German hyperinflation

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pages: 381 words: 101,559

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

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In round after round of devaluation and default, the major economies of the world raced to the bottom, causing massive trade disruption, lost output and wealth destruction along the way. The volatile and self-defeating nature of the international monetary system during that period makes Currency War I the ultimate cautionary tale for today as the world again confronts the challenge of massive unpayable debt. Currency War I began in 1921 in Weimar Germany when the Reichsbank, Germany’s central bank, set about to destroy the value of the German mark through massive money printing and hyperinflation. Presided over by Reichsbank head Dr. Rudolf von Havenstein, a Prussian lawyer-turned-banker, the inflation proceeded primarily through the Reichsbank’s purchases of bills from the German government to supply the government with the money needed to fund budget deficits and government spending. This was one of the most destructive and pervasive monetary debasements ever seen in a major developed economy.

Economic historians customarily treat the 1921–1924 hyperinflation of the Weimar Republic separately from the worldwide beggar-thy-neighbor competitive devaluations of 1931–1936, but this ignores the continuity of competitive devaluations in the interwar period. The Weimar hyperinflation actually achieved a number of important political goals, a fact that had repercussions throughout the 1920s and 1930s. Hyperinflation unified the German people in opposition to “foreign speculators” and it forced France to show its hand in the Ruhr Valley, thus creating a case for German rearmament. Hyperinflation also evoked some sympathy from England and the United States for alleviation of the harshest demands for reparations emanating from the Versailles Treaty. While the collapse of the mark was not directly linked to the value of reparations payments, Germany could at least argue that its economy had collapsed because of hyperinflation, justifying some form of reparations relief. The currency collapse also strengthened the hand of German industrialists who controlled hard assets in contrast to those relying solely on financial assets.

These industrialists emerged from the hyperinflation more powerful than before because of their ability to hoard hard currency abroad and buy up assets of failed enterprises on the cheap at home. Finally, the hyperinflation showed that countries could, in effect, play with fire when it came to paper currencies, knowing that a simple resort to the gold standard or some other tangible asset such as land could restore order when conditions seemed opportune—exactly what Germany did. This is not to argue that German hyperinflation in 1922 was a carefully thought-out plan, only that hyperinflation can be used as a policy lever. Hyperinflation produces fairly predictable sets of winners and losers and prompts certain behaviors and therefore can be used politically to rearrange social and economic relations among debtors, creditors, labor and capital, while gold is kept available to clean up the wreckage if necessary.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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Other Mittel-European countries, such as Austria, Hungary, and Poland, experienced hyperinflationary episodes at the same time, and none of these episodes was due to the enactment of Keynesian policies. Their common origins lay instead in the fact that World War I had been financed through debt rather than through taxes, which lowered postwar exchange rates and made imports more expensive, which in turn fostered inflation. The inflation pent-up from that earlier period ebbed and flowed for almost a decade. Second, though the German hyperinflation was caused by government policy, it was intimately bound up with the desire of the German government to break the economic stranglehold of the war reparations that it owed to France under the Treaty of Versailles. France wanted Germany to pay off its war reparation in either gold-backed marks or foreign currencies. But for Germany to earn foreign currency when its own exchange rate was falling required more and more marks, further stoking inflation.

As Fred Block put it with justified irony, “The American contribution to … the problem was to lend Germany huge sums of capital, which were then used to finance reparations payments.”13 If you think this sounds a little like continually giving the European periphery loans that those countries can never hope to pay back because of their already high debt burdens, again, you would not be completely wrong. The whole system stayed afloat, after the German hyperinflation of 1923, for about four years, until United States capital exports slowed down as a result of the Wall Street boom of 1928 and the subsequent crash of 1929.14 Alarmed by the booming stock market, the US Federal Reserve raised interest rates in 1928 to cool domestic demand. This had the effect of reversing the flow of capital to Europe as US capital came home to take advantage of these higher interest rates, which unexpectedly further stoked the stock market boom.15 After all, why put your money in Germany when you can make 15 percent buying shares in an investment trust and 7 percent in a bank deposit in the USA?

Defending the Franc—But Not France: French Austerity Policies 1919–1939 Despite being on the victorious side in the First World War, France, among all the Allied powers, suffered the most wartime destruction of persons, property, and wealth. So much so that getting the Germans to pay for all the damage constituted a significant part of forward budgetary planning. That the Germans did not want to pay and, after the hyperinflation, basically didn’t pay, was to prove a significant problem for the French economy going forward. The boom-slump-stabilization pattern that characterized the world economy in the early 1920s hit France in a peculiar way. By relying on German reparations to supply a large portion of their budget, when payments were not forthcoming, the resulting budget deficits had to be met with higher interest rates to attract capital.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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Sometimes the inflation cure can be worse than the disease. One reason why Bryan lost the 1896 election was that his campaign had little appeal to industrial workers for whom higher food prices meant a lower standard of living; outside the South (then a Democratic stronghold) Bryan carried only one city with more than 100,000 inhabitants. Inflation penalizes the thrifty. In the chaos that followed the end of the First World War, German hyperinflation, designed to erode the burden of the reparations imposed by the Treaty of Versailles, destroyed the savings of the middle class and paved the way for the rise of Hitler. Even bankers become less concerned with the idea of sound money when their own survival is at stake. They are quick to call for governments and central banks to cut interest rates and to create as much new money as is needed to stabilize the financial system.

Schacht’s plan, which had echoes of the French revolutionary issue of assignats, declared that the new currency was backed by the value of German land. This was a wholly illusory promise, but in the short term, it didn’t matter; the Rentenmark was an acceptable means of exchange. In its own way, though, it set a precedent. Paper money did not have to be backed by gold for citizens to believe in it. In the short term, however, German hyperinflation only increased the belief that politicians were not to be trusted with paper money, any more than an alcoholic should be left in charge of the drinks cabinet. It was time to return to the eternal verities of the gold standard, to reassert the rights of creditors. If the gold standard was to be restored, the key country was Britain. Even though the country’s wealth had declined drastically, it was still Europe’s most significant financial power.

The US was running a trade surplus and accumulating gold, but it was not required to adjust its policy by raising its prices to make its goods less competitive. All the adjustment was forced on to the deficit countries, a process that will seem familiar to modern-day residents of Greece and Ireland. In 1924, a deal had been made on reparations, a running sore throughout the early 1920s. Under US leadership, German reparations payments had been lowered and extended. As the German economy stabilized after hyperinflation, US banks became willing to lend to Germany. In effect, money was being recycled round the system; US banks lent to Germany, which allowed the Germans to pay the reparations bill, allowing Britain and France to meet their US war debts. But from 1928 onwards, this lending slowed and then ceased. Initially, higher US interest rates meant that American banks wanted to keep their capital at home; then the 1929 Wall Street crash and subsequent crisis made them afraid to lend abroad, and Germany lost a key source of financing.


pages: 275 words: 82,640

Money Mischief: Episodes in Monetary History by Milton Friedman

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Bretton Woods, British Empire, currency peg, double entry bookkeeping, fiat currency, financial innovation, fixed income, floating exchange rates, full employment, German hyperinflation, income per capita, law of one price, money market fund, oil shock, price anchoring, price stability, transaction costs

There also still existed old czarist paper rubles. Since there was small prospect that a czar would return to redeem the promise printed on the czarist rubles, it is remarkable that they were still being accepted as substitute currency and had retained their purchasing power. They retained their value precisely because no new czarist rubles could be created, and hence the quantity available to circulate was fixed. During the German hyperinflation after World War I, currencies of foreign countries served as a substitute currency. After World War II, the Allied occupational authorities exercised sufficiently rigid control over monetary matters, in the course of trying to enforce price and wage controls, that it was difficult to use foreign currency. Nonetheless, the pressure for a substitute currency was so great that cigarettes and cognac emerged as substitute currencies and attained an economic value far in excess of their value purely as goods to be consumed.

