 136 Parmalat 250, 298–9 Partnoy, Frank 87 pension funds 43, 108–10, 115, 204–5, 255 People’s Bank of China (PBOC) 276–7 Peters’ Principle 71 petrodollars 71 Pétrus (restaurant) 121 Philippines, the 9 phobophobia 177 Piga, Gustavo 106 PIMCO 19 Plaza Accord 38, 94, 99, 220 plutophobia 177 pollution quotas 320 ‘portable alpha’ strategy 115 portfolio insurance 112, 202–3, 294 power reverse dual currency (PRDC) bonds 226–30 PowerPoint 75 preferred exchangeable resettable listed shares (PERLS) 255 presentations of business models 75 to clients 57, 185 prime brokerage 309 Prince, Charles 238 privatization 205 privity of contract 273 Proctor & Gamble (P&G) 44, 101–4, 155, 298, 301 product disclosure statements (PDSs) 48–9 profit smoothing 140 ‘programme’ issuers 234–5 proprietary (‘prop’) trading 60, 62, 64, 130, 174, 254 publicly available information (PAI) 277 ‘puff’ effect 148 purchasing power parity theory 92 ‘put’ options 90, 131, 256 ‘quants’ 183–9, 198, 208, 294 Raabe, Matthew 217 Ramsay, Gordon 121 range notes 225 real estate 91, 219 regulatory arbitrage 33 reinsurance companies 288–9 ‘relative value’ trading 131, 170–1, 310 Reliance Insurance 91–2 repackaging (‘repack’) business 230–6, 282, 290 replication in option pricing 195–9, 202 dynamic 200 research provided to clients 58, 62–4, 184 reserves, use of 140 reset preference shares 254–7 restructuring of loans 279–81 retail equity products 258–9 reverse convertibles 258–9 reverse dual currency bonds 223–30 ‘revolver’ loans 284–5 risk, financial, types of 158 risk adjusted return on capital (RAROC) 268, 290 risk conservation principle 229–30 risk management 65, 153–79, 184, 187, 201, 267 risk models 163–4, 173–5 riskless portfolios 196–7 RJ Reynolds (company) 220–1 rogue traders 176, 313–16 Rosenfield, Eric 168 Ross, Stephen 196–7, 202 Roth, Don 38 Rothschild, Mayer Amshel 267 Royal Bank of Scotland 298 Rubinstein, Mark 42, 196–7 13_INDEX.QXD 17/2/06 4:44 pm Page 333 Index Rumsfeld, Donald 12, 134, 306 Rusnak, John 143 Russia 45, 80, 166, 172–3, 274, 302 sales staff 55–60, 64–5, 125, 129, 217 Salomon Brothers 20, 36, 54, 62, 167–9, 174, 184 Sandor, Richard 34 Sanford, Charles 72, 269 Sanford, Eugene 269 Schieffelin, Allison 76 Scholes, Myron 22, 42, 168–71, 175, 185, 189–90, 193–7, 263–4 Seagram Group 247 Securities and Exchange Commission, US 64, 304 Securities and Futures Authority, UK 249 securitization 282–90 ‘security design’ 254–7 self-regulation 155 sex discrimination 76 share options 250–1 Sharpe, William 111 short selling 30–1, 114 Singapore 9 single-tranche CDOs 293–4, 299 ‘Sisters of Perpetual Ecstasy’ 234 SITCOMs 313 Six Continents (6C) 275–6 ‘smile’ effect 145 ‘snake’ currency system 203 ‘softing’ arrangements 117 Solon 137 Soros, George 44, 130, 253, 318–19 South Sea Bubble 210 special purpose asset repackaging companies (SPARCs) 233 special purpose vehicles (SPVs) 231–4, 282–6, 290, 293 speculation 29–31, 42, 67, 87, 108, 130 ‘spinning’ 64 333 Spitzer, Eliot 64 spread 41, 103; see also credit spreads stack hedges 96 Stamenson, Michael 124–5 standard deviation 161, 193, 195, 199 Steinberg, Sol 91 stock market booms 258, 260 stock market crashes 42–3, 168, 203, 257, 259, 319 straddles or strangles 131 strategy in banking 70 stress testing 164–6 stripping of convertible bonds 253–4 structured investment products 44, 112, 115, 118, 128, 211–39, 298 structured note asset packages (SNAPs) 233 Stuart SC 18, 307, 316–18 Styblo Bleder, Tanya 153 Suharto, Thojib 81–2 Sumitomo Corporation 100, 142 Sun Tzu 61 Svensk Exportkredit (SEK) 38–9 swaps 5–10, 26, 35–40, 107, 188, 211; see also equity swaps ‘swaptions’ 205–6 Swiss Bank Corporation (SBC) 248–9 Swiss banks 108, 305 ‘Swiss cheese theory’ 176 synthetic securitization 284–5, 288–90 systemic risk 151 Takeover Panel 248–9 Taleb, Nassim 130, 136, 167 target redemption notes 225–6 tax and tax credits 171, 242–7, 260–3 Taylor, Frederick 98, 101 team-building exercises 76 team moves 149 technical analysis 60–1, 135 television programmes about money 53, 62–3 Thailand 9, 80, 302–5 13_INDEX.QXD 17/2/06 4:44 pm Page 334 334 Index Thatcher, Margaret 205 Thorp, Edward 253 tobashi trades 105–7 Tokyo Disneyland 92, 212 top managers 72–3 total return swaps 246–8, 269 tracking error 138 traders in financial products 59–65, 129–31, 135–6, 140, 148, 151, 168, 185–6, 198; see also dealers trading limits 42, 157, 201 trading rooms 53–4, 64, 68, 75–7, 184–7, 208 Trafalgar House 248 tranching 286–9, 292, 296 transparency 26, 117, 126, 129–30, 310 Treynor, Jack 111 trust investment enhanced return securities (TIERS) 216, 233 trust obligation participating securities (TOPS) 232 TXU Europe 279 UBS Global Asset Management 110, 150, 263–4, 274 uncertainty principle 122–3 unique selling propositions 118 unit trusts 109 university education 187 unspecified fund obligations (UFOs) 292 ‘upfronting’ of income 139, 151 Valéry, Paul 163 valuation 64, 142–6 value at risk (VAR) concept 160–7, 173 value investing 111 Vanguard 116 vanity bonds 230 variance 161 Vietnam War 182, 195 Virgin Islands 233–4 Vivendi 247–8 volatility of bond prices 197 of interest rates 144–5 of share prices 161–8, 172–5, 192–3, 199 Volcker, Paul 20, 33 ‘warehouses’ 40–2, 139 warrants arbitrage 99–101 weather, bonds linked to 212, 320 Weatherstone, Dennis 72, 268 Weil, Gotscal & Manges 298 Weill, Sandy 174 Westdeutsche Genosenschafts Zentralbank 143 Westminster Group 34–5 Westpac 261–2 Wheat, Allen 70, 72, 106, 167 Wojniflower, Albert 62 World Bank 4, 36, 38 World Food Programme 320 Worldcom 250, 298 Wriston, Walter 71 WTI (West Texas Intermediate) contracts 28–30 yield curves 103, 188–9, 213, 215 yield enhancement 112, 213, 269 ‘yield hogs’ 43 zaiteku 98–101, 104–5 zero coupon bonds 221–2, 257–8


