Goldman Sachs: Vampire Squid

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pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

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activist fund / activist shareholder / activist investor, algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk

D. Ellis, The Partnership—The Making of Goldman Sachs (New York: Penguin, 2008), 664. 7. B. McLean, “The Bank Job,” Vanity Fair, March 23, 2012, http://www.vanityfair.com/business/features/2010/01/goldman-sachs-200101. 8. http://www.thedailyshow.com/watch/thu-april-28-2011/exclusive-william-cohan-extended-interview-pt-2. 9. Stephen Colbert, “Greg Smith’s Goldman Sachs Op-Ed,” The Colbert Report (Viacom), March 14, 2012. 10. W. D. Cohan, “Doing God’s Work: How Goldman Became the Vampire Squid,” Institutional Investor, April 25, 2011, http://www.institutionalinvestor.com/Popups/PrintArticle.aspx?ArticleID=2813008. 11. http://businesshighbeam.com/435607/article-1G1-16396594/inside-goldman-college-cardinals. 12. James Quinn and James Hall, “Goldman Sachs Vice-Chairman Says: ‘Learn to Tolerate Inequality,’” The Telegraph, www.telegraph.co.uk/finance/recession/6392127/Goldman-Sachs-vicechairman-says-Learn-to-tolerate-inequality.html. 13.

By October, Goldman’s stock price has more than fully recovered, selling at about $194 per share. In June 2009, Goldman Sachs repaid the US Treasury’s TARP investment, with 23% interest (in the form of $318 million preferred dividend payments and $1.418 billion in warrant redemptions). Blankfein sends letter to Financial Services Committee members of the US House of Representatives thanking the government for its extraordinary efforts and the taxpayers’ patience; stating that it regrets that it participated in the market euphoria and didn’t raise a responsible voice; and stating that it has obligations to the public interest. Lloyd Blankfein is named CEO of the Year by Directorship magazine. Matt Taibbi publishes a scathing article on Goldman in Rolling Stone, which includes the often-quoted “vampire squid” analogy.4 A Goldman subsidiary settles with the SEC for $1.2 million over improper proprietary trading by employees.

“Goldman to Review Its Business Practices,” New York Times, May 7, 2010, http://dealbook.nytimes.com/2010/05/07/goldman-toreview-its-business-practices/. 42. Endlich, Goldman Sachs, 164. 43. “Goldman Sachs Clients Lost in Translation,” London Evening Standard, January 14, 2011, http://www.this islondon.co.uk/standard-business/article-23914152-city-spy-goldman-sachs-clients-lost-in-translation.do. 44. L. Rappaport, “Goldman Opens Up to Mollify Its Critics,” Wall Street Journal, January 11, 2011, http://online.wsj.com/article/SB10001424052748703779704576074360288635474.html. 45. S. Johnson, “Goldman Sachs: ‘We Consider Our Size an Asset That We Try Hard to Preserve,’” Baseline Scenario, January 13, 2011, http://baselinescenario.com/2011/01/13/goldman-sachs-we-consider-our-size-an-asset-that-we-try-hard-to-preserve/. 46. R. Teitelman, “Goldman Sachs, Business Standards and the Critics,” Huffington Post, January 14, 2011, http://www.huffingtonpost.com/robert-teitelman/goldman-business-standard_b_808827.html. 47.

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

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affirmative action, Affordable Care Act / Obamacare, Bernie Sanders, Bretton Woods, carried interest, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, money market fund, moral hazard, mortgage debt, obamacare, passive investing, Ponzi scheme, prediction markets, quantitative easing, reserve currency, Ronald Reagan, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

And far from being the best fruit of a democratic, capitalist society, it’s the apotheosis of the Grifter Era, a parasitic enterprise that has attached itself to the American government and taxpayer and shamelessly engorged itself on us all. THE FIRST THING you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates. Most of us know the major players: Henry Paulson, George Bush’s last Treasury secretary, who used to run Goldman and was the architect of a suspiciously self-serving plan to funnel trillions from the Treasury to a small list of his old friends on Wall Street.

My contribution to this was to launch a debate over whether or not it was appropriate for a reputable mainstream media organization to publicly call Lloyd Blankfein a motherfucker. This was really what most of the “vampire squid” uproar boiled down to. The substance of most of the freak-outs by mainstream financial reporters and the bank itself over the Rolling Stone piece was oddly nonspecific. Goldman spokesman Lucas van Praag called the piece “vaguely entertaining” and “an hysterical compilation of conspiracy theories.” Van Praag even made an attempt at humor, saying, “Notable ones missing are Goldman Sachs as the third shooter [in John F. Kennedy’s assassination] and faking the first lunar landing.” But at no time did the bank ever deny any of the information in the piece. Their only real factual quibble was with the assertion that they were a major player in the mortgage market—the bank somewhat gleefully noted that its “former competitors,” like the since-vaporized Bear Stearns, were much bigger players.

One, the state of Massachusetts in the person of Attorney General Martha Coakley launched an investigation of some of the mortgage-lending companies in her state, including Litton Loans—a wholly owned subsidiary of Goldman Sachs that ended up owning the smaller of Eljon’s two mortgage loans. Coakley accused Goldman Sachs of facilitating the kind of fraud practiced by Solomon Edwards by providing a market for these bad loans through the securitization process, by failing to weed out bad or unfair loans, and by failing to make information about the bad loans available to potential investors on the other end. By the time Coakley settled negotiations with Goldman Sachs, the latter had already been the beneficiary of at least $13 billion in public assistance through the AIG bailout, with $10 billion more coming via the Troubled Asset Relief Program and upwards of $29 billion more in cheap money coming via FDIC backing for new debt under another Geithner bailout program, the Temporary Liquidity Guarantee Program.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

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activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, too big to fail, women in the workforce, young professional

The epitome of the old boys’ network is Goldman Sachs. It is the most exclusive of all exclusive clubs and artfully illustrates how the power-laws of network science correlate with actual network power. Due to the fact that Goldman always seems to make money regardless of the circumstances, it has been vilified as the “great vampire squid wrapped around the face of humanity”17 and alleged to have caused as well as profited from various financial crises. Goldmanites are everywhere, as the firm hires former high-level public sector employees, and partners leave the firm to take public office. In the time leading up to the financial crisis, Robert Rubin, previously co-CEO of Goldman Sachs, served as secretary of the U.S. treasury under President Bill Clinton. During the crisis, Hank Paulson, then CEO of Goldman Sachs, became the next U.S. treasury secretary.

The president of the European Central Bank, Mario Draghi, was once vice chairman and managing director of Goldman Sachs International. Mario Monti, prime minister of Italy from 2011 to 2013, worked as an adviser for Goldman Sachs. Robert Zoellick went from being Goldman Sachs’s head of international affairs to president of the World Bank. From there he returned to Goldman and became chairman of the international advisory board. The German government awarded him the Federal Cross of Merit for his services regarding the German reunification. Speaking of Germany, its government was heavily criticized for providing too much top-level government access to Goldman Sachs, which the political opposition labeled the “bonus program for investment bankers.” Prior Goldman Sachs employees have also obtained high-level government positions throughout the world.

Prior Goldman Sachs employees have also obtained high-level government positions throughout the world. Numerous other influential and famous Goldmanites include John Thain (former chairman and CEO of CIT Group, former president and co-CEO of Goldman Sachs), Jon Corzine (CEO of MF Global, former U.S. senator of New Jersey, former CEO of Goldman Sachs), Duncan Niederauer (former CEO of NYSE Group, former partner at Goldman Sachs Group), Joshua Bolten (White House chief of staff to U.S. President George W. Bush, former executive director for legal and government affairs at Goldman Sachs), and countless more. That’s Rich: Superhubs and Super-Riches One thing that nearly all top financial executives have in common is great wealth, which is a measurable, publicly known yardstick for success. Together they can increase their financial muscle even more, be it for political influence, charities, or otherwise.


pages: 1,073 words: 302,361

Money and Power: How Goldman Sachs Came to Rule the World by William D. Cohan

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asset-backed security, Bernie Madoff, buttonwood tree, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, fear of failure, financial innovation, fixed income, Ford paid five dollars a day, Goldman Sachs: Vampire Squid, Gordon Gekko, high net worth, hiring and firing, hive mind, Hyman Minsky, interest rate swap, John Meriwether, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, mega-rich, merger arbitrage, moral hazard, mortgage debt, Myron Scholes, paper trading, passive investing, Paul Samuelson, Ponzi scheme, price stability, profit maximization, risk tolerance, Ronald Reagan, Saturday Night Live, South Sea Bubble, time value of money, too big to fail, traveling salesman, value at risk, yield curve, Yogi Berra, zero-sum game

That frustration—and confusion—showed up first in a July 2009 issue of Rolling Stone magazine in a now-classic bit of conspiracy-theory journalism written by reporter Matt Taibbi. “The first thing you need to know about Goldman Sachs is that it’s everywhere,” Taibbi wrote. “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Taibbi blamed Goldman for a multitude of financial sins, including the Great Depression, the Internet bubble, the housing bubble, the explosion in the per-gallon price of gasoline, as well as for “rigging the bailout” to its advantage. The metaphor of Goldman being a “great vampire squid” soon became so ubiquitous that even Blankfein could not ignore it. “That Rolling Stone article oddly enough tapped into something,” he said in an interview in August 2009.

But it is also something else altogether: a symbol of immutable global power and unparalleled connections, which Goldman is shameless in exploiting for its own benefit, with little concern for how its success affects the rest of us. The firm has been described as everything from “a cunning cat that always lands on its feet” to, now famously, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” by Rolling Stone writer Matt Taibbi. The firm’s inexorable success leaves people wondering: Is Goldman Sachs better than everyone else, or have they found ways to win time and time again by cheating? But in the early twenty-first century, thanks to the fallout from Goldman’s very success, the firm is looking increasingly vulnerable. To be sure, the firm has survived plenty of previous crises, starting with the Depression, when much of the firm’s capital was lost in a scam of its own creation, and again in the late 1940s, when Goldman was one of seventeen Wall Street firms put on trial and accused of collusion by the federal government.

Schloss loan of of Penn Central, 6.1, 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 8.1, 10.1, 12.1, 14.1, 14.2, 18.1 Pillsbury’s mortgage bonds and with RCA and GE, 10.1, 10.2 for Sinclair Oil Studebaker trade with Sumitomo, 10.1, 12.1, 12.2 Goldman Sachs, mortgage backed securities traded by, 10.1, 10.2, 12.1, 12.2, 18.1, 18.2, 21.1, 22.1, 22.2 “big short” of, prl.1, prl.2, prl.3, prl.4, prl.5, prl.6, 19.1, 19.2, 19.3, 20.1, 21.1, 21.2, 21.3, 21.4, 21.5, 21.6, 22.1, 22.2, 22.3, 22.4, 23.1, 23.2 CDOs of, prl.1, prl.2, 19.1, 19.2, 19.3, 19.4, 19.5, 20.1, 20.2, 20.3, 20.4, 20.5, 21.1, 21.2, 21.3, 21.4, 21.5, 21.6, 21.7, 21.8, 21.9, 22.1, 22.2, 22.3, 22.4, 22.5, 22.6, 22.7, 22.8, 23.1, 24.1 CDSs and, 18.1, 18.2, 19.1, 19.2, 20.1, 20.2, 20.3, 21.1, 21.2, 23.1 GSAMP deal of, 18.1, 18.2, 18.3, 18.4, 19.1, 19.2, 19.3, 19.4, 19.5, 20.1, 21.1 hedging of, 18.1, 18.2, 18.3, 19.1, 19.2, 20.1, 20.2, 20.3, 21.1, 21.2, 22.1; see also “big short” marking down of, 22.1, 22.2 Massachusetts’s investigation of Mississippi’s investigation of residential (RMBS), 19.1, 21.1, 21.2, 21.3, 22.1, 22.2, 22.3, 22.4 subprime Goldman Sachs Asia Goldman Sachs Asset Mangement Goldman Sachs Fellowship Goldman Sachs Trading Corporation, 2.1, 2.2, 2.3, 3.1, 3.2, 3.3, 4.1, 5.1, 8.1, 9.1 stock prices of, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 Goldman Sachs: The Culture of Success (Endlich), 10.1, 12.1 Goldman v. United States, prl.1 gold standard Gordon, Albert Gorter, James, 14.1, 14.2, 15.1 grain Grand Central Terminal, 7.1, 7.2 Granite Capital International Group Grannin, Chuck Grassley, Charles Grasso, Richard, 17.1, 17.2 Gray, Harry Great Britain, 1.1, 14.1, 14.2 Great Crash, The (Galbraith), 2.1, 2.2, 2.3, 2.4, 2.5 Great Depression, prl.1, 2.1, 2.2, 4.1, 4.2, 5.1, 6.1, 6.2, 8.1, 9.1, 13.1, 14.1, 24.1 Goldman Sachs’s strategy for Greatest Trade Ever, The (Zuckerman), 19.1 Great Recession Greenberg, Maurice R.


pages: 515 words: 132,295

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

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

Author interview with Stiglitz for this book. 57. “Metal Bashing,” Economist, August 17, 2013; Matt Taibbi, “The Vampire Squid Strikes Again: The Mega Banks’ Most Devious Scam Yet,” Rolling Stone, February, 12, 2014. 58. United States Senate Permanent Subcommittee on Investigations, “Wall Street Bank Involvement with Physical Commodities: Majority and Minority Staff Report,” November 2014, 378. 59. Omarova, “The Merchants of Wall Street,” 324–33. 60. CFTC staff size hovered around 600 in 1997–2000. (See “CFTC Says Low Salaries, Retirements to Take Toll,” Wall Street Journal, September 17, 1997.) The sizes of the US futures market and swaps market are based on CFTC estimates as of June 2015. 61. Taibbi, “The Vampire Squid Strikes Again.” 62. Gina Chon, Caroline Binham, and Laura Noonan, “Six Banks Fined Total of $5.6 Billion over Rigging of Forex Markets,” Financial Times, May 21, 2015. 63.