The quantity of commodity money is subject to similar physical limits, though it has at times grown more rapidly than output in general, as the examples of the flood of precious metals from the New World in the sixteenth and seventeenth centuries and of gold in the nineteenth century illustrate. The modern forms of money—paper and bookkeeping entries—are subject to no such physical limits. During the German hyperinflation after World War I, hand-to-hand money increased at the average rate of more than 300 percent a month for more than a year, and so did prices. During the Hungarian hyperinflation after World War II, hand-to-hand money increased at the average rate of more than 12,000 percent a month for a year, and prices at the even higher rate of nearly 20,000 percent a month (see Cagan 1956, p. 26). During the moderate inflation in the United States from 1969 to 1979, the quantity of money increased at the average rate of 9 percent a year and prices at the average rate of 7 percent a year.


pages: 708 words: 196,859

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed

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Albert Einstein, anti-communist, bank run, banking crisis, Bretton Woods, British Empire, capital controls, central bank independence, centre right, credit crunch, currency manipulation / currency intervention, Etonian, full employment, German hyperinflation, index card, invisible hand, Lao Tzu, large denomination, Long Term Capital Management, margin call, market bubble, Mexican peso crisis / tequila crisis, mobile money, money market fund, moral hazard, new economy, open economy, Plutocrats, plutocrats, price stability, purchasing power parity, pushing on a string, rolodex, the market place

But instead of trying to rebuild its finances, the German government adopted a policy of systematic inflation, in part to meet reparations, and thus launched itself on that voyage of fantasy into the outer realms of the monetary universe. FIGURE 1 Britain and France lay somewhere in between. During the war, France had expanded its currency by 350 percent, pushing up prices equivalently. After the war, the Banque de France avoided German-style hyperinflation and currency collapse by putting a lid on the issue of new currency. However, France continued to flirt with disaster by running budget deficits of $500 million and was saved once again only by the remarkable thriftiness of its people. While there was a group within the Banque who harbored the fantasy of reversing the more than threefold price increase and returning the franc to gold at its prewar parity, most rational observers agreed that when France returned to the gold standard, it would have to be at a radically lower exchange rate—and even that still seemed many years away.

Without such a discipline to protect them, central banks would inevitably come under constant pressure to help finance their governments in much the same way that they had done during the war with all the inflationary consequences that were still all too apparent. The link with gold was the only sure defense against such a downward spiral in the value of money. His reaction to the Tract was colored by his personal dealings with Keynes. After the war, Norman, agreeing with much of Keynes’s argument on reparations, had consulted him at the height of the German hyperinflation. But Keynes’s vocal opposition to the war-debt settlement with the United States, which Norman had been responsible for engineering, created a rift. Norman, acutely sensitive to public criticism, harbored grudges for a long time—“the most vindictive man I have ever known,” according to one close friend. Thereafter, though their social circles overlapped somewhat and though Keynes, for all his youthful iconoclasm, was already widely recognized as the most brilliant monetary economist of his generation, Norman studiously ignored him professionally, and refused ever to invite him to advise the Bank.

Though only an observer, without any official status, Logan had done more than almost anyone else to keep the United States engaged in Continental affairs and was viewed as the unofficial U.S. ambassador to Europe. As the committee began its deliberations, it found itself facing two tasks. The first was to persuade the French to accede to a lower payment schedule, at least temporarily, to which they would only agree if stringent foreign controls were imposed on the management of German finances. The French saw German hyperinflation as part of a deliberate campaign by its officials to wreck their own economy and thus prevent reparations from being paid. Some mechanism for preventing any future sabotage of Germany’s finances had to be put in place. The second task was therefore to persuade the Germans to accept such an imposition. The first task became much easier when within a week of the delegation’s arrival, France was plunged into its own financial crisis.


pages: 471 words: 124,585

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

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Moreover, those in charge of Weimar economic policy in the early 1920s felt they had little incentive to stabilize German fiscal and monetary policy, even when an opportunity presented itself in the middle of 1920.59 A common calculation among Germany’s financial elites was that runaway currency depreciation would force the Allied powers into revising the reparations settlement, since the effect would be to cheapen German exports relative to American, British and French manufactures. It was true, as far as it went, that the downward slide of the mark boosted German exports. What the Germans overlooked was that the inflation-induced boom of 1920-22, at a time when the US and UK economies were in the depths of a post-war recession, caused an even bigger surge in imports, thus negating the economic pressure they had hoped to exert. At the heart of the German hyperinflation was a miscalculation. When the French cottoned on to the insincerity of official German pledges to fulfil their reparations commitments, they drew the conclusion that reparations would have to be collected by force and invaded the industrial Ruhr region. The Germans reacted by proclaiming a general strike (‘passive resistance’), which they financed with yet more paper money. The hyperinflationary endgame had now arrived.

‘Inflation is a crowd phenomenon in the strictest and most concrete sense of the word,’ Elias Canetti later wrote of his experiences as a young man in inflation-stricken Frankfurt. ‘[It is] a witches’ sabbath of devaluation where men and the units of their money have the strongest effects on each other. The one stands for the other, men feeling themselves as “bad” as their money; and this becomes worse and worse. Together they are all at its mercy and all feel equally worthless.’60 The price of hyperinflation: a German billion mark note from November 1923 Worthlessness was the hyperinflation’s principal product. Not only was money rendered worthless; so too were all the forms of wealth and income fixed in terms of that money. That included bonds. The hyperinflation could not wipe out Germany’s external debt, which had been fixed in pre-war currency. But it could and did wipe out all the internal debt that had been accumulated during and after the war, levelling the debt mountain like some devastating economic earthquake.