pages: 459 words: 118,959

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff by Christine S. Richard

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activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, banking crisis, Bernie Madoff, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Ponzi scheme, profit motive, short selling, statistical model, white flight, zero-sum game

Long Term Capital Management, a hedge fund run by a team of Nobel Prize-winning mathematicians, was unraveling and threatening to take the financial system with it. Almost immediately after the AHERF bankruptcy filing, MBIA sought to reassure investors by stating that it had $75 million of reserves that would be adequate to absorb the loss. Yet confidence in the bond insurer continued to falter that summer on a combination of AHERF concerns and the Asian financial crisis. For the first time, investors were asking whether MBIA’s triple-A rating was at risk. MBIA’s shares had been sinking all summer, dropping from a high of around $53 in April to $43 by late summer and then tumbling precipitously in early September. On September 11, 1998, the company held a conference call to set the record straight. “I understand that we have exhausted the phone line capacity of the provider, and I think we have something like over 250 participants on this conference call,” MBIA’s then chairman and chief executive officer (CEO) David Elliott said.


pages: 379 words: 114,807

The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

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Asian financial crisis, banking crisis, big-box store, blood diamonds, British Empire, Buy land – they’re not making it any more, Cape to Cairo, carbon footprint, clean water, corporate raider, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, index fund, Jeff Bezos, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, Mohammed Bouazizi, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, urban planning, urban sprawl, WikiLeaks

He claimed a patriotic purpose. He told environmentalists he would create a “sustainable” forest industry in Indonesia, based around acacia plantations. I still have the publicity literature from the time. But the plantations only emerged when the forests were all gone. He continued to oversee unprecedented forest destruction. The wheels nearly came off the deforestation juggernaut after the 1998 Asian financial crisis. This followed huge forest fires in Sumatra and Borneo during the 1997 El Niño drought, which had alerted the world to the parlous state of the Indonesian forests. Both APP and APRIL effectively went bust as global pulp prices collapsed and their activities came under international scrutiny for the first time. They had borrowed huge sums to set up the two Riau mills, and invested heavily in the logging to feed them.


pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

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3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

Governments that have a deficit of more than 3 per cent of GDP or public debt exceeding 60 per cent of GDP that is not falling towards that level by at least one-twentieth averaged over three years are subject to further interventions under the Excessive Deficit Procedure. http://www.eurozone.europa.eu/media/304649/st00tscg26_en12.pdf 366 http://europa.eu/rapid/press-release_MEMO-13-457_en.htm 367 http://europa.eu/rapid/press-release_MEMO-13-318_en.htm 368 See, for example, the notes to governments explaining what they must do to comply: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf 369 Monitoring worrying imbalances seems like a good idea, but in practice such surveillance tends to be ineffective. It often raises false alarms – hence the joke that economists have predicted ten of the last three recessions. It often fails to warn (or warns too late) about big crises: the IMF missed the 1997–8 Asian financial crisis; the IMF, ECB and the European Commission were all blindsided by the current financial crisis and its eurozone offshoot. Even when risks are correctly identified, political interference and special-interest lobbying often ensure that concerns are watered down or ignored. Last but not least, the resulting policy recommendations may be flawed or not implemented. 370 The European Commission previously monitored imbalances through the EU’s Broad Economic Policy Guidelines. 371 To have any hope of identifying problems in good time, an early-warning system ought to be based on current information and in particular on leading indicators – economic data that tends to provide early indications of future trends.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

., Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O’Neill, R. N., Parvelo, J., Raskin, R. G., Sutton, P., and van den Belt, M. (1997). The value of the world’s ecosystem services and natural capital, Nature 387, 253–260. 95. Cox, J. C., Ingersoll, J. E., and Ross, S. A. (1985). A theory of the term structure of interest rates, Econometrica 53, 385–407. 96. Cronin, R. P. (1998). Asian Financial Crisis: An Analysis of U.S. Foreign Policy Interests and Options, Foreign Affairs and National Defense Division, http:// www.fas.org/man/crs/crs-asia.htm. 97. Crutchfield, J. P. and Mitchell, M. (1995). The evolution of emergent computation, Proceedings of the National Academy of Science, U.S.A. 92, 10742–10746. 402 references 98. D’Agostini, G. (1999). Teaching statistics in the physics curriculum: Unifying and clarifying role of subjective probability, American Journal of Physics 67, 1260– 1268. 99.

Commodity Trading Advisors: Risk, Performance Analysis, and Selection by Greg N. Gregoriou, Vassilios Karavas, François-Serge Lhabitant, Fabrice Douglas Rouah

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Asian financial crisis, asset allocation, backtesting, capital asset pricing model, collateralized debt obligation, commodity trading advisor, compound rate of return, constrained optimization, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, discrete time, distributed generation, diversification, diversified portfolio, dividend-yielding stocks, fixed income, high net worth, implied volatility, index arbitrage, index fund, interest rate swap, iterative process, linear programming, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, p-value, Pareto efficiency, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk-adjusted returns, risk/return, selection bias, Sharpe ratio, short selling, stochastic process, survivorship bias, systematic trading, technology bubble, transaction costs, value at risk, zero-sum game

INTRODUCTION In recent years, hedge funds and commodity trading advisors (CTAs) have drawn considerable attention from regulators, investors, academics, and the general public.1 Much of the attention has focused on the concern that hedge funds and CTAs exert a disproportionate and destabilizing influence on financial markets, which can lead to increased price volatility and, in some cases, financial crises (e.g., Eichengreen and Mathieson 1998). Hedge fund trading has been blamed for many financial distresses, including the 1992 European Exchange Rate Mechanism crisis, the 1994 Mexican peso crisis, the 1997 Asian financial crisis, and the 2000 bust in U.S. technology stock prices. A spectacular example of concerns about hedge funds can be found in the collapse and subsequent financial bailout of Long-Term Capital Management (e.g., Edwards 1999). The concerns about hedge fund and CTA trading extend beyond financial markets to other speculative markets, such as commodity futures markets. These concerns were nicely summarized in a meeting between farmers and executives of the Chicago Board of Trade, where farmers expressed the view that “the funds— managed commodity investment groups with significant financial and technological resources—may exert undue collective influence on market direction without regard to real world supply-demand or other economic factors” (Ross 1999, p. 3).


pages: 464 words: 121,983

Disaster Capitalism: Making a Killing Out of Catastrophe by Antony Loewenstein

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activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Asian financial crisis, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, clean water, collective bargaining, colonial rule, corporate social responsibility, Corrections Corporation of America, Edward Snowden, facts on the ground, failed state, falling living standards, Ferguson, Missouri, financial independence, full employment, G4S, Goldman Sachs: Vampire Squid, housing crisis, illegal immigration, immigration reform, income inequality, Julian Assange, mandatory minimum, market fundamentalism, mass incarceration, Naomi Klein, neoliberal agenda, obamacare, Occupy movement, offshore financial centre, open borders, private military company, profit motive, Ralph Nader, Ronald Reagan, Satyajit Das, Scramble for Africa, Slavoj Žižek, stem cell, the medium is the message, trade liberalization, WikiLeaks

In 2014 locals still complained about not being consulted about anything, including services and the hospital. “Sometimes we feel as though we are the forgotten island,” says Linda Cash, Christmas Island Tourism Association’s marketing manager.7 Christmas Island and the Cocos Islands were essentially colonies controlled by Australia. In the 1990s a casino brought riches to Christmas Island, but closed due to the Asian financial crisis. Some locals wanted it reopened. Boat arrivals had made at least ten people millionaires on Christmas Island—savvy beneficiaries of the detention business.8 Building commenced in 2006, and the facility was initiated with roughly 800 beds at a cost of $400 million. But the cost increased, and private contractors still had not completed all the work when John Howard was voted out of office in 2007.