Yet nearly every economist and many bankers I’ve spoken to believe that financial speculation is playing a greater and greater role in fueling volatility in commodities, a suspicion that is bolstered by the fact that prices of all kinds have begun rising and falling in sync with one another—a historically unusual trend. In April 2011, journalist Frederick Kaufman wrote an article for Foreign Policy magazine titled “How Goldman Sachs Created the Food Crisis,” which put the blame squarely on Wall Street.10 Kaufman outlined many of the headline statistics about just how financialized food and all sorts of other commodities had become. Since 2000 there has been a fiftyfold increase in dollars invested into commodities-linked index funds. It was a shift that was due to several things: the creation of a commodity index fund by Goldman Sachs in 1991, which allowed raw materials to become securities that could be bought and sold by investors; the deregulation of commodities markets in 2000, which poured gasoline on that process; the financial crisis of 2008, which scared everyone out of stocks and drove investors into “safety” bets like raw materials; and the beginning of the Federal Reserve’s quantitative easing program the following year, a $4.5 trillion money dump that was meant to help Main Street but ended up giving Wall Street a lot of easy money to burn.

Yet interestingly, none of the public comments about the matter mentions Goldman or any other banks, and public relations representatives at the companies declined to comment for this book about the banks’ involvement in the issue. No wonder. Coke has been a longtime investment banking client of Goldman Sachs, and at the time of the LME complaint, it had recently hired the bank to advise it on a $12 billion acquisition.68 “If I were Coca-Cola’s general counsel, I wouldn’t want my company to start a big fight with Goldman Sachs, either,” says Omarova. “What if we need to raise debt on the public markets tomorrow and need an underwriter? What if we plan a merger and need transaction advice? What might Goldman research analysts do to our share price if they wanted to? Coke needs Goldman. They are everywhere.”


pages: 296 words: 78,112

Devil's Bargain: Steve Bannon, Donald Trump, and the Storming of the Presidency by Joshua Green

4chan, Affordable Care Act / Obamacare, Ayatollah Khomeini, Bernie Sanders, business climate, centre right, collateralized debt obligation, conceptual framework, corporate raider, crony capitalism, currency manipulation / currency intervention, Donald Trump, Fractional reserve banking, Goldman Sachs: Vampire Squid, Gordon Gekko, guest worker program, illegal immigration, immigration reform, liberation theology, low skilled workers, Nate Silver, nuclear winter, obamacare, Peace of Westphalia, Peter Thiel, quantitative hedge fund, Renaissance Technologies, Ronald Reagan, Silicon Valley, speech recognition, urban planning

By 1986, Bannon’s first full year on Wall Street, Milken had become Wall Street’s most notorious villain and Drexel Burnham its most profitable investment bank, clearing $545.5 million on revenues of $4 billion. More important for Bannon and Goldman Sachs, Milken and his army of raiders had struck terror in the hearts of the chief executives of America’s finest corporations. “Everything in the Midwest was being raided by Milken,” said Bannon. “It was like a firestorm.” The attacks by Milken had a corollary effect on the companies he targeted: they needed help staving off the barbarians at the gates. This, too, created profitable new business opportunities. Goldman Sachs, not yet evolved into the money-grubbing “vampire squid” it would later become, was a white-shoe firm that wouldn’t deign to represent corporate raiders in hostile takeover bids. Instead, Goldman developed a specialty in raid defense for blue-chip companies targeted by the likes of Drexel Burnham and First Boston.

Brimming with vigor in a military field jacket, he made an impassioned speech about the power of the Tea Party movement, still a gathering force, and Palin’s place in the vanguard of a new populist conservatism. He was clearly intelligent, had a manic charisma, and espoused a distinct and unusual politics. He also claimed to have been a Goldman Sachs investment banker and Hollywood producer, recently returned from running a video-game empire in Hong Kong. I quickly sized him up as a colorful version of a recognizable Washington character type: the political grifter seeking to profit from the latest trend. No politician was hotter in 2011 than Palin. And Washington was rife with Tea Party con men. We agreed to stay in touch (grifters can be good sources). Later on, out of idle curiosity as much as anything else, I called Goldman Sachs to see if Bannon had really worked there. He had. A quick check revealed that he had also produced movies for Sean Penn and Anthony Hopkins. His story, in all its multifaceted oddness, checked out.

We’re looking for a position player.’” Bannon walked away convinced that, despite his grades and class standing, he might not get an interview anywhere, much less get a job. He had little choice but to keep trying. A short while later, a team from Goldman Sachs arrived on campus. Bannon dutifully attended a presentation delivered by Kevin Kennedy, a young vice president who would go on to become a senior partner at the firm. Thirty years later, Bannon could still summon the details of Kennedy’s no-bullshit pitch to the HBS students for a Goldman Sachs that was then still a close-knit, privately held partnership. “He says, ‘We’re a very hard-working place. There are no stretch limos outside. We’re very middle class. We work very hard. It’s all about the firm. It’s about partnership. It’s about teamwork.


pages: 243 words: 77,516

Straight to Hell: True Tales of Deviance, Debauchery, and Billion-Dollar Deals by John Lefevre

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airport security, blood diamonds, colonial rule, credit crunch, fixed income, Goldman Sachs: Vampire Squid, high net worth, income inequality, jitney, market clearing, Occupy movement, Sloane Ranger, the market place

The premise was simple—to illuminate Wall Street culture in an entertaining and insightful way. I chose Goldman Sachs because of their position as public enemy #1, and people’s fascination with “vampire squids” and the absurdity of Lloyd Blankfein claiming to be “doing God’s work.” More specifically, in having recently gone through the arduous process of being offered the prestigious job of Head of Asia Debt Syndicate at Goldman Sachs (a hiring that was deemed newsworthy by Bloomberg and others), I found their culture to be an amplified version of broader banking culture. I kept the construct of elevators simply as an homage to the original Condé Naste feed, but made it clear that it was never literally about conversations overheard in elevators at Goldman Sachs. Over the days that followed, I got mentions in the the Daily Mail, on Gawker, at ZeroHedge, in the New York Post, and elsewhere.

One friend of mine joked about how his wife had been nearly heckled out of a Manhattan doctor’s office after being overheard telling the receptionist that their insurance was provided by Goldman Sachs. Anti–Wall Street sentiment was rampant. “Fucking plebes.” Earlier that day, I had seen a Daily Mail story about an anonymous Twitter account (@CondeElevator) that hilariously chronicled the most ridiculous conversations overheard in the elevators of the infamous Condé Nast building. Holy shit, I thought. If people are so intrigued by this kind of banality, I cannot imagine what they would think if they heard the outrageous things bankers say and do. Despite all of the vilification and negative attention, most people still had no idea what Wall Street culture was really like. In the drunken haze of that subsequent evening, @GSElevator was born—“Things heard in the Goldman Sachs elevators do not stay in the Goldman Sachs elevators. Email me what you hear.”

He can also name the best karaoke joint or massage parlor in every city in Asia, which comes in handy with his superiors, visiting colleagues from out of town, and clients. One day, Earpiece doesn’t show up. He doesn’t respond to emails or texts; he’s gone. Many hope he’s dead. Rumors have it that he’s resigned to go to Goldman Sachs and run the loan syndicate team over there (a team that is later supposed to report to me). Thank fucking Christ; they can have him. We’re celebrating. There are two problems. First, our degenerate head of , Wisal Lari, misses having someone so dedicated to kissing his ass. Second, Goldman Sachs is famous for rigidly refusing to hire someone and promote them at the same time. For example, if there’s a well-regarded associate or VP at a real bank, a second-tier house can easily come in and steal them away with the promise of a guarantee and an immediate promotion in rank.


pages: 438 words: 109,306

Tower of Basel: The Shadowy History of the Secret Bank That Runs the World by Adam Lebor

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banking crisis, Basel III, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, central bank independence, corporate governance, corporate social responsibility, deindustrialization, eurozone crisis, fiat currency, financial independence, financial innovation, forensic accounting, Goldman Sachs: Vampire Squid, haute cuisine, IBM and the Holocaust, Occupy movement, offshore financial centre, Ponzi scheme, price stability, quantitative easing, reserve currency, special drawing rights, V2 rocket

The IMF, the World Bank, the European Commission, and the BIS itself are also members of the FSB, as are three of the most powerful committees hosted at the BIS: the Basel Committee on Banking Supervision, the Committee on the Global Financial System, and the committee dealing with payment and settlement systems. The writer Matt Taibbi once memorably described Goldman Sachs, the giant investment bank, as a “vampire squid.”8 The BIS is now the vampire squid of the regulatory world, hosting a myriad of committees that in turn spawn a raft of subcommittees, many of which are composed of the same central bankers and officials, each producing reams of reports that are passed back and forth from Basel to national central banks and governments in an endless merry-go-round of resolutions and recommendations. Others argue that the answer to the banking crisis is not more insider committees and regulatory bodies hosted at the BIS, or anywhere else, but much less, or none at all.

There were few, if any, people in the United States then with a more powerful and influential set of friends than John Foster Dulles, who served as legal counsel to the US delegation at the Paris Peace Conference, where he had specialized in German war reparations. His time in Paris gave him a privileged insight into the workings of international finance and diplomacy and a network of coveted contacts. Dulles’s client list during the 1920s read like a who’s who of American finance: J. P. Morgan; Kuhn, Loeb & Co.; Harris, Forbes & Co.; Brown Brothers; W. A. Harriman; and Goldman Sachs. Dulles arranged tens of millions of dollars’ worth of loans to clients, including to the cities of Munich, Frankfurt, Nuremberg, Berlin, and Hanover, and to the Union of German Mortgage Banks, the Berlin City Electric Company, Hamburg Street Railways, and the State of Prussia. Dulles also worked on the Dawes Plan German Loan in 1924 and the German Government International Loan of 1930 that had been instigated by the Young Committee.5 Wall Street in the 1920s was possessed by a near-mania to lend to Germany.

In that sense, McKittrick was the perfect candidate. He was citizen of both a neutral country—the United States—and of the world’s newest hinterland—transnational finance. McKittrick had worked for Higginson & Company, the British subsidiary of Lee, Higginson & Company—a renowned Boston investment house. The bank no longer exists, thanks in part to McKittrick, but in its heyday it was richer and more prestigious than Goldman Sachs and Lehman Brothers. Born in St. Louis, McKittrick had graduated from Harvard in 1911. He moved to Italy where he worked for the foreign arm of the National City Bank of New York, before joining the US Army in 1918. He was sent to Liverpool, where he was seconded to British military intelligence, to check that there were no spies using the docks to pass in and out of Britain. After the armistice in November, McKittrick was dispatched to France to work with the Allied occupation forces.


pages: 443 words: 98,113

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

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

‘GOLDMANSACHISM’ The financial crash that threatened the global economy in 2007–08 was due largely to recklessness by financiers in the big financial institutions. Yet executives of those firms continue to move into senior government positions that make economic policy nationally and internationally. Many of the top spots have been taken by people from just one Wall Street institution, investment bank Goldman Sachs, once dubbed by Rolling Stone magazine ‘the vampire squid’.22 These unelected technocrats are running the global economy. Mario Draghi, ex-Goldman Sachs and president of the European Central Bank, instituted the policy of quantitative easing that has enriched the rentiers and has called for more powers for the unelected ECB to force countries to undertake structural reforms in return for aid. He can act without having to obtain democratic consent. Indeed, according to polls, the country whose population was required to contribute most to QE, Germany, was vehemently opposed to the policy.