Only entrepreneurs were in a position to insulate themselves by adjusting prices upwards, hoarding dollars, investing in ‘real assets’ (such as houses or factories) and paying off debts in depreciating banknotes. The enduring economic legacy of the hyperinflation was bad enough: weakened banks and chronically high interest rates, which now incorporated a substantial inflation risk premium. But it was the social and political consequences of the German hyperinflation that were the most grievous. The English economist John Maynard Keynes had theorized in 1923 that the ‘euthanasia of the rentier’ through inflation was preferable to mass unemployment through deflation - ‘because it is worse in an impoverished world to provoke unemployment than to disappoint the rentier’.61 Yet four years earlier, he himself had given a vivid account of the negative consequences of inflation: By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.


pages: 497 words: 153,755

The Power of Gold: The History of an Obsession by Peter L. Bernstein

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Albert Einstein, Atahualpa, Bretton Woods, British Empire, California gold rush, central bank independence, double entry bookkeeping, Edward Glaeser, falling living standards, financial innovation, floating exchange rates, Francisco Pizarro, German hyperinflation, Hernando de Soto, Isaac Newton, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, large denomination, liquidity trap, long peace, money: store of value / unit of account / medium of exchange, old-boy network, Paul Samuelson, price stability, profit motive, random walk, rising living standards, Ronald Reagan, seigniorage, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route

It made no sense to keep shipping one-dollar bills when ten-dollar bills would buy what one-dollar bills had once bought, and the ten-dollar bills would take up one-tenth the cargo space-and in time one-hundred-dollar notes could replace ten-dollar notes. Yet the currency orders never kept pace with the inflation. The planes continued to be crammed with excessive amounts of low-denomination notes occupying cargo space desperately needed for food, oil, weapons, and ammunition. Similar myopia in adjusting denominations to price increases explains the stories about people running around with wheelbarrows full of currency in the German hyperinflation of the 1920s. About one thousand years after Qin, during the reign of Hien Tsung (806-821), a severe shortage of copper induced the emperor to use sheets of paper for money in place of bronze coins. If there was no point in making payments with useful stuff, the emperor reasoned, why not go all the way and adopt paper? This newfangled idea appears to have been more of a historical accident than a stroke of financial genius, but the long perspective of history suggests that Hien Tsung's inadvertent innovation should join printing, gunpowder, and the compass among China's most enduring contributions to the civilization of the world.

Although Norman spoke fluent French, he insisted on speaking English at his meetings with Moreau; this meant that Moreau always had to have an interpreter present. Norman, who had spent one period of his youth in Germany, was always partial to Germans and antagonistic toward the French; his warm friendship with the Reichsbank president, Hjalmar Horace Greeley Schacht, only added to the friction between him and Moreau. Schacht was a powerful and brilliant financier who had been primarily responsible for ending the wild German hyperinflation of the early 1920s. In the later 1930s, he was both President of the Reichsbank and Minister of Economics under Hitler, but rivalry with Hermann Goering led to his dismissal in 1939. He was imprisoned after the assassination attempt on Hitler on July 20, 1944, and also faced the war crimes tribunal in Nurnberg after World War 11-where he was acquitted. He died in 1970, at the age of 93. At their first confrontation a month after Moreau's appointment, Norman made no effort to disguise his dislike for the French, although he did emphasize that most of his animosity was directed at the politicians.


pages: 194 words: 59,336

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by J L Collins

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asset allocation, Bernie Madoff, compound rate of return, diversification, financial independence, full employment, German hyperinflation, index fund, money market fund, nuclear winter, passive income, payday loans, risk tolerance, Vanguard fund, yield curve

What is not so encouraging is that a deflationary depression like that of 1929 is only one of the two possible economic disasters that can destroy wealth on a major scale. The other is Hyperinflation. Here in the U.S., we haven’t had to deal with this monster since the Revolutionary War way back in 1776. But it destroyed Zimbabwe’s economy as recently as 2008. Hungary had the worst case of it in history when in July 1946, the peak inflation rate reached 41.9 quadrillion percent, and many credit the German hyperinflation of the 1920s with ushering the Nazis to power in the 1930s. Hyperinflation is very bad news—every bit as destructive as deflation—and it is exactly what it sounds like: Inflation running out of control. A little inflation can be a very healthy thing for an economy. It allows for prices and wages to expand. It keeps the economic wheels greased and running smoothly. It is the antidote to looming deflationary depressions.

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

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Here, the black-and-white photos of Wörgl’s long-departed citizens going about their daily lives seem strikingly ordinary, given the backdrop 175 176 RETHINKING MONEY of this extraordinary moment in time. To appreciate the full panorama of what happened in German-speaking Europe in the years between the two world wars, besides the earlier example of the WIR, a look at Wörgl and the Wära provide some important insights. Mostly forgotten today is that the large number of cooperative currencies arose in the aftermath of the German hyperinflation of the 1920s, when the Reichsmark, the German currency at the time, became worthless. Similarly, there was an explosion of local currencies in both Western Europe and North America following the economic crash of 1929 and, more recently, in Argentina, following the collapse of its national currency in 2001. And now, at present, there is a resurgence of cooperative currencies and other innovations as the shadow of recession looms, but the dire consequences and tough lessons from these experiences seem to have lapsed from memory.


pages: 473 words: 132,344

The Downfall of Money: Germany's Hyperinflation and the Destruction of the Middle Class by Frederick Taylor

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Albert Einstein, anti-communist, banking crisis, Berlin Wall, British Empire, central bank independence, centre right, collective bargaining, falling living standards, fiat currency, fixed income, full employment, German hyperinflation, housing crisis, Internet Archive, Johann Wolfgang von Goethe, mittelstand, offshore financial centre, Plutocrats, plutocrats, quantitative easing, rent control, risk/return, strikebreaker, trade route, zero-sum game

10 Consequences 11 Putsch 12 The Rally 13 Goldilocks and the Mark 14 Boom 15 No More Heroes 16 Fear 17 Losers 18 Kicking Germany When She’s Down 19 Führer 20 ‘It Is Too Much’ 21 The Starving Billionaires 22 Desperate Measures 23 Everyone Wants a Dictator 24 Breaking the Fever 25 Bail-out Afterword Appendix Acknowledgements Image Section Bibliography Notes A Note on the Author By the Same Author Also by Frederick Taylor Introduction This book seeks to provide a narrative description of the origins, progression and effects of the German hyperinflation and to place this extraordinary phenomenon in the turbulent, ominous human context of the world in which it occurred. It is not by any means a book about economics in the narrow sense. The ills of the German currency between 1914 and 1924 arose out of, and then fed back into, the ills of the country itself. It contains elements of economic explanation, without which there would be no background to the story.


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

And the response to these fiscal crises—frantic, savage attempts to slash spending—has pushed unemployment all around Europe’s periphery to Great Depression levels, and seems at the time of writing to be pushing Europe back into outright recession. The Politics of Despair The ultimate costs of the Great Depression went far beyond economic losses, or even the suffering associated with mass unemployment. The Depression had catastrophic political effects as well. In particular, while modern conventional wisdom links the rise of Hitler to the German hyperinflation of 1923, what actually brought him to power was the German depression of the early 1930s, a depression that was even more severe than that in the rest of Europe, thanks to the deflationary policies of Chancellor Heinrich Brüning. Can anything like that happen today? There’s a well-established and justified stigma attached to invoking Nazi parallels (look up “Godwin’s law”), and it’s hard to see anything quite that bad happening in the twenty-first century.


pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game by Lee Munson

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affirmative action, asset allocation, backtesting, barriers to entry, Bernie Madoff, Bretton Woods, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fiat currency, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, High speed trading, housing crisis, index fund, joint-stock company, money market fund, moral hazard, Myron Scholes, passive investing, Ponzi scheme, price discovery process, random walk, risk tolerance, risk-adjusted returns, risk/return, too big to fail, trade route, Vanguard fund, walking around money

Inflation is like being dehydrated—treatable if found early. The second camp is all about fear. It’s true; gold bugs are having their day in the sun with the massive run up in prices since 1999. But they fail to mention the longer-term track record of the metal or the overall purpose for holding the stuff. I find it unclear what their reasoning is outside of the endless chatter of fumbling central banks and parallels to pre-World War II German hyperinflation. Okay, I do get it. Some people want to see the world burn and have the only form of money that has lasted throughout the ages, mainly because you can’t destroy basic elements. Nobody wants to be sitting in line at the corner store with a wheelbarrow of cash when a simple sliver of gold could pay for a loaf of bread. But is gold an investment? I am not sure the case has been made for either camp.