pages: 388 words: 125,472

The Establishment: And How They Get Away With It by Owen Jones

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anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, laissez-faire capitalism, light touch regulation, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, Plutocrats, plutocrats, popular capitalism, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, The Wealth of Nations by Adam Smith, transfer pricing, union organizing, unpaid internship, Washington Consensus, wealth creators, Winter of Discontent

Growing economies that have imposed such controls over the last few years include powerhouses such as Brazil, South Korea and India, and China never got rid of them. When Iceland was plunged into economic ruin by the financial collapse, capital controls were fundamental to its recovery. Brazil, for example, imposed a financial transactions tax that went up to 6 per cent, and was hailed by its government as a success because it prevented its exchange rate jumping too quickly. Malaysia survived the 1997 Asian financial crisis better than competitor economies precisely because it had capital controls. Capital controls monitor the flow of money in and out of a given economy, guarding against asset bubbles and investors’ short-term interests that may be on a collision course with the interests of society as a whole. Capital can surge in, hiking up property prices and exchange rates, and then suddenly withdraw, precipitating a violent crash.


pages: 483 words: 143,123

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman

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activist fund / activist shareholder / activist investor, American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, corporate raider, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay

But McClendon had made sure most of it wasn’t due for several years, giving Chesapeake breathing room. Within six months, Chesapeake had spent $800 million to buy a series of companies with about eight hundred billion cubic feet of gas equivalent reserves, as it reinvented itself as a traditional gas exploration company. The purchases didn’t help much, though. Anemic oil and gas prices kept pressure on Chesapeake shares, as the Asian financial crisis and OPEC’s inability to keep a lid on its members’ production flooded the market with surplus energy. By February 1999, Chesapeake shares traded at a measly seventy cents each, giving the company a market value of only about $75 million. When McClendon and Ward met with veteran landman Larry Coshow to try to recruit him, Coshow was skeptical: “Man, I’ve been reading y’all’s balance sheet and y’all are broke.”


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, commoditize, complexity theory, continuation of politics by other means, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, digital map, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

When countries are willing to sell, trade, or open their territory to foreign governance at such large scale, it is a sign of the shift toward a supply chain world where optimizing economic geography supersedes preserving territorial sovereignty. All of Southeast Asia is now aggregating according to the same logic. The regional diplomatic grouping called ASEAN was founded four decades ago on the mantra “Prosper thy neighbor,” but Cold War politics prevented any such camaraderie. Since the region’s hammering in the 1997–98 Asian financial crisis, however, the ASEAN Economic Community has risen to become the world’s fifth-largest economic area with a GDP of over $2 trillion (behind the EU, the United States, China, and Japan) and attracts more FDI than China due to its youthful 650 million people. Even as it competes with China, ASEAN helps Asia strengthen its grip on global supply chains.1 From 1990 to 2013, Asia’s share of global manufacturing rose from 25 percent to 50 percent and will rise even further in the coming decade.


pages: 570 words: 158,139

Overbooked: The Exploding Business of Travel and Tourism by Elizabeth Becker

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airport security, Asian financial crisis, barriers to entry, Berlin Wall, BRICs, car-free, carbon footprint, clean water, collective bargaining, colonial rule, computer age, corporate governance, Costa Concordia, Deng Xiaoping, European colonialism, Exxon Valdez, Fall of the Berlin Wall, Frank Gehry, global village, happiness index / gross national happiness, haute cuisine, indoor plumbing, Masdar, Murano, Venice glass, open borders, out of africa, race to the bottom, Ralph Nader, Scramble for Africa, Silicon Valley, statistical model, sustainable-tourism, the market place, union organizing, urban renewal, wage slave, young professional, éminence grise

With that aim in mind, he and his partners are sponsoring the World Congress on Art Deco in 2015 to spotlight and preserve what is left of Art Deco buildings in Shanghai. It is a gamble to convince the government there is room in Shanghai for the historic Bund as well as Disneyland. All of this maneuvering has been done against the backdrop of the rapid buildup of tourism that exploded in 2000 when domestic tourism was unleashed and foreigners discovered China’s strength, especially after the Asian financial crisis. The Golden Weeks announcement of guaranteed vacation “put it all together,” said Cranley. “Now we have to deal with our success. We’re all experimenting to find the sweet spot where tourism is working for China and where Chinese tourists feel they are free as tourists.” Bill and I met many of those Chinese tourists at the site of the First National Congress of the Chinese Communist Party, when the party was officially founded, a critical milestone on the road to revolution.


pages: 433 words: 125,031

Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

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affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, creative destruction, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, Rubik’s Cube, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, transatlantic slave trade, We are the 99%, William Langewiesche

He was forced to take a year off just as Garantia reached its peak. In a sign of its clout, the bank managed to bring Margaret Thatcher to Brazil for a meeting with local businessmen in 1994. And that year Garantia cleared a billion dollars in profit. Pioneers of risky American-style financial bets, its traders got cocky. They sold tons of insurance on Brazilian government bonds without properly hedging their bets, and when the Asian financial crisis exploded in 1997, sending interest rates soaring in emerging markets, Garantia lost hundreds of millions of dollars. Telles would later explain the disaster by blaming Lemann’s absence and the fact that he himself, along with Sicupira, were busy with their outside takeovers. Whatever the truth, Lemann and his partners decided to sell the bank to Credit Suisse. They got $675 million, a good deal less than they would have a couple of years earlier.