The United States must lead global financial reform efforts, and we must start by getting our own house in order. In short, the former CEO of Goldman Sachs, who was in charge of economic policy, had been spectacularly wrong. But he was not required to resign; he stayed in office until 2009. The Canadian Governor of the Bank of England, Mark Carney, was also previously employed by Goldman Sachs. William Dudley, chair of the Federal Reserve Bank of New York, is another Goldman Sachs alumnus. In Britain, Jim O’Neill, former Goldman Sachs chief economist, was ennobled and made a Treasury minister in 2015. O’Neill predicted before the financial crash that millions were about to enter the world’s affluent middle class. Months later, millions more had joined the precariat instead, many with unsustainable debt. Goldman Sachs represents an interest – finance capital. Those trained and working in it espouse and serve that interest.

The proposed creation of a Eurozone finance ministry, which the ECB supports, would make things worse.23 In the mid-1990s, Mario Monti, ex-Goldman Sachs, became an unelected EU Commissioner responsible for the internal market and then competition policy; he subsequently became the unelected Prime Minister of Italy. When eventually he had to go before the Italian electorate, he received a derisory vote. In the USA, a series of Goldman Sachs executives moved into top government posts. Robert Rubin, Treasury Secretary between 1995 and 1999, was described by Bill Clinton as ‘the greatest Secretary of the Treasury since Alexander Hamilton’. After the 2008 crash, Clinton admitted Rubin had been wrong in recommending against regulating derivatives, a factor in the crash, and also a major source of income for Goldman Sachs.24 In 2006, Henry Paulson, Goldman Sachs’s CEO, was appointed Treasury Secretary.


pages: 223 words: 10,010

The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

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banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

The proportion of landowners and industrialists with inherited wealth slipped.355 Although there were some financiers in the 1990 list—from the break-up king, James Goldsmith to the legendary financier Tiny Rowland—the number of City bankers and financial deal-makers has been rising sharply. In 2010, nearly a fifth of the richest 1000—including 51 hedge fund owners—made their money through banking and finance whereas only 11 per cent made it in industry or engineering. Thirteen partners at the American investment bank, Goldman Sachs—famously described by Rolling Stone magazine as a “vampire squid wrapped around the face of humanity”—made it into the top 1000.356 A certain level of finance-led industrial restructuring that forges more competitive and sustainable companies is inevitable and necessary. Mergers sometimes make sound business sense, while some companies need stronger management. Economies have to evolve and adjust as some companies fail, new ones emerge and the success stories of the past are overtaken by new technological developments and the industries of the future.

In 2007, Paulson clocked a profit of $3.7 billion in one year through a highly controversial deal that correctly predicted the collapse of derivatives linked to sub-prime mortgages. Paulson was betting that the mortgages would fail. It later emerged that Goldman Sachs, the investment bank handling the deal, had sold the mortgage-backed security—largely a pool of sub-prime mortgages called Abacus—onto unsuspecting clients in full knowledge that if Paulson was right these customers would make huge losses. The losses helped bankrupt the German Bank IKB and cost the Royal Bank of Scotland, and the British taxpayer, close to £600 million. Paulson, with Goldman Sachs, was deliberately creating toxic assets in order to profit from their failure, effectively a massive institutional transfer of wealth. Goldman Sachs was later fined $550 million—the largest such fine in history, $250 million to be returned to investors and $300 million paid to the U.S.

For a while, with market conditions especially favourable to such activity, these accounts generated substantial profits, while those running these highly secretive and opaque accounts would end up at the top end of banking salaries. Mark McGoldrick, nicknamed ‘Goldfinger’, who ran a ‘special-situations’ fund for Goldman Sachs—invested in a variety of obscure and illiquid investments, from Japanese golf courses to Thai auto loans—earned $70 million in 2006, but left a year later to set up his own hedge fund. The investment banks have always been highly guarded about the role of such trading. Although they have also claimed that the desks played a minor role, they accounted for a significant proportion of revenue at the height of the financial boom. In the case of Goldman Sachs, a study by the University of Massachusetts found that such trading accounted for some 64 per cent of the bank’s net revenue in 2006 and 2007.339 Another key way in which the increasing power of the City has been bad news for other sectors of the economy has been through the growing and to most, disproportionate, rewards available in finance.


pages: 270 words: 79,180

The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit by Marina Krakovsky

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Affordable Care Act / Obamacare, Airbnb, Al Roth, Black Swan, buy low sell high, Chuck Templeton: OpenTable, Credit Default Swap, cross-subsidies, crowdsourcing, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, information asymmetry, Jean Tirole, Kenneth Arrow, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, Metcalfe’s law, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, ride hailing / ride sharing, Robert Metcalfe, Sand Hill Road, sharing economy, Silicon Valley, social graph, supply-chain management, TaskRabbit, The Market for Lemons, too big to fail, trade route, transaction costs, two-sided market, Uber for X, ultimatum game, Y Combinator

To my mind, nasty characterizations of middleman minorities as unwelcome guests feeding off their hosts further discredited the notion that middlemen are parasites.28 I am still convinced that the general stereotype of the parasitic middleman is wrong—as all stereotypes are—but the more reporting I did, the harder it was to deny that in many specific cases, individual middlemen or organized groups of them do act like free riders, causing more harm than good. That’s how many of us regard Goldman Sachs, the Wall Street giant that the journalist Matt Taibbi famously, and to great applause, called “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”29 Indeed, a study of brand perceptions showed that people’s ratings of Goldman Sachs put the company squarely in the cold-incompetent quadrant.30 It’s not just Goldman Sachs that can evoke contempt, of course. Consider today’s typical money managers: whether they are personal financial advisors or pros managing multibillion-dollar mutual funds, most fail to beat the market—and when you take management fees into account, most actually underperform cheaper alternatives, such as index funds.31 What’s more, although there may be value to having an expert tailor a portfolio of investments right for your age and risk preferences, recent evidence suggests that financial advisors tend to create one-size-fits-all portfolios for their clients, providing off-the-rack services for bespoke-level fees.32 So when people say, as PBS economics correspondent Paul Solman has, that “most money management firms are parasites who live handsomely off innocent investors,” their strong feelings have a basis in reality.33 Consider, too, the primary middlemen in car sales in the United States: although many new-car dealers are probably skilled, honest, and customer-oriented, their trade groups are another story: the National Automobile Dealers Association and its state and local counterparts seem most concerned with lobbying for protectionist laws that benefit neither car buyers nor manufacturers.34 Middlemen who are seen as both cold (interested only in their own gain) and incompetent (creating more cost than value) will evoke contempt,35 and for them, the Parasite label is harsh but more or less apt.

Fixed Commissions and Social Waste in the Real Estate Industry,” Journal of Political Economy 111, no. 5 (2003): 1076–122. 2 THE CERTIFIER: APPLYING THE SEAL OF APPROVAL 1.American Pickers, Too Hot to Handle, season 2, episode 18, 2011. 2.Libby Callaway with Mike Wolfe, Frank Fritz, and Danielle Colby, American Pickers Guide to Picking (New York: Hyperion, 2011), 11. 3.Libby Callaway with Mike Wolfe, Frank Fritz, and Danielle Colby, American Pickers Guide to Picking, 107. 4.Loren Feldman, “Goldman Sachs and the $580 Million Black Hole,” New York Times, July 14, 2012. 5.Ruchika Tulshyan, “$100,000 Matchmaker, Make Me a Match,” Time, August 2, 2010. 6.This is the International Marriage Broker Regulation Act of 2005, also known as IMBRA. Government intervention was necessary because there wasn’t enough of a market incentive for these brokers to screen the men, who were the buyers in these transactions.

., 175–6 Crabtree, Michael, 179–80 Craigslist, 30–5, 37, 44–6, 65, 89, 171 decision simplicity, 169 Dell, Michael, 195–7 Dictator Game, 181–2 Direct from Dell (Dell), 195 Disney, 140 Dropbox, 18–20 Eachnet, 85 eBay Certifiers and, 58–62, 134, 164 Concierges and, 169 Eachnet and, 85, 102 Enforcers and, 84–5, 91 feedback and, 84–5, 89, 134 middlemen and, 3–4, 7 reputation and, 62, 67, 91 Eberlijn, Nina, 148–51 Edmunds.com, 165 Einstein, Albert, 127 Elberse, Anita, 135 Enforcers clients and, 107–9 explained, 7 knowing the workers, 75–7 need for, 73–5 playing watchdog, 77–8 punishment and, 92–7 reputation and, 85–6 restaurant business and, 78–84 role, 73 setting shared standards, 101–7 threat of consequences and, 86–8 trading in private information, 97–100 weak vs. strong, 88–92 Enron, 41 Expedia, 145 experiments Dictator Game, 181–2 Investment Game, 86–8, 92–4, 101–5 “Letter E” experiment, 131 networking and, 21 reputation and, 62 Ultimatum Game, 183–4 watchdogs and, 77–8 external risk, 111, 120, 123, 125–8, 142 see also risk Facebook, 4, 20, 22–3, 36, 80, 128–9, 137, 175 farmers’ markets, 66 Feller, William, 142 Fernandez-Mateo, Isabel, 98–100 Fershtman, Chaim, 183–4 Finlay, William, 175–6 Fischbacher, Urs, 181 Flash Boys (Lewis), 112 Floodgate, 5, 124–5, 127, 132 Free (Anderson), 39 Friendster, 36 Galinsky, Adam, 131 gallerists see art gallerists Gambetta, Diego, 74 Game-Changer (McAdams), 90 Garden, Sara, 193–4 Gates, Bill, 3 General Electric, 8 Give and Take (Grant), 41 Gneezy, Uri, 183–4 Goldberg, Bryan, 179 Goldman, Eric, 91 Goldman Sachs, 10 Google, 21, 128, 156, 175 Gottlieb, Robert, 69–70 Graham, Paul, 125 Granovetter, Mark, 24, 27, 42 Grant, Adam, 41 Green, Michael, 177 Greylock, 125 Grosvenor, Deborah, 68–70 Groupon, 44 GrubHub, 38, 40 Hall, Sarah, 146 Harley-Davidson, 137 Hawkison, Paul, 53–4, 71 headhunters, 2, 7, 61, 66, 175–6, 180 see also Insulators Hewlett-Packard, 196 hidden action, 74, 104 hidden information, 66, 73–4 Hoffman, Reid, 27 HomeAway, 90–1 Horejs, Jason, 113–17, 135, 198 Houston, Drew, 18 Hunt for Red October, The (Clancy), 68 Insulators agents and, 178–80 black markets and, 174–5 duty and, 190–3 example, 173–4 explained, 7 need for, 193–4 niceness and, 185–90 recruiting and, 175–8, 180–2 role, 173 toughness and, 182–5 insurance Bridges and, 30–1 Concierges and, 172 Insulators and, 188 “Market for Lemons” and, 65 middlemen and, 2 Risk Bearers and, 111–14, 121–2, 138–9 internal risk, 123, 126 see also risk Investment Game, 86–8, 92, 94, 101–3, 105 iSoldIt, 3, 59 J.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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

During a 2010 US Senate hearing on investment banking practices in the lead-up to the GFC, Goldman executives illustrated Upton Sinclair's observation: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”7 The following exchange occurred during the hearing: Senator Levin: “Don't you also have a duty to disclose an adverse interest to your client? Do you have that duty?” Dan Sparks (head of Goldman Sach's mortgage trading): “About?” Senator Levin: “If you have an adverse interest to your client, do you have the duty to disclose that to your client?” Dan Sparks: “The question about how the firm is positioned or our desk is positioned?” Senator Levin: “If you have an adverse interest to your client when you are selling something to them, do you have a responsibility to tell that client of your adverse interest?” Dan Sparks: “Mr. Chairman, I am just trying to understand what the ‘adverse interest’ means…”8 Rolling Stone magazine journalist Matt Taibbi called Goldman Sachs “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”9 But the US investment bank was not alone.

The end of the Cold War also provided a peace dividend, in the form of a significant drop in defense spending that freed up money for other purposes. Reduced funding for military research, the cancellation of the Superconducting Super Collider project, and the scaling down of Bell Laboratories meant that a large number of scientists, some from Eastern Europe and China, drifted into finance. These POWs—physicists on Wall Street, a term coined by Goldman Sachs's Emanuel Derman—helped drive the trading of complex instruments, which were now an established part of the finance economy. These events and their influences were central to the continuation of postwar expansion. The period commencing in the 1990s became known as the Great Moderation, an era of strong economic growth, high production and employment, low inflation, reduced volatility in the business cycle, and self-adulation among politicians, central bankers, and academic economists.