The Armchair Economist: Economics and Everyday Life by Steven E. Landsburg

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Albert Einstein, Arthur Eddington, diversified portfolio, first-price auction, German hyperinflation, Golden Gate Park, information asymmetry, invisible hand, Kenneth Arrow, means of production, price discrimination, profit maximization, Ralph Nader, random walk, Ronald Coase, sealed-bid auction, second-price auction, second-price sealed-bid, statistical model, the scientific method, Unsafe at Any Speed

They might sound unimportant in the grand scheme of things, but the deadweight losses due to inflation are estimated to total about $15 billion per year in the United States, or $60 per American—hardly devastating, but hardly trivial either. In times of very high inflation, the deadweight losses can become enormous. In the Hungarian hyperinflation of 1948, workers were paid three times a day and their spouses were 68 GOOD AND EVIL employed full-time running back and forth between the workplace and the bank, trying to deposit paychecks before they became worthless. During the German hyperinflation that followed World War I, John Maynard Keynes reported that tavern-goers frequently ordered several beers early in the evening— before the price went up. Drinking warm beer can be a hidden cost of inflation. Hollywood screenwriters and denizens of the college lecture circuit periodically rediscover the dramatic potential of a burning dollar bill. Typically the torching is accompanied by impass-sioned commentary— issuing from a sympathetic character on the movie screen or an aging cultural icon in the college gym— about how a dollar bill is nothing more than a piece of paper.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

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3D printing, bank run, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, 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 Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

The Chicago School used the idea of “adaptive expectations” to study people’s reaction to inflation. Adaptive expectations are predicated on the idea that our expectations of what will happen tomorrow are based on an average of today’s events and those of the recent past. If inflation has been creeping up, we would expect it to go on rising further. We would then bring our purchases forward to avert the higher prices; but that would make prices more likely to rise further. During the German hyperinflation, this adaptive behavior occurred during the course of the day so that by the afternoon prices were higher than they had been in the morning. Monetarism undermined the twin pillars of Official Keynesianism. Budget deficits were no longer benign and inflation rather than underemployment was the principal problem market economies had to tackle. Chapter Five DECLINING FORTUNES When World War II was coming to an end and the outcome was certain, attention turned to postwar economic issues.


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

This suspicion is echoed in Johann Wolfgang von Goethe’s Faust, when the demon Mephistopheles tempts the emperor, who is in severe financial distress, to introduce paper money to increase spending and pay off state debt. The device works in the short run but ultimately leads to inflation and ruin. Goethe, writing early in the nineteenth century, was nothing if not prescient. Without paper money, there might have been no German hyperinflation, and perhaps no World War II.1 Failed paper money may be cursed, but successful paper money has long been a cornerstone of the world’s most successful economies. A century and a half before the founding of the Federal Reserve in 1913, American Benjamin Franklin arrived in London, planning to suggest that the British allow the American colonies to create a universal paper money to help pay their share of costs from the Seven Years’ War; the idea did not materialize.2 Ironically, the very American currency Franklin envisioned 250 years ago has now not only come into existence, it has also far surpassed its British counterpart in global import and now constitutes what is perhaps the greatest symbol of American power.


pages: 519 words: 104,396

Priceless: The Myth of Fair Value (And How to Take Advantage of It) by William Poundstone

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availability heuristic, Cass Sunstein, collective bargaining, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, East Village, en.wikipedia.org, endowment effect, equal pay for equal work, experimental economics, experimental subject, feminist movement, game design, German hyperinflation, Henri Poincaré, high net worth, index card, invisible hand, John von Neumann, Kenneth Arrow, laissez-faire capitalism, Landlord’s Game, loss aversion, market bubble, mental accounting, meta analysis, meta-analysis, Nash equilibrium, new economy, Paul Samuelson, payday loans, Philip Mirowski, Potemkin village, price anchoring, price discrimination, psychological pricing, Ralph Waldo Emerson, RAND corporation, random walk, RFID, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, rolodex, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, ultimatum game, working poor

She was charging a markup, but only in marked-down marks. Fisher’s point was that money is just a tool for getting stuff. When prices are stable, we can act as if money and purchasing power are one and the same. When the purchasing power of money varies, it’s necessary to draw a distinction. This is how economists think, at any rate. Regular folks, like the shopkeeper, tend to ignore inflation. The peak year of German hyperinflation was 1923, when prices were doubling every two days. A news photo showed a German woman shoveling marks into her furnace. By then, a pile of burning cash generated more heat than the shrinking pile of firewood it could buy. Fisher nonetheless found that Germans managed to live in partial denial. Their mind was on the prices, not on the stuff. The money illusion is almost always introduced in the context of inflation.

The Future of Money by Bernard Lietaer

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agricultural Revolution, banks create money, barriers to entry, Bretton Woods, clean water, complexity theory, corporate raider, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, Lao Tzu, Mahatma Gandhi, means of production, microcredit, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, reserve currency, Ronald Reagan, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, trade route, transaction costs, trickle-down economics, working poor

You will also see that these experiments were stopped by governments, not because they were not working, but because they were working too well without the need for central government involvement. The path not taken in the 1930’s If your family lived in the 1930s in Western Europe, the US, Canada or Northern Mexico (i.e. the area where the Great Depression hit hardest), you may have heard about the path not taken. In the aftermath of the German hyperinflation period of the 1920s, or of the Crash of 1929 in the other countries, literally thousands of communities started their own currency systems. Your village or town probably used one. The interesting solutions, which were implemented at that time, include a now almost forgotten movement of 'emergency currencies'. There was one overriding objective in all the 1930s complementary currency systems: ensuring that people had the medium of exchange necessary for their activities, to give each other work.