pages: 437 words: 113,173

Age of Discovery: Navigating the Risks and Rewards of Our New Renaissance by Ian Goldin, Chris Kutarna

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Airbnb, Albert Einstein, AltaVista, Asian financial crisis, asset-backed security, autonomous vehicles, banking crisis, barriers to entry, battle of ideas, Berlin Wall, bioinformatics, bitcoin, Bonfire of the Vanities, clean water, collective bargaining, Colonization of Mars, Credit Default Swap, crowdsourcing, cryptocurrency, Dava Sobel, demographic dividend, Deng Xiaoping, Doha Development Round, double helix, Edward Snowden, Elon Musk, en.wikipedia.org, epigenetics, experimental economics, failed state, Fall of the Berlin Wall, financial innovation, full employment, Galaxy Zoo, global supply chain, Hyperloop, immigration reform, income inequality, indoor plumbing, industrial cluster, industrial robot, information retrieval, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invention of the printing press, Isaac Newton, Islamic Golden Age, Khan Academy, Kickstarter, labour market flexibility, low cost carrier, low skilled workers, Lyft, Malacca Straits, mass immigration, megacity, Mikhail Gorbachev, moral hazard, Network effects, New Urbanism, non-tariff barriers, Occupy movement, On the Revolutions of the Heavenly Spheres, open economy, Panamax, Pearl River Delta, personalized medicine, Peter Thiel, post-Panamax, profit motive, rent-seeking, reshoring, Robert Gordon, Robert Metcalfe, Search for Extraterrestrial Intelligence, Second Machine Age, self-driving car, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart grid, Snapchat, special economic zone, spice trade, statistical model, Stephen Hawking, Steve Jobs, Stuxnet, TaskRabbit, The Future of Employment, too big to fail, trade liberalization, trade route, transaction costs, transatlantic slave trade, uranium enrichment, We are the 99%, We wanted flying cars, instead we got 140 characters, working poor, working-age population, zero day

The hindsight-informed analysis has been repeated many times: American and European bankers played round after round of a highly lucrative game—lending cash to consumers and homebuyers, moving the debts and risk off their books through securitization and credit derivatives, then lending again—until households were drowning in borrowing costs and the balance sheets of big financial institutions were awash with hundreds of billions in bad debts that would never be paid off. The integration of emerging economies into global capital markets amplified the risk: China was generating lots of cash, saw few investment opportunities in Asia after the 1997 Asian financial crisis, and so plowed it into the US economy by buying US government debt. The foreign cash infusion helped dampen domestic interest rates and kept the game going longer. We did not clearly understand how fragile these activities made the global financial system, and we broke it. Households that took out big mortgages in the belief that housing prices would never go down turned out to be wrong.

Poisoned Wells: The Dirty Politics of African Oil by Nicholas Shaxson

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Asian financial crisis, Berlin Wall, blood diamonds, business climate, central bank independence, clean water, colonial rule, energy security, Exxon Valdez, failed state, Fall of the Berlin Wall, Hernando de Soto, income per capita, inflation targeting, Martin Wolf, mobile money, offshore financial centre, old-boy network, Ronald Reagan, Scramble for Africa, Yom Kippur War, zero-sum game

Alassane Ouattara, an Ivory Coast economist who became a deputy IMF managing director, argued powerfully inside the Fund for corruption to be considered, and finally, in 1996, World Bank president James Wolfensohn marked a turning point. “Let us not mince words,” he said. “We need to deal with the cancer of corruption.”5 He had placed the issue squarely on the development agenda for the first time at a multilateral institution. Peter Eigen, chairman of Transparency International, calls the World Bank “the most powerful force against corruption in the world nowadays.”6 The 1997 Asian financial crisis had rammed home the idea that economic liberalization is not enough if it is not accompanied by good governance. Government does not need sweeping away, it needs fixing. The worst disasters in postindependence Angola—civil war, hyperinflation, and corruption—came not from overly strong government, but from government weakness—above all, weak military control and a fragmented economic system with out-of-control spending.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

The world has about twenty economically productive economies, with a total population of around 800 million, of which 300 million live in North America, a slightly larger number in Western Europe, and the remainder in Asia and Australia. It is fashionable to adopt one or other of these rich countries as the current exemplar of success-Japan took that role in the 1980s. As the Japanese sun set after 1989, the performance of the German economy was applauded, and then as that country struggled with the burden of reunification, attention turned to the Asian tigers. After the 1997 Asian financial crisis, the United States assumed the role of the most admired economy for economic commentary and business gurus. But, as I shall describe in chapter 4, differences in performance among these twenty countries are small relative to the differences between these twenty and the rest of the world. The division between rich and poor states is sharp and has been enduring. China is still Culture and Prosperity {17} extremely poor, but the extraordinary achievements of Chinese people outside China, and increasingly within China, may change this balance of the world economy in the twenty-first century.