English politician Lord Palmerston's famous dictum states that nations have no permanent friends or allies, only permanent interests. A confluence of economic self-interest and necessity is reversing global integration, favoring closed economies with narrowly based strategic links between nations. The growth in trade and cross-border investment that underpinned prosperity and development is weaker, removing a key driver of economic growth. In 2001 Goldman Sachs's Jim O’Neill coined the term BRIC, for Brazil, Russia, India, and China. He predicted that these nations would overtake the six largest Western economies by 2041 (later revised to 2039 then 2032), arguing that there would be a corresponding decline in the economic status and power of the developed world. When he launched the idea of BRIC, O’Neill had little firsthand knowledge of these economies.


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

Public opinion turned against banking and finance, reflected in the Occupy movement and the surge in popularity of fringe political movements. A century after Upton Sinclair and Ida Tarbell the tradition of the muckraker was revived. A new generation of journalists sought to expose corporate and – especially – financial malpractice. When the internet journalist Matt Taibbi described Goldman Sachs as ‘a giant vampire squid, sucking money from wherever it finds it’,45 the description quickly went viral. The firm, which did not even advertise its presence at 200 West Street, was pilloried in Congress and the press. The power of Taibbi’s metaphor comes from its implication that Goldman was not creating wealth itself but benefiting from wealth that had been created by other people and businesses. And this suspicion is at the centre of many people’s concerns about the role of the financial sector.

It is entirely possible that some individuals and pension funds were on both sides of the bet. These luckless investors would not have known, and nor would anyone else. ‘Putting the client first’ begins with identifying who the client is. In the case of Fabulous Fab’s transactions Goldman Sachs may have been acting for Paulson, who wanted to bet on widespread defaults in sub-prime mortgages. Or the firm may have been acting for the purchasers of the securities based on these mortgages. Goldman Sachs may have been trading for the benefit of the shareholders of Goldman Sachs. The business should properly have owed duties of loyalty and prudence towards whichever one of the three parties was its client, but could not properly have been acting for all three. The predictable outcome of this ethical confusion was that ‘Fabulous Fab’ was in reality acting, not for the benefit of any of these parties, but for the benefit of ‘Fabulous Fab’.

People I talk to in the financial world find it difficult to conceive of a future financial system in which large corporations are not active in the repo market, in which asset-backed securities are not integral to housing finance, and where there are no futures contracts or stock market indexes. Yet there was a time when none of these things existed, and there could be such a time again. We need some of the things that Citigroup and Goldman Sachs do, but we do not need Citigroup and Goldman Sachs to do them. And many of the things done by Citigroup and Goldman Sachs do not need to be done at all. In 2008 the established finance sector was on the point of collapse. Most of the major financial institutions of the world were dependent on government support for their continued existence – as, to a large extent, they still are. During the global financial crisis governments were in a position to impose essentially any conditions they liked on the finance sector.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, basic income, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, Plutocrats, plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

The word makes it seem that all that had to be dealt with was technical, engineering problems, not issues of political economic power, so it was supposedly legitimate for politicians to hand over to technical experts for a while, for the politicians were both ignorant of the financial system’s working and too biased by political ties to do what was necessary. Hudson describes it as ‘a scientific sounding euphemism for bank lobbyists’.106 In effect, the technocrats protected the rule of the rich from the threat of democratic reaction. Goldman Sachs’ European reach In a famous article on Goldman Sachs in Rolling Stone, Matt Taibbi wrote: ‘The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.’107 It also ensured that it was represented far and wide in politics. In the US, Goldman Sachs men Robert Rubin and Hank Paulson both served periods of office as Treasury Secretary.108 But it has also had extensive influence in Europe. Here are just some of the more prominent examples, mostly from 2011: Mario Monti – the ‘technocrat’ – was imposed as Prime Minister of Italy in 2011 in place of the absurd but democratically elected Silvio Berlusconi.

On the Greek side, another former Goldman Sachs employee, Petros Christodoulou, Head of Greece’s debt management agency, was also alleged to be involved. Peter Sutherland, Attorney General of Ireland in the 1980s and another former EU Competition Commissioner, is now non-executive chairman of Goldman Sachs’s UK-based broker-dealer arm, Goldman Sachs International; until its collapse and nationalisation he was also a non-executive director of RBS. Belgian Karel van Miert, former EU Competition Commissioner, was an advisor to Goldman Sachs. So was Otmar Issing, former board member of Germany’s Bundesbank, economic advisor to Angela Merkel, and one of the creators of the euro.109 Antonio Borges, former head of the International Monetary Fund’s European division, was previously vice-chairman of Goldman Sachs International.

See also http://my.firedoglake.com/fflambeau/2010/04/27/a-list-of-goldman-sachs-people-in-the-obama-government-names-attached-to-the-giant-squids-tentacles/ and http://www.salon.com/2009/04/04/summers/. 108 Engelen et al (2011), p 171. See also Johnson, S. (2009) ‘The quiet coup’, The Atlantic, May, http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/2/. 109 Foley, S. (2011) ‘What price the new democracy? Goldman Sachs conquers Europe’, Independent, 18 November, http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html. 110 Marshall, A.G. (2013) ‘Global power project Part V: banking on influence with Goldman Sachs’, 15 July, http://truth-out.org/news/item/17563-global-power-project-part-v-banking-on-influence-with-goldman-sachs. 111 http://www.publiceye.ch/en/news/public-eye-awards-2013-naming-and-shaming-awards-go-goldman-sachs-and-shell/. 112 For further information, see Engelen et al (2011), chs 6 and 7. 113 Ferguson, C. (2012) Inside job, London: Oneworld, pp 248–53. 114 Bloomberg (2009) ‘Harvard swaps are so toxic even Summers won’t explain, (update3)’, 18 December, http://www.bloomberg.com/apps/news?


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

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bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, creative destruction, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Plutocrats, plutocrats, private military company, Republic of Letters, Richard Feynman, Richard Feynman, Robert Shiller, Robert Shiller, Scientific racism, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

Library of Congress Cataloging in Publication Data is available. ISBN 978-0-307-96243-0 (hardcover) ISBN 978-0-307-96244-7 (eBook) Jacket design by Evan Gaffney v3.1 To Kristina Contents Cover Title Page Copyright Dedication 1 What Is Money? 2 Getting Money’s Measure 3 The Aegean Invention of Economic Value 4 The Monetary Maquis 5 The Birth of the Money Interest 6 The Natural History of the Vampire Squid 7 The Great Monetary Settlement 8 The Economic Consequences of Mr. Locke 9 Money Through the Looking-Glass 10 Strategies of the Sceptics 11 Structural Solutions 12 Hamlet Without the Prince: How Economics Forgot Money … 13 … and Why It Is a Problem 14 How to Turn the Locusts into Bees 15 The Boldest Measures Are the Safest 16 Taking Money Seriously Notes Bibliography Acknowledgements Illustration Credits A Note About the Author 1 What Is Money?

Outside of the traditional sources of sub-sovereign wealth and power—the aristocracy and the church—the commercial revolution was beginning to build a new mercantile class. Its practices may not have enjoyed the nice theoretical apparatus of Oresme—but then the merchants did not need scholastic logic to justify their activities. They were busily rediscovering an invention that would turn monetary society on its head in a way in which Oresme’s brilliantly argued tract never could. That invention was the bank. 6 The Natural History of the Vampire Squid THE MYSTERIOUS MERCHANT OF LYONS In around 1555 there arose a scandal in the city of Lyons.1 An Italian merchant had settled there and proceeded to make himself prodigiously rich in a remarkably short space of time. By itself, there was nothing particularly surprising about that. Lyons was one of the great commercial cities of France, and of Europe. It was no stranger to the business of international trade, or to the wealth that it could bring the enterprising merchant.

was the famous saying attributed to the Argive aristocrat Aristodemus, quoted both by Pindar and by Alcaeus; see chapter 3. 20. Rolnick, Velde, and Weber, 1996, 797. 21. Ibid. 22. Ibid. 23. Sumption, 2001, p. 195. 24. Johnson, 1956. 25. Ibid., p. 10. 26. Ibid., pp. 19–20. 27. Ibid., p. 38. 28. Ibid., p. 40. 29. Ibid., p. 6. 30. Ibid., p. 17. 31. Ibid., p. 44. 32. Ibid., p. 42. 6 The Natural History of the Vampire Squid 1. Described in Frankel, 1977, p. 15. 2. Élie Brackenhofer was told in 1634 that the Fair of Lyons had been founded in AD 172. See Braudel, 1992. 3. See Spufford, 2002, p. 19 ff. 4. Braudel, 1992, p. 91. 5. The phrase is Braudel’s, quoted in Frankel, 1977, p. 15. 6. Amis, 1984, pp. 119–20. 7. De Rubys, 1604, Part IV, chapter 9, p. 499. The pound (livre) was the abstract money of account, whilst the sou was a coin of the French king. 8.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Two days before Bloomberg and Schumer took to the op-ed pages of the Wall Street Journal to raise the curtain on their report, another bipartisan pair, Glenn Hubbard, the dean of Columbia Business School, former Bush adviser, and future Mitt Romney adviser, and John Thornton, the active Democratic donor and former president of Goldman Sachs, announced that they, too, had organized a study on costly regulation and whether it was causing the U.S. capital markets to lose ground to foreign rivals. Hank Paulson, the Republican Treasury secretary and former chairman and CEO of Goldman Sachs, traveled to New York a few weeks after these twin editorials to give a speech to the Economic Club of New York on “The Competitiveness of U.S. Capital Markets” in which he praised the Bloomberg/Schumer op-ed as being “right on target.” To make his point that Americans were in danger of overregulation, Paulson approvingly quoted a Democratic predecessor as secretary of the Treasury and fellow former Goldman Sachs chairman, Bob Rubin: “In a recent speech, former Treasury secretary Bob Rubin said this about regulation: ‘Our society seems to have an increased tendency to want to eliminate or minimize risk, instead of making cost/benefit judgments on risk reduction in order to achieve optimal balances.’”

His appointment as Treasury secretary in 2006 wasn’t Paulson’s first stint in D.C. In his early twenties, Paulson worked at the Pentagon, and then in Richard Nixon’s White House. Throughout his thirty-year career at Goldman Sachs Paulson was renowned for his political savvy both inside the firm and far beyond its old headquarters at 85 Broad Street, deftly building an influential network of connections as far afield as China. He made his career in the relationship business of investment banking, and within Goldman Sachs, Paulson was known as an expert operator. “When he ran the Chicago office, he managed to get the entire firm to work for him,” one Goldman Sachs partner who had worked closely with Paulson told me admiringly. So how did this smart, experienced leader come to participate in such an ill-judged lunch, the sort of insider meeting that is the stuff of fantasy for the Goldman haters?

THE TWIN GILDED AGES—ENTER THE BRICS On a bitter evening in mid-January 2012, a group of bankers and book publishers gathered on the forty-second floor of Goldman Sachs’s global headquarters at the southern tip of Manhattan. The setting could not have been more American—the most eye-catching view was of the skyscrapers of midtown twinkling to the north, and a jazz ensemble played softly in one corner. But the appetizers were an international mishmash—thumb-sized potato pancakes with sour cream and caviar, steaming Chinese dumplings, Indian samosas, Turkish kebabs. That’s because the party was in honor of the Goldman thinker who served notice to the Western investment community a decade ago that the Internet revolution wasn’t the only economic game in town. The world was also being dramatically transformed by the rise of the emerging markets, in particular the four behemoths that Jim O’Neill, then chief economist at Goldman Sachs, dubbed the BRICs: Brazil, Russia, India, China.


pages: 559 words: 155,372

Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez

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Airbnb, airport security, always be closing, Amazon Web Services, Burning Man, Celtic Tiger, centralized clearinghouse, cognitive dissonance, collective bargaining, corporate governance, Credit Default Swap, crowdsourcing, death of newspapers, drone strike, El Camino Real, Elon Musk, Emanuel Derman, financial independence, global supply chain, Goldman Sachs: Vampire Squid, hive mind, income inequality, information asymmetry, interest rate swap, intermodal, Jeff Bezos, Malcom McLean invented shipping containers, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, means of production, Menlo Park, minimum viable product, move fast and break things, move fast and break things, Network effects, Paul Graham, performance metric, Peter Thiel, Ponzi scheme, pre–internet, Ralph Waldo Emerson, random walk, Ruby on Rails, Sand Hill Road, Scientific racism, second-price auction, self-driving car, Silicon Valley, Silicon Valley startup, Skype, Snapchat, social graph, social web, Socratic dialogue, source of truth, Steve Jobs, telemarketer, urban renewal, Y Combinator, zero-sum game, éminence grise

In San Francisco, people don’t pay two months’ rent to a real estate pimp: they create Craigslist and make the pimp obsolete. What else could I pimp out for page views? What other meme was flitting across the national zeitgeist? Oh! Who else but my former employer, that vampire squid with its tentacles violating virgins and robbing starving babies across the land? The great capitalist evil: Goldman Sachs. Everyone would cheer on its lynching. Imagine the lurid interest in what life was really like inside, plus the joy at its roasting. It would be a titillating spectacle of taboo revelation. New York tech and life at Goldman Sachs, those would be our first two forays into the corporate-driven, mercenary written word—“content marketing,” to use the hideous marketer’s term for it. According to the leading PR mythologies, day-of-the-week posting choice was critical.