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

GETTY IMAGES The First World War (1914–18) was an intense, all-encompassing struggle in which goverments resorted to paper money. They borrowed unprecedented amounts to spend on armaments. © BETTMANN/CORBIS Ford was a symbol of American industrial might for much of the twentieth century. Ford’s successes in the 1920s were built on the back of an unsustainable consumer credit bubble. GETTY IMAGES German hyperinflation, stoked by paper money, shocked the world during the early 1920s. It has shaped the German preoccupation with a strong currency. © BETTMANN/CORBIS The Wall Street Crash which followed in 1929 rocked the financial world. Wall Street had emerged as the international financial centre after the First World War; its sudden collpase had an equally global impact. GETTY IMAGES The resort where the global financial system was repaired.


pages: 505 words: 142,118

A Man for All Markets by Edward O. Thorp

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3Com Palm IPO, Albert Einstein, asset allocation, beat the dealer, Bernie Madoff, Black Swan, Black-Scholes formula, Brownian motion, buy low sell high, carried interest, Chuck Templeton: OpenTable, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, compound rate of return, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial innovation, George Santayana, German hyperinflation, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Meriwether, John Nash: game theory, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, margin call, Mason jar, merger arbitrage, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, Richard Feynman, risk-adjusted returns, Robert Shiller, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, statistical arbitrage, stem cell, survivorship bias, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

Overall, the index has increased by about 3.6 percent a year, but there are some unusual variations. The index falls (deflation!) after the 1929 crash and stays at a reduced level for the next decade. Then it increases rapidly during World War II and the first postwar years. Although inflation has been moderate in the United States and in most first-world countries most of the time, it is occasionally catastrophic. During the German hyperinflation of 1919–23, the currency declined to one hundred billionth of its starting value (divide by 100,000,000,000). Debtors were freed and lenders were ruined. This level of inflation would reduce the $18 trillion or so US national debt of 2015 to the equivalent of $180. In 2009, the African nation of Zimbabwe experienced a hyperinflation comparable to the German one, with Z-one-trillion bills commonplace.


pages: 407 words: 114,478

The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William J. Bernstein

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asset allocation, Bretton Woods, British Empire, buy low sell high, carried interest, corporate governance, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, diversification, diversified portfolio, Edmond Halley, equity premium, estate planning, Eugene Fama: efficient market hypothesis, financial independence, financial innovation, fixed income, George Santayana, German hyperinflation, high net worth, hindsight bias, Hyman Minsky, index fund, invention of the telegraph, Isaac Newton, John Harrison: Longitude, Long Term Capital Management, loss aversion, market bubble, mental accounting, money market fund, mortgage debt, new economy, pattern recognition, Paul Samuelson, quantitative easing, railway mania, random walk, Richard Thaler, risk tolerance, risk/return, Robert Shiller, Robert Shiller, South Sea Bubble, survivorship bias, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the rule of 72, transaction costs, Vanguard fund, yield curve, zero-sum game

Treasury version, the 30-year “Treasury Inflation Protected Security,” or TIPS, currently yields 3.45%. So no matter how badly inflation rages, the interest payments of these bonds will be 3.45% of the face amount in real purchasing power, and the principal will also be repaid in inflation-adjusted dollars. (These are the equivalent of the gold-backed bonds of the last century.) Third, inflation is a painful, searing experience for the bondholder and is not soon forgotten. During the German hyperinflation of the 1920s, bonds lost 100% of their value within a few months. German investors said, “Never again,” and for the past 80 years, German central banks have carefully controlled inflation by reining in their money supply. American investors, too, were traumatized by the Great Inflation of 1965 to 1985 and began demanding an “inflation premium” when purchasing long-term bonds. For example, long-term corporate bonds currently yield more than 6%, nearly 4% above the inflation rate.


pages: 376 words: 118,542

Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman

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affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, Corn Laws, Fractional reserve banking, full employment, German hyperinflation, invisible hand, labour mobility, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration

The quantity of commodity money is subject to similar physical limits, though, as the examples of tobacco, precious metals from the New World, and gold in the nineteenth century illustrate, commodity money has at times grown far more rapidly than output in general. Modern forms of money—paper and bookkeeping entries—are subject to no physical limits. The nominal quantity, that is, the number of dollars, pounds, marks, or other monetary units, can grow at any rate, and at times has grown at fantastic rates. During the German hyperinflation after World War I, for example, hand-to-hand money grew at the average rate of more than 300 percent a month for more than a year, and so did prices. During the Hungarian hyperinflation after World War II, hand-to-hand money rose at the average rate of more than 12,000 percent per month for a year, and prices at the even higher rate of nearly 20,000 percent a month.10 During the far more moderate inflation in the United States from 1969 to 1979, the quantity of money rose at the average rate of 9 percent per year and prices at the average rate of 7 percent per year.


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

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?

Social Capital and Civil Society by Francis Fukuyama

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Berlin Wall, blue-collar work, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, George Akerlof, German hyperinflation, Jane Jacobs, Joseph Schumpeter, Kevin Kelly, labor-force participation, low skilled workers, p-value, Pareto efficiency, postindustrial economy, principal–agent problem, RAND corporation, Silicon Valley, The Death and Life of Great American Cities, transaction costs, World Values Survey

[FUKUYAMA] Social Capital 469 ample, are bound by a common religion and ethnicity, but are also shaped by common experiences of persecution that create solidarities of a different sort. Many cultural phenomena can have relatively recent political or economic roots: hence the postwar German central bank’s emphasis on a strong Deutschmark and a tough anti-inflationary policy is said to be a direct outcome of the German experience with hyperinflation during the Weimar period. 4 . Norms rooted in nature. Despite the changes in family structure described in the first lecture, kinship remains the most powerful form of social relationship in contemporary societies. As I indicated in Trust, the importance of kinship relative to other kinds of social structures varies considerably from one society to another, but there is no society in which it has completely withered away.


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State of Emergency: The Way We Were by Dominic Sandbrook

anti-communist, back-to-the-land, banking crisis, Bretton Woods, British Empire, centre right, collective bargaining, Corn Laws, David Attenborough, Doomsday Book, edge city, estate planning, Etonian, falling living standards, fear of failure, Fellow of the Royal Society, feminist movement, financial thriller, first-past-the-post, fixed income, full employment, German hyperinflation, mass immigration, moral panic, Neil Kinnock, new economy, New Urbanism, Norman Mailer, North Sea oil, oil shock, Own Your Own Home, sexual politics, traveling salesman, union organizing, upwardly mobile, urban planning, Winter of Discontent, young professional

We must expect chaos, the £ to be worth 1 penny, if we are lucky, and the oil sheiks buying up our industries. A jolly prospect.’30 At one level, the popularity of the Weimar parallel was a classic illustration of the contemporary obsession with the Second World War, which dominated the British imagination like no other historical event. By the end of 1973, indeed, it seemed that almost no economic setback went by without observers reaching for their textbooks on the German hyperinflation of the 1920s, the collapse of Weimar democracy and the rise of National Socialism. As Sir Alec Guinness, who wore the dictator’s uniform for the wildly sensationalist film Hitler: The Last Ten Days (1973), told Time magazine, ‘the situation in England strikes every month a decadent, yes decadent note. All these depressing things. People say, why not get someone else to sort it all out for them … a strong man.’