Stock Market Wizards: Interviews With America's Top Stock Traders by Jack D. Schwager

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Asian financial crisis, banking crisis, barriers to entry, beat the dealer, Black-Scholes formula, commodity trading advisor, computer vision, East Village, Edward Thorp, financial independence, fixed income, implied volatility, index fund, Jeff Bezos, John Meriwether, John von Neumann, locking in a profit, Long Term Capital Management, margin call, money market fund, Myron Scholes, paper trading, passive investing, pattern recognition, random walk, risk tolerance, risk-adjusted returns, short selling, Silicon Valley, statistical arbitrage, the scientific method, transaction costs, Y2K

., option premiums), which may be higher or lower than the historical volatility, is called the implied volatility. INDEX accounting, 84, 89, 91, 94, 324 Blake, Gil, 189, 197-98 Bloomberg financial services, 57, 59 acquisition finance, 250-52, 253 Advanced Research Projects Agency (ARPA), 262 AIDS drugs, 1 74 Amazon.com, 150-52, 272-73, 323 America Online (AOL), 43-44, 235, 259 Amerigon, 62 arbitrage, 132-33, 255-56, 267, 284 ARPAnet, 262 Asian financial crisis, 18 assets: growth of, 23-24, 207, 312-13 liquidation of, ]65 return of, ], 31 transfer of, 189 value of, 41, 63, 248-49, 253 audits, 84,91 Balance Bars, 66 balance sheets, 42, 51, 85, 268 Bankers Trust, 57, 58 banking, 141, 243-44, 249 Bombay (clothing store), 67-68 bonds: convertible, 257 government, 8, 247-48 illiquid, 7, 8, 25 interest rates and, 9, 24, 67, 105, 133-34, 135, 269, 277 junk, 82 market for, 9-10, 1 10-1 1, 144-45, 285, 309 price of, 7-8, 110-11, 144-45, 285 book value, 44, 149, 150, 165, 167 Brandywine Fund, 58-59 brokerage firms, 55-56, 61-62 Buffett, Warren, 40, 42, 157 business plans, 68-69, 91, 94, 1 18, 122, 316, 324 Business Week, \27n Canada, 1-6, 9-10, 36 capital: bankruptcy, 12-14, 24, 105-6, 122, 139, 145-46, appreciation of, 23 loss of, 68 163 Bannister, Roger, 291 Bear Stearns, 127, 131, 135-36, 138, 142 Beat the Dealer (Thorpe), 266 Beat the Market (Thorpe), 266 Bender, John, 221-38 background of, 221-25 fund managed by, 221, 222 losses of, 225 as novice trader, 225-27 profits of, 221-22, 234 strategy of, 221, 226-38, 303, 304, 306, 312 Bezos, Jeff, 272-73 preservation of, 44, 141, 217 venture, 10, 205, 207, 222, 303 capitalization: large, 34, 43-44, 150, 198-99, 320 medium, 58 revenue vs., 36-37, 45, 52 small, 24, 47, 57, 58, 59, 68, 69, 78, 198-99, 281 for trading, 10, 114-19, 120, 142, 146, 147,205, 207, 222, 303 cash flow, 43, 44, 45, 51, 149, 248 catalysts, 44-46, 52, 60, 61, 62-63, 89, 94, 114, bid/ask differentials, 134-35 215-17,220, 279-81, 307, 325 Black & Decker, 62-63 central processing unit (CPU), 261 blackjack, 266-67 Black-Scholes model, 221, 227-34 certificates, stock, 69-70 chart patterns, 181-84 331 INDEX chief executive officers (CEOs), 49, 91, 241, 244-45, 250 Cook, Marvin, 95, 96, 123-24, 126 Cook, Terri, 97, 99, 106 funds managed by, 128-29, 138, 142-47 Ingram's, 272 as novice trader, 127-38 initial public offerings (IPOs), 24, 25, 250-52, chief financial officers (CFOs), 57, 58, 59, 60, 62, 64, Cramer's commentary, 218 67, 71, 72,94, 142, 324 Church, George J., 320 Cisco, 22 Cray, Seymour, 261-62 profits of, 128-29, 132, 141-42, 147 strategy of, 138-47, 252, 300, 301, 304, 305, 306 279-81 innovation, 147 currency trading, 5, 9, 202-3 Cyrus J.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

(He is just one of many experts who worry about the market-distorting effects of the Fed’s unprecedented program of asset buying and low interest rates, which reached an apex in the wake of the 2008 crisis.) “Easy money monetary policy is the best reward in the world for Wall Street. After all, it’s mainly the rich who benefit from a rising stock market.”58 Although markets boomed under Greenspan, they also went bust more than ever before. The crash of 1987, the S&L crisis of 1989, the Mexican peso collapse of 1994, the Asian financial crisis of 1997, the larger emerging-market crisis of 1998, and the dot-com boom and bust all happened on his watch. Each time the economy faltered as a result, Greenspan would lower rates to boost lending. (He used this tactic so reliably, in fact, that Wall Street bankers began calling it the “Greenspan put”—a caustic term that encapsulated their belief that the Fed would bail them out no matter what.)