Like a rock-bottom alcoholic contemplating his vomit-stained sheets through the haze of another postbender hangover, you occasionally asked yourself: How did I get here? How could I do this to myself? Where was the humanity? I joined Goldman Sachs after five flailing years in a physics PhD program at Berkeley. At the time, my graduate stipend (taxable as income!) was the princely sum of $19,000. The average salary at Goldman Sachs in 2005 was $521,000, and that’s counting each and every trader, salesperson, investment banker, secretary, mail boy, shoe shiner, and window cleaner on the payroll. One of the few things I took from my sordid grad student pad was a copy of Michael Lewis’s Liar’s Poker, that classic of the Wall Street trading genre, for reference. My job on arrival? I was a pricing quant on the Goldman Sachs corporate credit trading desk.* That means I was responsible for modeling and pricing the various credit derivatives that the biggest credit-trading house in the world traded.

We still had the second Goldman Sachs post in the ammo bin. I had included a link to the Goldman Sachs post in the New York tech scene one, but few had bruited about it. The PR tsunami had crested nicely on Wednesday, and continued on through the rest of the week. By Monday, the hive mind would be on to its next amusing post, and we’d need to rekindle interest. This post would be the first in a series of hyperviral blog posts that would put AdGrok on the startup map (if not quite the customer one). Every three to four weeks, another gaseous emanation from the latrine of human thought (a.k.a. me) would appear and rocket us to the top of Hacker News (the tech geek’s Cosmo), and make another stir in the evanescent tech buzz-o-sphere. Until AdGrok’s very end, search terms like “goldman sachs” and “fuck you” (I had written a post about the ever-elusive goal of “fuck-you money”) would be the most popular terms that led to clicks to our site.* It irritated MRM to no end.


pages: 514 words: 152,903

The Best Business Writing 2013 by Dean Starkman

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Asperger Syndrome, bank run, Basel III, call centre, clean water, cloud computing, collateralized debt obligation, Columbine, computer vision, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, Erik Brynjolfsson, eurozone crisis, Exxon Valdez, factory automation, fixed income, full employment, Goldman Sachs: Vampire Squid, hiring and firing, hydraulic fracturing, income inequality, jimmy wales, job automation, John Markoff, late fees, London Whale, low skilled workers, Mahatma Gandhi, market clearing, Maui Hawaii, Menlo Park, Occupy movement, oil shale / tar sands, Parag Khanna, Pareto efficiency, price stability, Ray Kurzweil, Silicon Valley, Skype, sovereign wealth fund, stakhanovite, Steve Jobs, Stuxnet, the payments system, too big to fail, Vanguard fund, wage slave, Y2K, zero-sum game

Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym. Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all. It makes me ill how callously people talk about ripping their clients off. Over the last twelve months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the SEC, Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding.

Pamila Payne Los Angeles, CA 90068 Greg Smith 22. Why I Am Leaving Goldman Sachs New York Times The op-ed of the year, by a large margin, came from a formerly unknown South African equity-derivatives banker in London. In a self-serving but extremely powerful and resonant statement, he took on Goldman Sachs from the pages of the New York Times and won a book deal and a news cycle or three in the process. Greg Smith’s criticisms weren’t new, but this was the first time they’d come from inside rather than outside the company, giving them unprecedented and undeniable heft. For most of the rest of the year, Goldman found itself on the back foot, defending itself from the impression the op-ed created. Today is my last day at Goldman Sachs. After almost twelve years at the firm—first as a summer intern while at Stanford, then in New York for ten years, and now in London—I believe I have worked here long enough to understand the trajectory of its culture, its people, and its identity.

As of the end of 2010, fewer than 12 percent of the borrowers who’d applied for a HAMP modification with Litton were granted one. The vast majority of those denials, Wyatt says, were not legitimate. Goldman Sachs’s emphasis on maximizing profits rather than preventing foreclosures is typical of the servicing industry, he says, particularly the larger banks. “They could have addressed the crisis way earlier. Had companies changed their philosophy and said, ‘You know what? We’re not going to beef up our collections staff; we’re going to beef up our loss-mitigation staff.’ Had they done that and come up with loan-modification scenarios that were reasonable and put people into more affordable payments early on, we wouldn’t be where we are now.” A spokesman for Goldman Sachs said the company disagreed with Wyatt’s account but offered no specifics. At Bank of America, by far the country’s largest servicer, an employee who works in one of the bank’s many call centers finds the process as mystifying as do the borrowers to whom he speaks every day.


pages: 358 words: 106,729

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

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

Radical proposals traverse the blogosphere—though with all the upheaval, the public tolerance of the additional uncertainty associated with change is also low. The public has lost faith in a system where the rules of the game seem tilted in favor of a few. Some of the bailout proposals, put together over sleepless weekends, seem poorly thought through at best and tainted by corruption at worst. Rolling Stone’s Matt Taibbi has called Goldman Sachs—a bank with alumni in every corner of the government, and, despite its protestations to the contrary, a significant beneficiary of the rescue—a “blood-sucking vampire squid.”1 The epithet seems to have stuck, epitomizing the public mood. Tin-eared bankers have not helped, paying themselves huge bonuses soon after being rescued by an ongoing public bailout, and, perhaps more infuriatingly, expressing surprised hurt at the public reaction. The private sector, however, is not alone in deserving blame.

Interestingly, even for the richest 0.01 percent of Americans toward the end of the twentieth century, 80 percent of income consisted of wages and income from self-owned businesses, and only 20 percent consisted of income from arm’s-length financial investments.11 This ratio is in stark contrast to the pattern in the early part of the century, when the richest derived most of their income from property. The rich are now the working rich—whether they are entrepreneurs like Bill Gates or bankers like Lloyd Blankfein of Goldman Sachs—instead of the idle rich. At a time when wealth seems to be within the grasp of anyone who can get a good job, it is all the more unfortunate that so many Americans, by dint of their poor education, are locked out of the productive jobs that would make them better off. I have used the term education so far, even when I refer to employability, but a better term is human capital, which refers to the broad set of capabilities, including health, knowledge and intelligence, attitude, social aptitude, and empathy that make a person a productive member of society.

A better explanation is that CEOs were vying among themselves for prestige by making more profits in the short term or by heading league tables for underwriting or lending, regardless of the longer-term risk involved. I wrote a paper describing such incentives following bank troubles in the early 1990s, and I think the phenomenon is more widespread.13 Stan O’Neal, the CEO of Merrill Lynch, pushed his firm into the seemingly highly profitable asset-backed securities business in an attempt to keep up with rivals like Goldman Sachs. He monitored Goldman’s quarterly numbers closely and often questioned colleagues on the companies’ relative performance.14 Merrill’s lack of experience in the area eventually resulted in enormous losses and a shotgun marriage with Bank of America. The pressures on the CEO may have come not just from shareholders or personal egos but also from aggressive subordinates. Citigroup CEO Chuck Prince’s comment in July 2007, only a month before markets started freezing up, has become emblematic of CEOs’ role in the current crisis.


pages: 320 words: 86,372

Mythology of Work: How Capitalism Persists Despite Itself by Peter Fleming

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1960s counterculture, anti-work, call centre, clockwatching, commoditize, corporate social responsibility, creative destruction, David Graeber, Etonian, future of work, G4S, Goldman Sachs: Vampire Squid, illegal immigration, Kitchen Debate, late capitalism, Mark Zuckerberg, market bubble, market fundamentalism, means of production, neoliberal agenda, Parkinson's law, post-industrial society, profit maximization, profit motive, quantitative easing, Results Only Work Environment, shareholder value, The Chicago School, transaction costs, wealth creators, working poor

A contemporary version of Svejk-like behaviour in the workplace is provided by Carmen Segarra, the US Federal Reserve Bank of New York regulator who secretly taped 48 hours of conversation that revealed the intimate relationship between regulators and Goldman Sachs. The degree of implicit cooperation between the Fed watchdog and Goldman Sachs was so close that she decided to gain evidence in case she could no longer participate and was fired (which she eventually was). Goldman Sachs is a very powerful, very aggressive and very male institution. Following the financial crisis, Rolling Stone Magazine colourfully described the company as ‘a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money’. Insulting to squid some might say. Anyway, Segarra recalls her reaction when the boss announced her next assignment: He said, do you know where you’re going?

Any normal person would have raised serious objections about the level of collusion. But an institutional climate of fear was deeply ingrained, and large investment banks could count on the regulators turning a blind eye when required. As she recorded, Segarra was mostly invisible, a wallpaper character that looked like everybody else. She finally spoke out when a superior asked her to change her report about Goldman Sachs so that it omitted a damaging fact. Her defiance was no doubt licensed by the clandestine voice recorder, which was a stroke of genius. Coming out of the woodwork at the crucial time, and knowing full well that it would certainly mean ‘moving on’, is a definitive Svejkian trait. As Segarra refuses to change the damaging report, her boss Jonathan Kim suddenly concentrates on her, amplifying the ‘I, Job’ function.