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The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society by David Wolman

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Bay Area Rapid Transit, Berlin Wall, Bernie Madoff, bitcoin, Bretton Woods, carbon footprint, cashless society, central bank independence, collateralized debt obligation, corporate social responsibility, credit crunch, cross-subsidies, Diane Coyle, fiat currency, financial innovation, floating exchange rates, German hyperinflation, greed is good, Isaac Newton, M-Pesa, Mahatma Gandhi, mental accounting, mobile money, money: store of value / unit of account / medium of exchange, offshore financial centre, Peter Thiel, place-making, placebo effect, Ponzi scheme, Ronald Reagan, seigniorage, Silicon Valley, special drawing rights, Steven Levy, the payments system, transaction costs

Younger Americans today have been so lulled by economic stability that the notion of all prices surging upward is alien. A $100 hot dog or a $10,000 sheet of plywood only reads like a typo because of our good fortune. Still, those images from pathological instances of hyperinflation are plenty searing: banknotes used as wallpaper in Zimbabwe, swept into the gutter in postwar Budapest, or spilling out of wheelbarrows in Germany like so many leaves. One German artist during the Weimar hyperinflation covered a park bench with 100,000-mark notes. He titled the work “Deutsche Bank,” a pun on the German word for bench, which is bank. We can only pray that the same never happens here. Fears about inflation and hyperinflation may not always be rational, but countermeasures against them sure as hell are. In a roundabout way, then, maybe the wise move really is to spend whatever’s necessary to fund small coinage so as to prevent worries about inflation.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, 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, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

The Bank of England was in principle a private institution until it was nationalised in 1946, following the twenty-year governorship of the mentally unbalanced Montagu Norman. The Banque de France, on the other hand, has always been effectively an organ of the French state. The post-war Bundesbank had a different constitutional role: to act as autonomous defender of the integrity of the German currency following that country’s history of hyperinflation. This conflict between French and German views of the role of a central bank feeds into different views of the role of the European Central Bank. France and the majority of Eurozone members wish to use the ECB as an instrument of European economic policy. Germany is determined to maintain the bank’s independence – a provision which at Germany’s insistence is enshrined in the Maastricht Treaty, which established the ECB.


pages: 180 words: 61,340

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

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

But even then, there have been attempts at seeking separate national explanation for the Great Depression. It has been argued in the case of the USA by Milton Friedman that this was a case of central bank failure on the part of the Fed. British explanations rely on overvaluation of the Pound after the 1925 return to the Gold Standard and the resulting shock to exports. German explanations hinge on the aftermath of the hyperinflation of 1923–24, reparations payments and the sudden reversal of US bank credits after the Great Crash.6 But the crisis and the following downward cycle was an international and not a national phenomenon. And this internationalisation of the crash/panic was much more damaging in this crisis than in any previous crisis. Stock markets crashed in Wall Street and this led to a credit squeeze.


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Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

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Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, 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 for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War


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Portfolio Design: A Modern Approach to Asset Allocation by R. Marston

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asset allocation, Bretton Woods, capital asset pricing model, capital controls, carried interest, commodity trading advisor, correlation coefficient, diversification, diversified portfolio, equity premium, Eugene Fama: efficient market hypothesis, family office, financial innovation, fixed income, German hyperinflation, high net worth, hiring and firing, housing crisis, income per capita, index fund, inventory management, Long Term Capital Management, mortgage debt, passive investing, purchasing power parity, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, Silicon Valley, superstar cities, survivorship bias, transaction costs, Vanguard fund

In particular, beginning in 1970 the Morgan Stanley Capital International (MSCI) indexes provided a common methodology for measuring stocks in all of the industrial countries. Of course, it is possible to trace stock markets much earlier than 1970. Indeed, Dimson et al (2002) reports on the stock returns of many industrial countries for the century from 1900 to 2000. But the quality of national indexes varies widely during earlier periods. For example, how reliable do you think German stock indexes were during the hyperinflation of the 1920s or during the period of the second World War? Hardly any emerging stock markets have data prior to the mid1970s. Global emerging market stock market indexes begin in the mid to late 1980s. This chapter will focus on the last four decades of stock market performance in the industrial countries using the MSCI indexes. The next chapter will address the emerging stock markets.


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Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin

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Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, Branko Milanovic, break the buck, Bretton Woods, BRICs, business climate, capital asset pricing model, commoditize, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, land reform, liquidity trap, Long Term Capital Management, McMansion, mega-rich, money market fund, moral hazard, mortgage tax deduction, naked short selling, negative equity, offshore financial centre, Ponzi scheme, price stability, pushing on a string, quantitative easing, RAND corporation, rent control, reserve currency, riskless arbitrage, Ronald Reagan, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, The Great Moderation, the scientific method, time value of money, too big to fail, upwardly mobile, War on Poverty, Yogi Berra, young professional


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, Vilfredo Pareto, We are the 99%, zero-sum game

Despite running large deficits during both world wars (the public debt briefly exceeded 100 percent of GDP in 1918–1920 and 150 percent of GDP in 1943–1944), inflation made it possible in both instances to shrink the debt very rapidly to very low levels: barely 20 percent of GDP in 1930 and again in 1950 (see Figure 4.2).1 Yet the recourse to inflation was so extreme and so violently destabilized German society and economy, especially during the hyperinflation of the 1920s, that the German public came away from these experiences with a strongly antiinflationist attitude.2 That is why the following paradoxical situation exists today: Germany, the country that made the most dramatic use of inflation to rid itself of debt in the twentieth century, refuses to countenance any rise in prices greater than 2 percent a year, whereas Britain, whose government has always paid its debts, even more than was reasonable, has a more flexible attitude and sees nothing wrong with allowing its central bank to buy a substantial portion of its public debt even if it means slightly higher inflation.


pages: 434 words: 135,226

The Music of the Primes by Marcus Du Sautoy

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Ada Lovelace, Andrew Wiles, Arthur Eddington, Augustin-Louis Cauchy, computer age, Dava Sobel, Dmitri Mendeleev, Eratosthenes, Erdős number, four colour theorem, Georg Cantor, German hyperinflation, global village, Henri Poincaré, Isaac Newton, Jacquard loom, Jacquard loom, music of the spheres, New Journalism, Paul Erdős, Richard Feynman, Richard Feynman, Rubik’s Cube, Search for Extraterrestrial Intelligence, Simon Singh, Solar eclipse in 1919, Stephen Hawking, Turing machine, William of Occam, Wolfskehl Prize, Y2K