pages: 654 words: 120,154

The Firm by Duff McDonald

Asian financial crisis, borderless world, collective bargaining, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, family office, financial independence, Frederick Winslow Taylor, income inequality, invisible hand, Jeff Bezos, Joseph Schumpeter, laissez-faire capitalism, Mahatma Gandhi, new economy, pets.com, Ponzi scheme, Ralph Nader, risk tolerance, risk-adjusted returns, shareholder value, Silicon Valley, Steve Jobs, supply-chain management, The Nature of the Firm, young professional

That officer: Idi Amin, the future tyrant.2 While the family did return to Canada—Barton spent the first eleven years of his McKinsey career in the Toronto office—the Ugandan experience had given him wanderlust, and Barton jumped at the chance to move first to Sydney, Australia, and then Seoul, South Korea, when the firm was having trouble finding partners to staff that office. Almost as soon as he arrived, the Asian financial crisis hit, dealing a severe blow to the Korean banking system. For Barton, though, the crisis was a bit of a godsend: With thirty-four of the country’s banks insolvent, his first big project was to help Korea restructure its entire banking system. “The public sector work was exciting,” he recalled. “And then when the entire region was on the move, it was totally enthralling.”3 Barton later ran the firm’s Asian operations out of its Shanghai office before moving to London upon his election as managing director.


pages: 1,509 words: 416,377

Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty by Bradley K. Martin

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anti-communist, Asian financial crisis, colonial rule, cuban missile crisis, Deng Xiaoping, failed state, four colour theorem, illegal immigration, informal economy, kremlinology, land reform, means of production, Mikhail Gorbachev, Potemkin village, profit motive, RAND corporation, Ronald Reagan, special economic zone, stakhanovite, UNCLOS, upwardly mobile, uranium enrichment, women in the workforce, zero-sum game

In fact, Japanese rivers are short and not especially mighty—a big reason why the country had chosen to emphasize nuclear power. By looking through Japanese product catalogs, Kim had discovered the installment plan. “How long have they been using this method of payments?” he asked his visitors from Japan. “Even shoddy products are being sold on the installment plan. It appears that the installment plan is due to slow sales.” His characterizations of South Korea, which at the time was suffering from a severe Asian financial crisis that had begun in 1997, were full of exaggeration and misrepresentation—perhaps simply his wishful thinking: “The real ruler of South Korea is the United States. Today South Korea is in turmoil politically and economically. Seoul officials are trying to restore economic stability but I doubt they will make it.” Of course, following that economic rough patch, they did make it. Revealing his faulty perception, Kim observed that, after having prospered “for about ten years starting in 1988,” the South Korean devils were “broke and dirt poor.”

(Only later would it become clear just how accurate Pyongyang had been in saying this was Kim Dae-jung’s show.) News of the summit announcement suggested that Kim Jong-il had looked over the possibilities for fixing his busted economy and realized that it could hardly be done without the participation of the estranged but filthy-rich Koreans living south of the Demilitarized Zone—-who by that time had shown their staying power by weathering the Asian financial crisis. Hyundai, with its tour cruises to Mount Kumgang, had given Pyongyang a tantalizing sample of just how much help the South could provide if relations improved. And the basic strategy embodied in both Kim Dae-jung’s sunshine policy and the South Korean–American-Japanese “Perry process,” named after the former defense secretary, was to combine aid with credible assurances of domestic non-interference and hook Pyongyang on peaceful coexistence.


pages: 351 words: 102,379

Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves by Andrew Ross Sorkin

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affirmative action, Asian financial crisis, Berlin Wall, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Fall of the Berlin Wall, fear of failure, fixed income, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Mikhail Gorbachev, money market fund, moral hazard, NetJets, Northern Rock, oil shock, paper trading, risk tolerance, rolodex, Ronald Reagan, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, value at risk, éminence grise

In late 1997, the so-called Asian flu became a pandemic, and after Thailand’s currency crashed, setting off a financial chain reaction, Cassano began looking for some safe-haven investments. It was during that search that he met with some bankers from JP Morgan who were pitching a new kind of credit derivative product called the broad index secured trust offering—an unwieldy name—that was known by its more felicitous acronym, BISTRO. With banks and the rest of the world economy taking hits in the Asian financial crisis, JP Morgan was looking for a way to reduce its risk from bad loans. With BISTROs, a bank took a basket of hundreds of corporate loans on its books, calculated the risk of the loans defaulting, and then tried to minimize its exposure by creating a special-purpose vehicle and selling slices of it to investors. It was a seamless, if ominous, strategy. These bond-like investments were called insurance: JP Morgan was protected from the risk of the loans going bad, and investors were paid premiums for taking on the risk.


pages: 584 words: 187,436

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

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Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, John Meriwether, Kenneth Rogoff, Long Term Capital Management, margin call, market bubble, market clearing, market fundamentalism, merger arbitrage, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, pattern recognition, Paul Samuelson, pre–internet, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs

W. Jones. Julian Robertson allowed me to read all his monthly letters to investors, spanning the twenty-year life of his Tiger fund; spiced with observations about fur-wearing men in Aspen and the difficulty of lowering one’s body temperature after a tennis match in Hong Kong, the two fat binders of Roberston’s letters were a book in themselves. Rodney Jones kept almost daily notes of the Asian financial crisis, allowing me to reconstruct the Soros funds’ role in Thailand, Indonesia, and South Korea in more detail than would have been possible based on interviews alone. Paul Tudor Jones wrote nocturnal e-mails that illustrated his thought process brilliantly. John Paulson’s memo to his investors laid out the logic of betting against the credit bubble so clearly that it makes you wonder how anyone could have been on the other side.