Sinha Group ref1 Becker, G. ref1, ref2, ref3, ref4 Benjamin, W. ref1, ref2 Berardi, F. ref1 Beynon, H. ref1 big government ref1, ref2, ref3 Bikini Kill ref1 biopolitics and biopower ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8 and uses of illness at work ref1 Bloch, E. ref1 body clock ref1 bonuses ref1, ref2, ref3, ref4 Brabeck, Peter ref1 Branson, Richard ref1 Braverman, H. ref1 Brecht, B. ref1 Breed, L. ref1 British Journal of Psychiatry ref1 British Petroleum (BP), rebranded as ‘Beyond Petroleum’ ref1, ref2, ref3 Brown, Derren ref1 Bukowski, C. ref1, ref2, ref3, ref4 bullshit jobs ref1 bureaucracy ref1, ref2, ref3, ref4, ref5 Buried (Cortés) ref1 Bush, George W. ref1, ref2 business ethics ref1, ref2, ref3, ref4, ref5, ref6 see also corporate social responsibility capitalism ref1, ref2 and class ref1, ref2 and critical theory ref1 and debt ref1 and democracy ref1, ref2 effect on time ref1, ref2, ref3 and engagement of workers ref1, ref2 and freedom of expression ref1 global ref1, ref2, ref3, ref4, ref5 and ideological structures ref1 and rationalization ref1, ref2 shareholder capitalism ref1, ref2, ref3, ref4 and surplus labour ref1 see also neoliberal capitalism Carbon Pollution Reduction Scheme (Australia) ref1 Carr, Allen ref1 Cederström, C. ref1 Certeau, M. de ref1, ref2 Challenger Space Shuttle (1986) ref1 Chomsky, N. ref1 Cipollone, Mrs ref1 circadian rhythms ref1 Clastres, P. ref1 climate change denial ref1 co-optation ref1, ref2, ref3, ref4, ref5 the common ref1, ref2, ref3 communication guerrilla groups ref1 communism ref1, ref2, ref3 construction industry, house building ref1, ref2 consumer society ref1, ref2, ref3 corporate citizenship ref1, ref2, ref3 corporate ideology ref1 and contradiction ref1 and enlightened self-interest ref1 and ‘false truth-telling’ ref1, ref2, ref3 impact of financial crisis ref1 as lie telling ref1 corporate social responsibility (CSR) ref1, ref2, ref3, ref4 in tobacco industry ref1 corporations ref1 ‘creating shared value’ ref1, ref2 and development of capitalist ideology ref1 and work–life balance policies ref1 Cortés, Rodrigo ref1 Crane, A. ref1 Crary, J. ref1, ref2 creditocracy ref1 Critchley, S. ref1 criticism/criticality and ‘sad truths’ ref1 usefulness of ref1 Crozier, M. ref1 The Cube (Natali) ref1 culture management ref1 Daimler ref1 Dardot, P. ref1, ref2 Dawkins, Richard ref1 deaths work-related ref1, ref2 see also suicides debt/indebtedness ref1, ref2, ref3, ref4, ref5, ref6 deformalization ref1 informality and authoritarianism ref1, ref2 Deleuze, G. ref1, ref2, ref3, ref4 biopower ref1, ref2, ref3 on criticism/criticality ref1, ref2 and de-subjectification ref1 and deceptive truths ref1 and illness ref1, ref2, ref3 language ref1, ref2 societies of control ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8, ref9 democracy and capitalism ref1, ref2 corporations and ref1, ref2 and false truth telling ref1 post-state democratic organizations ref1 self-organized ref1 workplace ref1 desertion ref1, ref2, ref3, ref4, ref5 dialogical reason autobiographical truth telling ref1 critique of ref1 dialectical reason ref1, ref2 dialogical politics at work ref1 dissenting consent ref1 humour ref1 irony ref1, ref2 post-dialogical politics at work ref1 abandonment ref1 absentification ref1 disciplinary power ref1, ref2, ref3, ref4 disposability ref1, ref2, ref3 see also abandonment ideology dissent commodification of ref1 dissenting consent ref1 Edwards, R. ref1 Eggers, D. ref1 email ref1, ref2, ref3, ref4 using outside working hours ref1, ref2, ref3, ref4, ref5 empty labour ref1, ref2 ‘Endies’ (Employed but with No Disposable Income or Savings) ref1 Enron ref1 Erhardt, Moritz ref1 escape ref1, ref2, ref3, ref4, ref5 antinomies of ref1 cinematic visions of ref1, ref2, ref3 negative optics of revolt ref1 see also alcohol consumption; desertion; post-labour strategy; suicide; totality refusal EU Time Directive ref1 exploitation ref1, ref2, ref3, ref4, ref5, ref6 CSR and ref1, ref2, ref3, ref4 and debt ref1, ref2 and escape ref1, ref2 and managerialism ref1, ref2 self-exploitation ref1, ref2, ref3 and self-reliance ref1, ref2, ref3 and subsidization ref1 see also working hours false truth telling ref1 semantic structure of ref1 in tobacco industry ref1, ref2 using the truth to lie ref1 see also dialogical politics; rituals of truth and reconciliation Feldman, R.S. ref1 financial crisis (2008) ref1, ref2, ref3, ref4, ref5, ref6, ref7 impact on corporate ideology ref1 Fisher, M. ref1 Flanagan, B. ref1, ref2, ref3, ref4, ref5 Fleming, P. ref1 flexible labour ref1, ref2, ref3, ref4, ref5 collective self-reliance of workforce ref1, ref2, ref3 Fordism ref1, ref2, ref3, ref4, ref5 and alienation ref1 end of ref1, ref2, ref3, ref4, ref5 Foster, J.B. ref1 Foucault, M. ref1, ref2 aphasia ref1 biopower and biopolitics ref1, ref2, ref3 disciplinary power ref1 parrhesia ref1, ref2, ref3 prison ref1 and regimes of truth ref1 technologies of the self ref1 Foxconn (China) ref1 France Telecom ref1 free time, dangers of ref1, ref2 Freud, S. ref1, ref2, ref3 Friedman, L. ref1 Friedman, M. ref1 ‘Fuck you!’ capitalism ref1, ref2, ref3, ref4 General Motors plant (Michigan) ref1 Goffee, R. ref1 Goldman Sachs ref1 The Good Soldier Svejk (Hasek) ref1 Gordon, D. ref1 Gorz, A. ref1, ref2 Graeber, D. ref1 Groundhog Day (Ramis) ref1 Guattari, F. ref1, ref2, ref3 on criticism/criticality ref1 and de-subjectification ref1 language ref1, ref2 Gujarat NRE ref1 Gulf of Mexico oil spill (2010) ref1 Hamper, B. ref1 Hanlon, G. ref1 Hardt, M. ref1 Hart, A. ref1 Harvard Business Review (HBR) ref1 Harvey, D. ref1, ref2 Hayek, F. ref1, ref2, ref3 health and safety ref1, ref2 ‘Help to Buy’ support scheme ref1 Hirschhorn, N. ref1 Hodgkinson, T. ref1 holiday policy ref1 Houellebecq, Michel ref1, ref2, ref3 human capital ref1, ref2, ref3, ref4, ref5, ref6, ref7 human relations movement ref1 Human Resource Management (HRM) ref1, ref2, ref3, ref4, ref5, ref6 humour ref1 ‘I, Job’ function ref1, ref2, ref3, ref4, ref5, ref6 and biopower ref1, ref2 and death drive ref1, ref2 as escape into work ref1 and illness ref1, ref2, ref3 resisting ref1, ref2, ref3, ref4, ref5, ref6 see also escape; totality refusal see also work, as all-encompassing; working hours illegal immigrants, deportations ref1 illness ref1, ref2 collective ref1, ref2 see also Social Patients’ Collective as desirable experience ref1, ref2, ref3, ref4 of managers ref1, ref2 and productive power ref1, ref2 as weapon against capitalism ref1 ‘immersion room’ exercise ref1, ref2, ref3, ref4 imperceptibility ref1 see also invisibility incentivization ref1 indexation process ref1, ref2, ref3, ref4, ref5 informality and authoritarianism ref1, ref2 see also deformalization insecurity ref1 Institute of Leadership and Management (ILM) ref1, ref2, ref3 invisibility ref1, ref2 ‘Invisible Committee’ ref1, ref2 Italian autonomist thought ref1, ref2 Jameson, F. ref1 Jones, G. ref1 Junjie, Li ref1 Kamp, A. ref1 Kein Mensch ist illegal ref1 Kellaway, L. ref1 Key Performance Indicators (KPIs) ref1 Keynes, J.M. ref1, ref2 Khrushchev, Nikita ref1, ref2 Kim, Jonathan ref1 King, Stephen ref1 ‘Kitchen Debate’ ref1 Kramer, M. ref1, ref2 labour unions ref1 dissolution of ref1, ref2 language, evolution of ref1 Larkin, P. ref1 Latour, B. ref1, ref2 Laval, C. ref1, ref2 Lazzarato, M. ref1, ref2 leaders backgrounds ref1 remuneration and bonuses ref1, ref2, ref3, ref4, ref5 see also managers Lefebvre, H. ref1 Leidner, R. ref1 Lewin, D. ref1 liberation management ref1, ref2, ref3, ref4, ref5 life itself, enlisting ref1, ref2, ref3, ref4, ref5 lines of flight ref1, ref2 Lordon, F. ref1, ref2, ref3 Lucas, R. ref1, ref2 Lukács, G. ref1 Lynch, R. ref1 McChesney, R. ref1 McGregor, D. ref1 management ref1, ref2 and class function ref1, ref2 as co-ordination ref1 and inducement of willing obedience ref1, ref2 information deficit ref1 and power ref1, ref2 self-justification rituals ref1 as transferable skill ref1, ref2 managerialism ref1, ref2, ref3, ref4, ref5, ref6, ref7 and abandonment ideology ref1, ref2, ref3, ref4, ref5 and boundary management ref1 and conflict-seeking behaviour ref1 division between managers and managed ref1, ref2 general principles of ref1 and leadership ref1 profligate management function ref1 refusing ref1 and securitization ref1 as self-referential abstraction ref1 managers as abandonment enablers ref1, ref2 and deformalization ref1 and engagement of workers ref1, ref2 lack of practical experience ref1 overwork ref1, ref2 see also leaders Marcuse, H. ref1 Market Basket supermarket chain ref1 Marx, K. ref1, ref2, ref3, ref4, ref5, ref6 Maslow, A. ref1 Matten, D. ref1 meat consumption ref1 Meek, J. ref1 Meyerson, D. ref1 Michelli, J. ref1 Miller, W.I. ref1 Mitchell, David ref1 mobile technology ref1, ref2, ref3, ref4, ref5, ref6, ref7 Modafinil ref1, ref2 Monaghan, A. ref1 money ref1, ref2 see also accumulation Mooney, G. ref1 Moore, A.E. ref1 Moore, Michael ref1, ref2 music industry ref1 Naidoo, Kumi ref1 NASA ref1 Natali, Vincenzo ref1 Negri, A. ref1, ref2 neoliberal capitalism ref1, ref2, ref3, ref4, ref5, ref6, ref7 and bureaucracy ref1 and ideal worker ref1, ref2 and non-work time ref1, ref2 and paranoia ref1, ref2 resisting ref1, ref2 see also post-labour strategy and threat of abandonment ref1, ref2 and truth telling ref1, ref2, ref3 neoliberalism ref1, ref2, ref3, ref4, ref5, ref6 and class relations ref1, ref2, ref3 and disciplinary power ref1 and human-capital theory ref1 and impossibility ref1, ref2, ref3, ref4, ref5, ref6 and micro-fascism ref1 and reign of technocrats ref1 role of state ref1 and truth telling ref1, ref2 and worker engagement ref1, ref2, ref3 Nestlé ref1 New Public Management ref1, ref2 New Zealand, and capitalist deregulation ref1 New Zealand Oil and Gas (NZOG) ref1 Newman, Maurice ref1 Nietzsche, Friedrich ref1, ref2 Nixon, Richard ref1, ref2 Nyhan, B. ref1 obsession ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8 Onionhead program ref1 overcoding ref1, ref2, ref3, ref4, ref5, ref6, ref7 The Pain Journal (Flanagan) ref1, ref2, ref3 paranoia ref1, ref2, ref3, ref4 overwork/paranoia complex ref1, ref2 Paris Commune ref1, ref2 Parkinson’s Law ref1 Parnet, C. ref1 Parsons, T. ref1 Peep Show (TV comedy) ref1 pensions ref1, ref2 personnel management ref1 see also Human Resource Management Peters, T. ref1 Philip Morris ref1 Pike River Coal mine (New Zealand) ref1 Pollack, Sydney ref1 Pook, L. ref1 Porter, M. ref1, ref2 post-labour strategy, recommendations ref1 postmodernism ref1, ref2, ref3 power ref1, ref2, ref3, ref4, ref5 and truth telling ref1 Prasad, M. ref1 Price, S. ref1 private companies, transferring to public hands ref1 privatization ref1, ref2, ref3, ref4, ref5, ref6, ref7 profit maximization ref1, ref2, ref3, ref4, ref5 quantitative easing ref1 Rand, Ayn ref1 rationalization ref1, ref2, ref3 Reifler, J. ref1 reserve army of the unemployed ref1 Ressler, C. ref1 results-only work environment (ROWE) ref1, ref2, ref3 Rimbaud, A. ref1 Rio+20 Earth Summit (2012) ref1 ‘riot grrrl’ bands ref1 rituals of truth and reconciliation ref1 Roberts, J. ref1 Roger Award ref1 Roger and Me (Moore) ref1 Rosenblatt, R. ref1 Ross, A. ref1, ref2 Ross, K. ref1 Rudd, Kevin ref1 ruling class fear of work-free world ref1, ref2 and paranoia ref1, ref2 Sade, Marquis de ref1 Sallaz, J. ref1 Saurashtra Fuels ref1 Scarry, E. ref1 Securicor (G4S) ref1 Segarra, Carmen ref1 self-abnegation ref1 self-employment ref1 self-management ref1, ref2, ref3, ref4, ref5 self-preservation ref1, ref2, ref3, ref4 self-sufficiency ref1, ref2, ref3 shareholder capitalism ref1, ref2, ref3, ref4 shift work ref1, ref2 see also working hours Shragai, N. ref1 sleep and circadian rhythms ref1 as form of resistance ref1 working in ref1, ref2, ref3 smart drugs ref1, ref2 Smith, Roger ref1 smoking and addiction ref1 dangers of ref1, ref2 scientific research ref1 sociability ref1, ref2 ‘the social’ ref1, ref2 social factory ref1, ref2, ref3, ref4, ref5, ref6, ref7 and structure of work ref1 social media ref1 Social Mobility and Child Poverty Commission ref1 Social Patients’ Collective (SPK) ref1, ref2, ref3 social surplus (commons) ref1, ref2, ref3 socialism ref1, ref2, ref3, ref4 Sontag, S. ref1 Spicer, A. ref1 stakeholder management ref1, ref2 Starbucks ref1 state, theory of ref1 subcontracting ref1, ref2, ref3 subsidization ref1, ref2, ref3, ref4, ref5, ref6, ref7 suicide as act of refusal ref1 Freud’s definition ref1 work-related ref1, ref2, ref3, ref4, ref5 surplus labour ref1, ref2 surplus living wage ref1 ‘tagged’ employees ref1 ‘tagged’ prisoner ref1 Tally, Richard ref1 taxation ref1, ref2, ref3 Taylor, F.W. ref1 Taylor, S. ref1 Taylorism ref1 technological progress, and emancipation from labour ref1 Thatcher, Margaret ref1 Thatcherism ref1 They Shoot Horses Don’t They?


pages: 424 words: 121,425

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran

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access to a mobile phone, affirmative action, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, Kickstarter, M-Pesa, McMansion, microcredit, mobile money, moral hazard, mortgage debt, new economy, Own Your Own Home, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, white flight, working poor

.… We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m going to start organizing.… I’ll tell you what, if you read our Founding Fathers, people like Benjamin Franklin and Jefferson, what we’re doing in this country now is making them roll over in their graves.28 Plenty of scorn was also directed at the modern moneylenders. Journalist Matt Taibbi called Goldman Sachs “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” The Occupy Wall Street movement embodied this disdain for reckless moneylending with demands that bankers be sent to jail. Their signs could have been written by a modern-day Nehemiah or Andrew Jackson: “Tax Wall Street Leeches,” “Turn Wall Street into Tahrir Square,” “JP Morgan is a Kleptomaniac,” “Jail the Bankers,” “Tear Down this Wall Street,” “Jesus was the 99%,” and “Kick ‘M in the Junk Bonds.”29 (Timothy Geithner dismissed those who were uncomfortable with bailing out banks as demanding “Old Testament Justice,”30 which seems accurate given the admonitions against usury in the book, but the modern state is no longer persuaded by Nehemiah’s arguments.)