Abel, Niels Henrik 66, 223 Adams, Douglas 283 Adleman, Leonard 11, 228–32, 229, 236, 238, 240, 249 Agrawal, Manindra 245 American Mathematical Society 224, 301, 304 Analytical Engine (Babbage) 190 Apollonius 61 Appel, Kenneth 211, 212 Arago, François 45 Archimedes 52, 61 Armengaud, Joel 208 Aronofsky, Darren 28 astronomy 208 AT&T 12, 219–23, 254, 270, 273, 280, 281, 311 Atkins, Derek 239 atoms 264–9, 277, 278 axioms, consistent 179–80, 181 Babbage, Charles 189–90, 191 Babylonians 67 Baker, Alan 16, 256, 258 Bamberger, Louis 160 Barnes, Ernest 126–7 Bell Laboratories 219, 238 Berndt, Bruce 146 Berry, Sir Michael 84, 278–80, 283, 285–6, 307, 311 Bertrand, Joseph 164 Bertrand’s Postulate 164, 169–70 Bessel-Hagen, Erich 151, 154 ‘Bible code’ 271, 275 Birch, Bryan 250–52 Birch-Swinnerton-Dyer Conjecture 246, 250–51, 252 Bletchley Park, Milton Keynes, Buckinghamshire 174, 175, 190, 191, 192, 204, 205, 206, 226, 311 Bloomsbury publishing house 15–16 Bohr, Harald 117, 118, 119, 121–2, 123, 156, 159 Bohr, Niels 117 Bois-Reymond, Emil du 113 Boiteux, Marcel 299 Bolyai, János 110 Bombieri, Enrico 8, 13, 19, 193, 218, 231, 307 faith in the Hypothesis 10, 214–15, 219 Fields Medal 16, 308 joke email announces the Riemann Hypothesis proved 2,3,4,9,12–14, 19, 102, 285, 309 studies the Reimann Hypothesis as a teenager 2–3, 5 Bonne-Nouvelle military prison, Rouen 289, 294, 297, 298 Born, Max 267 Bourbaki group 292, 299, 300–301 Brent, Richard 217 Brewster, Edwin Tenney 176 Brunswick, Carl Wilhelm Ferdinand, Duke of 22, 51, 57 BSI (German Security Agency) 231, 240, 250 Cameron, Michael 209 Cantor, Georg 185–6, 201, 202 Carr, George 132, 133 Carroll, Lewis 82, 283 Cartan, Elie 289, 290, 295–6, 297 Cartan, Henri 297 Castelnuovo, Guido 296 Catherine the Great 41, 42, 43 Cauchy, Augustin-Louis 65–6, 70–71, 72, 75, 81, 84, 103, 113, 194, 289, 291 Central Limit Theorem 176, 177 Ceres 19, 20, 49, 54, 57 Certicom 249, 252–3 Changeux, Jean-Pierre 7 chaos theory 276, 280 Chebyshev, Pafnuty 104, 164, 168 Chinese 22–3 Chladni, Ernst 265, 266 Choquet, Gustave 288 Chowla, Saravadam 170, 171, 263 Church, Alonzo 187 Churchill, Sir Winston 175 Class Number Conjecture 257–8 Clay, Landon T. 14–17, 33, 242, 246, 252 clock calculator 20–22, 29, 30, 74, 76, 168, 232–5, 238, 239, 240, 249, 295 Cohen, Paul 16, 201–2, 282, 304, 308 Cold War 199 Cole, Frank Nelson 224–5, 236, 244 computers 193, 203, 204–23, 311 Connes, Alain 3, 4, 7, 14, 16, 288–9, 305–9, 311 Conrey, Brian 173, 281, 283–5 Cray computers 207, 208, 220–21, 270 Cray Research 207, 208, 209 Critical line 99 cryptography 224–54 d’Alembert, Jean Le Rond 111 Davenport, Harold 126 Davis, Martin 198 de la Vallée-Poussin, Charles 106, 117, 127, 128, 168, 172, 311 De Morgan, Augustus 43 Decision Problem (Hilbert) 184, 186, 187, 188, 197 Dedekind, Richard 73, 106, 151, 153 Deligne, Pierre 16, 146 Descartes, René 62, 70, 111 Deuring, Max 258 Diaconis, Persi 271–5, 273 Diderot, Denis 42–3 Dieudonné, Jean 292 Difference Engine (Babbage) 189 Diffie, Whit 226–9 Diophantus 29 Lejeune-Dirichlet, Rebecka 75 Dirichlet, Peter Gustav Lejeune 64, 65, 73, 75, 76, 81, 82, 83, 100, 102, 106, 116, 134, 150, 155, 168–9 Dirichlet’s Theorem 81, 168–9 Doxiadis, Apostolos 15 Drazin, Philip 286 Dyson, Freeman 262–4, 267, 269, 275, 312 e-business 11, 74, 241, 246, 253 ECC Central 249, 250 Eddington, Arthur 110, 128 Egypt/Egyptians 67, 94 Einstein, Albert 2, 74, 161, 162, 166, 179, 307 Theory of Relativity 100, 289 electromagnetism 73–4 Electronic Frontier Foundation 209 electrons 265, 267, 268, 277 elliptic curves 246, 249, 251–2, 253 Encke, Johann 55, 56, 72 Enigma code 175, 190–91, 192, 205, 206, 225, 226, 242 equations 107, 113, 114, 193, 197–201, 295, 296 Eratosthenes 23, 239 erbium 264 Erdos, Paul 162–5, 168–71, 173, 176, 209, 219, 238, 245, 262, 311–12 Euclid 36–8, 37, 58, 61, 76, 81, 102, 109, 110, 111, 163, 178, 204, 205, 209, 243, 292, 301, 310 algorithm 16 Euler, Leonhard 41–5, 42, 57, 71–2, 77, 79–80, 86–9, 93, 97, 102, 104,105, 106, 113, 133, 135, 150, 162, 200, 223, 233, 235, 266 Euler’s product 17, 80–81, 89 Faber & Faber 15–16 Faber-Bloomsbury Goldbach prize 15–16 factorising numbers 236–8, 257–8, 259, 261 Felkel, Antonio 47 Feller, William 272 Fermat, Pierre de 5, 22, 29, 39–41, 44, 68, 76, 101, 122, 133, 136, 154, 168, 223, 231, 232, 233, 238, 292 Factorisation Method 238–9 Last Theorem 5, 12–16, 29, 33, 34, 44, 101, 113–14, 115, 118, 119, 136, 171, 193, 228, 233, 248, 251, 282, 289, 296, 298, 308 Little Theorem 8–9, 232, 233, 235, 238, 244 Feynman, Richard 262, 263, 285 Fibonacci, Leonardo 25–6 Fibonacci numbers 25, 26, 27, 142, 204, 206 Fields, John 16 Fields Medals 16, 146, 172, 202, 246, 289, 302 First World War 144, 145, 148, 155, 292 Five Hysterical Girls Theorem, The (off-Broadway show) 224 Flannery, Sarah 246–8, 249 Four-Colour Problem 210–12, 210 Fourier, Joseph 60, 93–6, 291 Fourier series 17 fourth dimension 84, 85 fractions 67 Frederick Barbarossa, Emperor 1–2, 115 Frederick the Great 41 French mathematical tradition 69–70, 72, 108 French Revolution 17, 53, 60, 94, 119, 291 Frenicle de Bessy, Bernard 233 Frey, Gerhard 204 Fry, John 281, 284 Fry Electronics 281, 282 Fuld, Caroline Bamberger 160 functions 71–2 Gage, Paul 207, 208 Galileo Galilei 269 Gandhi, Mahatma M.K. 293 Gardner, Martin 230–31, 236 Gauss, Carl Friedrich (main references) 21, 26, 52 background and childhood 20 Class Number Conjecture 257–8 clock calculators 20–22, 29, 30, 74, 232, 233, 234, 249, 295 death 74 director of Göttingen Observatory 57–8 discovery of Ceres’ path 19–20, 24, 49, 54, 64 discovery of a pattern in primes 47–51, 57 failure to disseminate his discoveries 20, 52–3 geometry 109–10, 202 and Germain 193–4 imaginary numbers 69, 71, 84, 85, 221, 257–8, 260–61 lateral thinking 25 logarithms 46–7, 55, 62, 72, 74, 91, 206 methods