Analysis of Financial Time Series by Ruey S. Tsay

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Asian financial crisis, asset allocation, Bayesian statistics, Black-Scholes formula, Brownian motion, capital asset pricing model, compound rate of return, correlation coefficient, data acquisition, discrete time, frictionless, frictionless market, implied volatility, index arbitrage, Long Term Capital Management, market microstructure, martingale, p-value, pattern recognition, random walk, risk tolerance, short selling, statistical model, stochastic process, stochastic volatility, telemarketer, transaction costs, value at risk, volatility smile, Wiener process, yield curve

The -step ahead forecast of the covariance between a1t and a2t is ρ̂21 [σ11,h ( )σ22,h ( )]0.5 , where ρ̂21 is the estimate of ρ21 and σii,h ( ) are the elements of Ξ∗h ( ). Example 9.1. As an illustration, consider the daily log returns of the stock market indexes for Hong Kong and Japan from January 1, 1996 to October 16, 1997 for 469 observations. The indexes are dollar denominated and the returns are in percentages. We select the sample period to avoid the effect of Asian financial crisis, -8 -4 log-rtn 0 2 4 6 (a) Hong Kong 0 100 200 300 400 300 400 days -4 -2 log-rtn 0 2 4 (b) Japan 0 100 200 days Figure 9.1. Time plots of daily log returns in percentages of stock market indexes for Hong Kong and Japan from January 1, 1996 to October 16, 1997: (a) the Hong Kong market, and (b) the Japanese market. 366 MULTIVARIATE VOLATILITY MODELS which hit the Hong Kong Market on October 17, 1997.


pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

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Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, capital controls, complexity theory, computer age, computerized trading, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, Induced demand, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, John Markoff, knowledge economy, knowledge worker, labor-force participation, labour market flexibility, labour mobility, laissez-faire capitalism, Leonard Kleinrock, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Robert Metcalfe, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, the new new thing, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl, zero-sum game

Kepel, G. (ed.) (1993) Les Politiques de Dieu, Paris: Seuil. Khoury, Sarkis and Ghosh, Alo (1987) Recent Developments in International Banking and Finance, Lexington, MA: D.C. Heath. Kiesler, Sara (ed.) (1997) The Culture of the Internet, Hillsdale, NJ: Erlbaum. Kim, E.M. (1989) “From domination to symbiosis: state and chaebol in Korea”, Pacific Focus, 2: 105–21. Kim, Jong-Cheol (1998) “Asian financial crisis and the state”, unpublished MA thesis, Berkeley, CA: University of California, Department of Sociology. Kim, Kyong-Dong (ed.) (1987) Dependency Issues in Korean Development, Seoul: Seoul National University Press. Kimsey, Stephen (1994) “The virtual flight of the cyber-trader”, Euromoney, June: 45–6. Kincaid, A. Douglas and Portes, Alejandro (eds) (1994) Comparative National Development: Society and Economy in the New Global Order, Chapel Hill, NC: University of North Carolina Press.


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Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

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Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, Atahualpa, banking crisis, barriers to entry, Berlin Wall, blood diamonds, British Empire, centre right, clean water, collapse of Lehman Brothers, colonial rule, conceptual framework, crony capitalism, deindustrialization, Deng Xiaoping, double entry bookkeeping, Edward Snowden, Erik Brynjolfsson, European colonialism, facts on the ground, failed state, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gini coefficient, Hernando de Soto, Home mortgage interest deduction, income inequality, information asymmetry, invention of the printing press, iterative process, knowledge worker, land reform, land tenure, life extension, low skilled workers, manufacturing employment, means of production, Menlo Park, Mohammed Bouazizi, Monroe Doctrine, moral hazard, new economy, open economy, out of africa, Peace of Westphalia, Port of Oakland, post-industrial society, Post-materialism, post-materialism, price discrimination, quantitative easing, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, Scientific racism, Scramble for Africa, Second Machine Age, Silicon Valley, special economic zone, stem cell, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, too big to fail, trade route, transaction costs, Tyler Cowen: Great Stagnation, Vilfredo Pareto, women in the workforce, World Values Survey, zero-sum game

Notwithstanding the clear limits to the radius of the national identity that the Indonesian state has been able to impose, the government has achieved a remarkable degree of national integration for a region that was not remotely a single nation one hundred years earlier. Indeed, Indonesian identity by the 1990s had become sufficiently secure that when the country as a whole transitioned to democracy after the Asian financial crisis in the late 1990s, it was able to permit a substantial devolution of power to its provinces and localities without fear of further fragmentation. Indonesia remains a highly fractured country, as communal violence against the Chinese and Christian communities and other minorities continues. Levels of corruption remain high as well. But all success is relative: given the kind of ethnic, religious, and regional fractionalization with which the country started, its nation-building success is quite remarkable.