The regulators knew of the situation, but because of the culture of the firms, they did not feel comfortable raising issues about the firms without their superiors’ blessings.128 Senior regulators even admitted to having witnessed “the capture set in.”129 This culture resulted in inaction in the face of mounting risks. In September 2014, a former employee of the FRBNY who was one of Goldman Sachs’ designated regulators released secret recordings of her time regulating the large firm. The tapes revealed what most banking experts suspected for years—Goldman Sachs, not its regulator, called the shots. The FRBNY regulators stationed at Goldman Sachs, many of whom would end up working at the investment bank, cowered at meetings with bankers where it should have been their role to press. When former employee Carmen Segarra did push, she was fired for having “sharp elbows” and “breaking eggs.” Segarra explained that “they were all sort of afraid of Goldman, and I think they were a little bit confused as to who they were working for.

There are countless stories of bankers lobbying for loopholes and exemptions in banking laws and even accusations that bankers’ lobbies have “captured” banking agencies.24 Moreover, most of the policymakers who engineered the bailout were either former Wall Street bankers or part of former administrations responsible for regulating (or more accurately, deregulating) the banking industry. This “revolving door” effect creates an environment where bank supervisors and bankers are often the same people. Henry Paulson, for example, the secretary of the Treasury who orchestrated the Troubled Asset Relief Program (TARP), was a former Goldman Sachs CEO, as was his predecessor in the Clinton Treasury, Robert Rubin. “In short,” observes one commentator, “Paulson, CEO of Goldman Sachs, was pushing free money to his former colleagues.”25 It is hard to imagine a scenario in which Paulson would let Wall Street fail, even if the sector’s economic contribution at the time was proven to be less than that of piano-playing cats. There is no doubt that these policymakers were at least influenced by their time inside the industries they eventually supervised, and a belief system partial to Wall Street interests may have affected their actions.


pages: 320 words: 87,853

The Black Box Society: The Secret Algorithms That Control Money and Information by Frank Pasquale

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Affordable Care Act / Obamacare, algorithmic trading, Amazon Mechanical Turk, American Legislative Exchange Council, asset-backed security, Atul Gawande, bank run, barriers to entry, basic income, Berlin Wall, Bernie Madoff, Black Swan, bonus culture, Brian Krebs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, Chuck Templeton: OpenTable, cloud computing, collateralized debt obligation, computerized markets, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, cryptocurrency, Debian, don't be evil, drone strike, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, financial innovation, financial thriller, fixed income, Flash crash, full employment, Goldman Sachs: Vampire Squid, Google Earth, Hernando de Soto, High speed trading, hiring and firing, housing crisis, informal economy, information asymmetry, information retrieval, interest rate swap, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, Julian Assange, Kevin Kelly, knowledge worker, Kodak vs Instagram, kremlinology, late fees, London Interbank Offered Rate, London Whale, Marc Andreessen, Mark Zuckerberg, mobile money, moral hazard, new economy, Nicholas Carr, offshore financial centre, PageRank, pattern recognition, Philip Mirowski, precariat, profit maximization, profit motive, quantitative easing, race to the bottom, recommendation engine, regulatory arbitrage, risk-adjusted returns, Satyajit Das, search engine result page, shareholder value, Silicon Valley, Snapchat, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, the scientific method, too big to fail, transaction costs, two-sided market, universal basic income, Upton Sinclair, value at risk, WikiLeaks, zero-sum game

But in this harsh new economic reality, the money “earned” by the speculators has all the more purchasing power, arrayed against the smaller incomes of those who did not take advantage of the bubble.170 Thus the great paradox of contemporary finance: its premier practitioners are far better at creating need and demand for their “product” (price discovery) than they are at actually providing it. Their primary results are murk, darkness, volatility, and doubt. Matt Taibbi called Goldman Sachs a “vampire squid;” an ink-squirting octopus of obfuscation would be fitting, too.171 Theoretical justifications for finance’s power focus on “free markets” generating fundamental knowledge about the economy. Without the great brokerages, and “bank holding companies,” how would we price debt, equity, or the more exotic risks assimilated into derivatives?172 Yet the rise of fi nancialization has created enormous uncertainty about the value of companies, homes, and even (thanks to the pressing need for bailouts) the once rock solid promises of governments themselves.

(“In a bruising Consent to a Final Judgment in the federal case against it, Goldman acknowledges [that its] marketing circular said the reference portfolio was “selected by” the independent firm, ACA Management LLC, when in fact Paulson & Co. Inc., an interested party, played a role in that selection.”) Cora Currier, “13 Reasons Goldman’s Quitting Exec May Have a Point,” ProPublica, March 14, 2012, http:// www.propublica.org /article /13-reasons-goldmans-quitting -exec-may-have -a -point. Shahien Nasiripour, “Goldman Sachs Values Assets Low, Sells High to Customers as Senate Panel Alleges Double Dealing,” Huffington Post, April 14, 2011, http://www.huffi ngtonpost.com /2011/04 /14 /goldman-sachs-values-asse _n _849398.html. 99. Kayla Tausche, “Wall Street into Snapchat, and Regulators Are on Alert,” CNBC, July 30, 2013, http://www.cnbc.com /id /100924846. 100. For example, since a “simple fi xed/floating interest-rate swap contract . . . has zero value at the start,” it “is considered neither an asset nor a liability, but is an ‘off-balance-sheet’ item.”

My point is narrower: that the government’s interest in intelligence gathering has led it into a pragmatic, powerful, and largely secret partnership with interests whose concern is not the public good, but private profit or personal advance. The most visible and controversial example so far has been the cooperation in Manhattan between the Department of Homeland Security, the New York Police Department, and several major banks.142 By 2009, the Lower Manhattan Security Coordination Center (LMSCC) was processing feeds from thousands of cameras run by Wall Street firms and the NYPD. One source identified Goldman Sachs, Citigroup, the Federal Reserve, and the New York 44 THE BLACK BOX SOCIETY Stock Exchange as participants at the center. The exact composition of the staff is a closely guarded secret, but there are likely many other Wall Street firms with “on-site representatives.”143 In the abstract, a post-9/11 partnership of this sort might seem like an efficient use of resources. But critics worried it would focus on protests like Occupy Wall Street, which was the target of other unusual federal involvements.144 Homeland Security officials may have advised local police about others of the hundreds of Occupy encampments that arose in the fall of 2011.145 According to documents obtained by the Partnership for Civil Justice, the Domestic Security Alliance Council described a “strategic partnership between the FBI, the Department of Homeland Security and the private sector” to closely monitor Occupy protests.


pages: 237 words: 64,411

Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence by Jerry Kaplan

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Affordable Care Act / Obamacare, Amazon Web Services, asset allocation, autonomous vehicles, bank run, bitcoin, Bob Noyce, Brian Krebs, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, combinatorial explosion, computer vision, corporate governance, crowdsourcing, en.wikipedia.org, Erik Brynjolfsson, estate planning, Flash crash, Gini coefficient, Goldman Sachs: Vampire Squid, haute couture, hiring and firing, income inequality, index card, industrial robot, information asymmetry, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Loebner Prize, Mark Zuckerberg, mortgage debt, natural language processing, Own Your Own Home, pattern recognition, Satoshi Nakamoto, school choice, Schrödinger's Cat, Second Machine Age, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, Skype, software as a service, The Chicago School, The Future of Employment, Turing test, Watson beat the top human players on Jeopardy!, winner-take-all economy, women in the workforce, working poor, Works Progress Administration

But I suspect that would simply embroil us in endless debates, pitting those who blame the poor for their own failure to thrive against those who blame needless government spending and regulatory interference against those who see those same regulations as hopelessly biased toward the rich against those who believe your income is a numerical measure of how pleased God is with you. Some would likely argue we should raise taxes and spend more on social programs. Others would counter that this will impede the “entrepreneurial spirit” by reducing the rewards for risk taking and hard work.15 Some would point the finger at layabout welfare recipients. Occupy Wall Streeters might take a similarly dim view of the investment bankers of Goldman Sachs, which Rolling Stone famously referred to as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”16 Perhaps a new federal jobs program is the ticket, reprising Franklin Delano Roosevelt’s WPA program, which employed almost 8 million people.17 But I propose that these approaches conflate two things we should consider separately: jobs and income.

See market forces free speech protection, 90 Fremer, Michael, 193 Friedman, Milton, 101, 157 “The Role of Government in Education,” 157 fundamental analysis investing, 62 fundamentalists, 163 futures contract, 97 Gates, Bill, 118 GDP, 168, 176, 196 growth rate, 176 genetically modified organisms, 203 Gini, Corrado, 179 “Variabilità e mutabilità,”179 Gini coefficient, 179–80 global warming, 131, 158 Goldman Sachs, 170 Google, 48, 67, 144 government, 4, 16, 57, 58 consumer information and, 178 corporate ownership and, 14 economic incentives and, 177 job mortgage loans proposal and, 153–54, 157 public assets ownership and, 180 social welfare and, 167–70, 171, 173, 182, 183–84 government bonds, 178 GPS (Global Positioning System), 6, 22, 46, 141, 142 grocery stores, 99, 145 happiness, 164 healthcare.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, Chuck Templeton: OpenTable, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

Instead of “burning time” at church, why not “burn money” by giving generously to religious or other social causes? Even better, why leave any ambiguity about the link between your displays of charity and your commercial interests when you can donate a portion of company profits to the church or some other charity? Lots of businesses publicly trumpet their philanthropic commitments, generally in areas that have nothing to do with the products they sell: Goldman “Vampire Squid” Sachs—blamed by many for helping to fleece investors during the financial crisis—funds an initiative to help poor African women become entrepreneurs. Target builds school libraries. GE funds community health centers. And we’re not talking chump change, either: companies are spending hundreds of millions of dollars apiece to make the world a better place, and then even more to tell us about it.12 There are surely many reasons why companies act like do-gooders (and want everyone to know it): Milton Friedman, a champion of free-market economics if there ever was one, argued that it’s primarily the result of corporate executives frittering away shareholder dollars on their own pet charities.

But some would say that is exactly what they were meant to do—pledge Torres to a gangster’s life in a credible and visible way that the less committed would never choose. If Akerlof’s lemons model illuminated how information gaps can make markets disappear, the signaling model of Michael Spence—built on the foundations laid down by Akerlof—explains one way that buyers and sellers can save the market. As a result, we now better appreciate why the San Fers and other gangs insist on permanently marking new members, why Goldman Sachs and McKinsey recruit Harvard philosophy majors, and why profit-focused corporations “burn money” by giving to charity. Cheap Talk Compare Torres’s tattoos to some other signs of commitment: the phrase “I love you” spoken above some club music at 2 a.m., or “Trust me” in an e-mail from a Nigerian “prince.” What do such assurances convey? Endearment? Faith? Honor? To an economist (and likely to you, we hope), they express nothing.