outstrip Legendre’s 56–7 patronage 22, 51–2 prime motivation 52 Prime Number Conjecture (later Theorem) 49, 53–4, 54, 57, 82, 83, 89, 90, 91, 97, 100, 103–6, 117, 134, 138, 142, 164–8, 170–73, 176, 243, 262, 270, 281, 291, 295, 308, 310–13 second conjecture 57, 128–30 stresses the value of proof 51 triangular numbers 25, 26, 26, 29, 32, 52 and Weber 73–4 Dirichlet succeeds 75 Gaussia 75 Gaussian integers 17 geometry 4, 61, 62, 67, 70, 74, 84, 87–8, 100, 109–13,178, 180, 202, 282, 289, 300, 306–7, 313 algebraic 296, 298, 302, 305, 306 Cartesian 111 non-commutative 288–9, 305, 309 Germain, Sophie 193 Germain primes 193 German Mathematical Society 108 Germany: educational revolution 60, 72 hyperinflation 118 Nazi 156 Ghosh, Amit 283 Gödel, Kurt 1, 2, 177, 178–84, 179, 187, 196, 197, 201, 256, 257, 263, 302, 312 Incompleteness Theorem 181, 182, 184, 186, 190 Gödel numbering 17, 181 Goethe, Johann Wolfgang von 59 Goldbach, Christian 44 Goldbach’s Conjecture 15–16, 31, 115, 141, 143, 158, 181, 182, 183, 256 golden ratio 27 ‘golden shield’ 253 Gonek, Steve 284, 285 Göttingen 62–4, 106, 118–9 Göttingen Library 73, 151, 154, 286–7 Göttingen Observatory 57 ‘Göttingen Seven’ 74 Gowers, Timothy 246 Graff, Michael 239 Grand Prix des Sciences Mathématiques (Paris Academy) 95, 104–5, 108, 116 Great Internet Mersenne Prime Search (GIMPS) 208 Greeks 20, 23, 29, 32, 34–5, 36, 41, 51, 61, 67, 68, 81, 84, 105, 106–7, 109, 110, 169, 178, 181, 194, 224 Greene, Graham 34 Griffith, C.L.T. 135 Grothendieck, Alexandre 16, 298, 299–306, 300, 303, 308 Guthrie, Francis 210, 211 Hadamard, Jacques 105, 106, 117, 127, 128, 134, 168, 172, 291, 311 Hajratwala, Nayan 209 Haken, Wolfgang 211, 212 Hardy, G.H. 11, 17, 30–31, 33, 38–9, 78, 119–23, 124, 153, 162–3, 165, 175, 212–13, 301, 313 on the difficulty of the primes 132 and Landau 155 and Littlewood 123–8, 132, 137–8, 143, 147, 152, 158–9, 170, 177, 256, 259, 260, 283 and Ramanujan 136–47, 158, 162 and Riemann Hypothesis 120, 121–2, 125–6, 150, 188, 312 and Skewes Number 129 and Turing 187, 188, 190 on uselessness of mathematics in real world 222–3, 250 Hardy-Littlewood Circle Method 17, 143 harmonic series 79, 80 Hasse, Helmut 251 Hawking, Stephen 84, 180 Hecke, Erich 258 height function 253 Heilbronn, Hans 128, 258 Heisenberg, Werner 267 Uncertainty Principle 180, 305 Hellman, Martin 227–8, 228, 229 Hermite, Charles 103, 104–5 Heuser, Ansgar 231, 240 Hewlett-Packard 12, 280, 281, 311 Hilbert, David 102, 106–16, 107, 108–9, 118, 125, 128, 148, 153, 155–6, 175, 191, 193, 291 brings best mathematicians to Göttingen 118, 119 death 156 Decision Problem 184, 186, 187, 188, 197 equations 107, 114, 193, 197–8, 199 geometry 109, 110–11, 178, 180 and Gödel 178, 179, 180, 182 and Hardy 119–20 lecture to International Congress of Mathematicians 1, 2, 112–15, 183–4 and a new approach 14–15, 112 and Noether 194 and Riemann Hypothesis 1–2, 17, 106, 114, 115, 243, 312 sets twenty-three problems 1–2, 113–15, 282 and Siegel 149, 152 tenth problem 114, 183, 197–9 Hilbert space 16 Hill, M.J.M. 135, 136 Hindu mathematicians 68 Hitler, Adolf 155, 160, 251, 291, 293 Hodges, Andrew 190 Humboldt, Alexander von 64, 75 Humboldt, Wilhelm von 59, 60, 64, 237 hydrogen 268 Hyperion (a satellite of Saturn) 24 imaginary numbers 66–72, 70, 81, 82, 84, 85, 86, 88, 103, 113, 115, 119, 221, 251, 257–8, 259, 261, 266, 267, 286, 287, 289, 300 infinities 185–6 Ingham, Albert 188, 283 Institut des Hautes Etudes Scientifiques, Paris 299, 303 International Congress of Mathematicians 1, 2, 3, 16, 17, 112, 115, 172, 183–4, 208 Internet 11–12, 74, 225–32, 247 irrational numbers 6, 67, 68, 68 Ishango bone 22 Iyer, Ganapathy 136 Iyer, Narayana 139 Jacobi, Carl 59–60, 75, 139 Jacquard weaving looms 189–90 James, Henry 34 Jordan, Camille 123 Kabalah 240 Kac, Mark 165 Kant, Imannuel 112 Katz, Nick 308 Kayal, Neeraj 245 Keating, Jon 283, 284, 285–7 Kelvin, Lord 95 Kingsley, Ben 240 Klein, Felix 108, 150, 153 Klondike (Idiot’s Delight) card game 274–5, 274 Koblitz, Neal 248–9, 250, 253 Königsberg (later Kaliningrad) 43, 106, 108, 178 Krieger, Samuel I. 196 Kulik, Jakub 56 Kummer, Ernst 150 Lagrange, Joseph-Louis 65, 301 Landau, Edmund 116–18, 117, 128, 132, 137, 143, 148–9, 152–5, 301 Landau, Leopold 148 Landau, Lev 268–9, 270 Lascar, Larry 240 Legendre, Adrien-Marie 53, 54, 56–7, 60, 62, 95, 132, 261–2 Lehmer, Derrick H. 196, 204, 206, 207, 215 Lehmer, D.N. 196, 204, 205–6 Leibniz, Gottfried 77–8, 119 Lenstra, Arjen 239 Lenstra, Hendrik 218, 237 Levinson, Norman 172–3 Leyland, Paul 239 Lindeberg, J.W. 176, 177 Linnik, Yu.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, negative equity, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

This is an appropriate moment to turn to Benjamin, because he also invokes the Übermensch to make sense of an economic condition in which our very capacity for exercising self-responsibility has been threatened, or even suspended, namely, debt. CAPITALISM, DEBT, AND RELIGION In “One-Way Street” (originally published 1923–1926, 1996e cited here), Walter Benjamin acts as our guide on “A Tour Through the German Inflation.” He was referring to the Weimar hyperinflation of 1921–24. Money, he observes, “stands ruinously at the centre of every vital interest” (Benjamin 1996e: 451–52).2 “Money and rain belong together,” he continues in “Tax Advice,” imagining a “cloudless realm of perfect goods, on which no money falls” (Benjamin 1996e: 481). In the same text, we find a striking description of banknotes: “The innocent cupids frolicking about numbers, the goddesses holding tablets of the law, the stalwart heroes sheathing their swords before the monetary units, are a world of their own: ornamenting the façade of hell” (Benjamin 1996e: 481).


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


pages: 1,335 words: 336,772