Vickrey’s 1961 paper, along with refinements supplied by Edward Clarke and Theodore Groves in the early ’70s, provided a sealed-bid mechanism that could easily be extended to work for more than one item. That meant its applications weren’t limited to unique items like epic poems or baseball superstars; it could, in theory, be used by a milk-marketing board to sell off its members’ output (this was the type of application Vickrey envisioned), or to auction Treasury bills to Goldman Sachs and J.P. Morgan. In what’s called a multiunit Vickrey auction, the task facing bidders remains much the same, but instead of providing a single number in their sealed envelopes, prospective buyers would list a bid schedule providing a separate figure for what they’d be willing to pay, depending on how many units they receive. Suppose, for example, you’re buying wholesale milk for a grocery chain.


pages: 351 words: 102,379

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

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

He had made it safely to the weekend, but he already was worried about what would happen on Monday if he didn’t find a way to save Morgan Stanley and Goldman Sachs. “John’s holding on to a slim reed,” Paulson had told Geithner about John Mack’s perilous position on a phone call the night before. They had heard that Morgan Stanley had only about $30 billion to $40 billion left, but Paulson was also still anxious about Goldman Sachs, his former employer. “We’ve got to find a lifeline for these guys,” said Paulson, and they reviewed the possible options. On a pad that morning, Geithner started writing out various merger permutations: Morgan Stanley and Citigroup. Morgan Stanley and JP Morgan Chase. Morgan Stanley and Mitsubishi. Morgan Stanley and CIC. Morgan Stanley and Outside Investor. Goldman Sachs and Citigroup. Goldman Sachs and Wachovia. Goldman Sachs and Outside Investor. Fortress Goldman. Fortress Morgan Stanley.

Willumstad and the AIG team were quickly having a difficult time keeping track of everyone in the growing crowd and, as the weekend wore on, whom they actually represented. When Christopher A. Cole from Goldman Sachs appeared with a small army of bankers, John Studzinski, AIG’s banker from Blackstone, became alarmed. Goldman? Who invited them? “Who are you working for?” Studzinski asked Cole. At first Cole seemed oddly reticent to say. “Well,” he said, “we have several clients here.” Studzinski just stared at him, hoping to hear more. As they spoke, Richard Friedman, who ran Goldman Sachs’ private investment business, walked by, which did not go unnoticed by everyone else in the room. Was Goldman actually there for itself? “We’re here,” Cole started speaking again, “working with Allianz, Axa, and Goldman Sachs Capital Partners.” It was all so confusing and conflicted. Skeptical about the answers he was getting, and perhaps a bit paranoid, Studzinski raced up to the senior security guard on the eighteenth floor, Nathan T.

You currently have an interest in a defined benefit pension plan through your former employers, the Goldman Sachs Group, Inc. Your total investment in this plan represents only a small fraction of your overall investment portfolio. For this reason, your financial interest in the plan is not so substantial as to be likely to affect the integrity of your services to the Government. With this waiver, you may participate personally and substantially in the particular matters affecting this defined benefit pension plan, including the ability or willingness of the Goldman Sachs Group, Inc. to honor its obligations to you under this plan. Unknown to the public, Paulson was now officially free to help Goldman Sachs. 267 “Stop the insanity—we need a time out” was the subject line of Glenn Schorr’s e-mail. An analyst at UBS who covered the banking industry, Schorr had sent the missive to accompany his latest report to his clients on Wednesday afternoon.


pages: 741 words: 179,454

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

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

Kennedy knew: “The greatest enemy of the truth is very often not the lie—deliberate, contrived, and dishonest—but the myth, persistent, persuasive, and unrealistic. Belief in myth allows the comfort of opinion without the discomfort of thought.”45 In 2009, Lloyd Blankfein, chairman of Goldman Sachs, described by Matt Taibbi of Rolling Stone as a “great vampire squid wrapped around the face of humanity,”46 told the UK’s Sunday Times that he was “doing God’s work.” Facing public anger, Blankfein, who earned $54 million for a year’s work just before the crisis, remained unapologetic about the firm’s behavior. In a piece of historical revisionism that Joseph Stalin would have admired, Goldman Sachs claimed that it never needed government assistance and would have survived the crisis without it.47 As old communists knew, it is difficult to know what will happen yesterday. As Keynes wrote in 1933: We have reached a critical point.

But as the baseball player Yogi Berra noted: “In theory there is no difference between theory and practice but in practice there is.” Synergies and cross-selling benefits failed to emerge. Competition limited CitiGroup’s gains. Other commercial banks built or bought investment banks to compete. i-Banks, the new buzzword for investment banks, shamelessly derivative of Apple’s ‘i’ products—particularly Morgan Stanley, Goldman Sachs, and Merrill Lynch (collectively dubbed MGM)—changed their business models to match the universal banks. At an internal conference in the early 1990s, John Thornton, a Goldman Sachs managing director, outlined a business model. Eschewing the traditional PowerPoint presentation, Thornton used a felt pen to draw dots on a white board. “These are the important people in the world.” Thornton then drew overlapping circles around the dots. “Inside these circles are the people they know, the deals they do, the ideas they are thinking about.

What is recurrently so described and celebrated is, without exception, a small variation on an established design.... The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version.11 The Economist summarized the era: Over the past 35 years it has seemed as if everyone in finance has wanted to be someone else. Hedge funds and private equity wanted to be as cool as a dot.com. Goldman Sachs wanted to be as smart as a hedge fund. The other investment banks wanted to be as profitable as Goldman Sachs. America’s retail banks wanted to be as cutting-edge as investment banks. And European banks wanted to be as aggressive as American banks.12 They would all end up wishing they could be back precisely where they started. Elite athletes sometimes use drugs to boost performance. Voodoo banking enabled banks to enhance short-term performance while risking longer-term damage.


pages: 385 words: 111,807

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

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

Barclays has a commercial bank, but also has an investment bank named Barclays Capital. Or it could be one company engaged in both, using different brands: JP Morgan Chase has an investment banking arm, using the brand of JP Morgan, and a commercial banking arm, using the brand of Chase Manhattan. Other investment banks – Goldman Sachs, Morgan Stanley, the now-defunct Lehman Brothers, etc. – do not have commercial siblings. Most of us have heard of them – especially Goldman Sachs, who have been infamously likened to a ‘vampire squid’ by the journalist Matt Taibbi – but don’t fully understand what they do. Investment banks have existed since the nineteenth century – sometimes as independent entities but often as parts of universal banks that perform both types of banking. German banks, such as Deutsche Bank or Commerzbank, are the quintessential examples.

For example, reflecting the strength of the US financial industry, during the last thirty-two years (between Ronald Reagan’s first presidency, 1981–5, and Barack Obama’s first, 2009–13), six out of the ten holders of the US treasury secretary position (collectively in office for 21.5 years) had worked in the financial industry.2Two of them – Robert Rubin and Hank Paulson – had worked for one firm, Goldman Sachs. The common point in all these theories is that the government is controlled and influenced by individuals who are like all other individuals – they are selfish. It is naive, if not exactly delusional, to expect them to put public interests before their own. The government may not be able to correct for market failures, even if it wants to, due to asymmetric information and resource constraints In addition to questioning the motives of the government – or, rather, of those who control the government – the government failure argument questions whether it is even capable of correcting for market failures, even in the unlikely case of it genuinely wanting to improve social welfare.


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Stress Test: Reflections on Financial Crises by Timothy F. Geithner

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Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, selection bias, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

In a futile gesture against the overwhelming consensus, I did call a New York Times editor to complain about a damaging story portraying the AIG rescue as a backdoor bailout for Hank’s former colleagues at Goldman Sachs. I had asked Lloyd Blankfein about Goldman’s direct exposure to AIG; when he assured me Goldman’s exposures were relatively small and fully hedged, I made him send me the documentation. Still, the Times wouldn’t correct the record, and my call probably strengthened its suspicions. The same reporter later did a story portraying the entire crisis response team as servants of Goldman, accompanied by a vampire squid–like diagram with me in the middle. In the media, in the public, even in the financial community, we faced withering skepticism about our motives as well as our competence. After all, we had lent a mismanaged insurance company three years’ worth of federal spending on basic scientific research.

Our critics didn’t explain how we could have imposed haircuts—many counterparties weren’t even U.S. firms—or why haircuts (or even protracted negotiations over haircuts) wouldn’t have produced downgrade and default. They simply found it obscene that our payouts to AIG flowed straight to financial giants such as Goldman Sachs. They didn’t have better solutions; they just didn’t like ours. We were often vulnerable to that kind of attack, because we rarely had good options. We just tried to choose the least-bad ones. Goldman Sachs was a particular lightning rod, because Hank and the chairman of my board, Steve Friedman, had both run Goldman, while one of Hank’s top aides on AIG issues, Dan Jester, and my markets chief, Bill Dudley, were former Goldman executives. It has become an article of faith in some circles on the left and right that the AIG rescue was obviously a backdoor bailout for Goldman.

Many Americans are still suffering, but a lot more suffering has been averted. And yes, the financial system is alive and flourishing again. That’s partly because of the strategy I helped design and execute, which is why I’m often described as a “Wall Street ally.” The New York Times once did an amusing story about my unearned reputation as a “Wall Street insider.” People still seem to think I cut my teeth at Goldman Sachs. But nothing we did during the financial crisis was motivated by sympathy for the banks or the bankers. Our only priority was limiting the damage to ordinary Americans and people around the world. During the crisis, we did a lot of things that would be unthinkable in normal times in a capitalist economy. But we kept our promises that our interventions would be as limited as possible. By the end of 2010, the U.S. government no longer owned a piece of any major bank.


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Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, debt deflation, deskilling, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, knowledge worker, labor-force participation, labour mobility, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, Plutocrats, plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Richard Feynman, Rodney Brooks, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

The primary complaint leveled against the financialization of the economy is that much of this activity is geared toward rent seeking. In other words, the financial sector is not creating real value or adding to the overall welfare of society; it is simply finding ever more creative ways to siphon profits and wealth from elsewhere in the economy. Perhaps the most colorful articulation of this accusation came from Rolling Stone’s Matt Taibbi in his July 2009 takedown of Goldman Sachs that famously labeled the Wall Street firm “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”54 Economists who have studied financialization have found a strong correlation between the growth of the financial sector and inequality as well as the decline in labor’s share of national income.55 Since the financial sector is, in effect, imposing a kind of tax on the rest of the economy and then reallocating the proceeds to the top of the income distribution, it’s reasonable to conclude that it has played a role in a number of the trends we’ve looked at.

., 103 food fabricators, 180, 246 food stamps, 201–202 Forbes (magazine), 84 “For Big Companies, Life Is Good” (Wall Street Journal), 39 Ford, Henry, 80 Ford, Henry, II, 193 Ford Motor Company, 76, 193 401k retirement plans, 222, 274 Foxconn, 10, 11, 14 fractional reserve banking, 218n France, 24, 41 Freeland, Chrystia, 51 freestyle chess, 122, 123 “freeters,” 221 “Free Trade’s Great, but Offshoring Rattles Me” (Blinder), 118 Frey, Carl Benedikt, 59, 223 Friedman, Milton, ix, 210–211 Friedman, Thomas, 133 The Gap, 17 Gates, Bill, 236 GDP (gross domestic product) consumer spending and, 199 corporate profits as share of, 40, 202, 203 finance-related activity as percentage of, 55 GDP (gross domestic product) deflator, 38n Genentech, 234 General Electric, 154, 179 General Motors, 76 The General Theory of Employment, Interest and Money (Keynes), 206 genetic programming, 108–109, 110 Georgia Institute of Technology (Georgia Tech), MOOCs and, 134–135, 142 Geraci, Robert, 235 Germany, 41 Ghayad, Rand, 45–46 globalization, 53–55, 116 glucose monitoring, 159 “Goggles” feature, 22 Gold, Jenny, 164 Goldman Sachs, 56 Good Data, 107 Google, xvi, 121, 236 Android system, 6, 21, 79, 121 artificial intelligence and, 231 autonomous cars and, xiii, 94, 182–183, 184, 186, 188, 189 big data and, 86 cloud computing and, 104, 106 cloud robotics and, 21 glucose monitor, 159 “Goggles” feature, 22 keyword-based search algorithm, 98–99 online language translation tool, 89–90, 130 personalized email and social response program, 93–94 profit and employee numbers, 76 revenue generation and, 76 robotics startup companies, acquisition of, 21n Singularity University and, 234 Thrun and Norvig and, 132 Udacity, 134 YouTube acquisition, 175 Gordon, Robert J., 65 government funding, of nanotechnology research, 242–243 government regulation of markets, 265 GPS (Global Positioning System), 209n Grabit Inc., 7–8 graphene nanotubes, 70n “gray goo” scenario, 244, 247 graying workforce, 220–223, 224 Great Recession corporate profits vs. retail sales during recovery from, 39–40, 202, 203 debt and, 200 increase in part-time jobs and, 49 jobless recovery and, 44–45, 280 productivity and, 207–208 “The Great Reversal in the Demand for Skill and Cognitive Tasks” (Beaudry, Green & Sand), 127 The Great Stagnation (Cowen), 65 Green, David A., 127 Grossman, Lev, 111 Grossman, Terry, 235 Grötschel, Martin, 71 guaranteed income.


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Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

“Becoming Flexible: Self-flexibility and Its Pedagogies,” British Journal of Management 20 (2009): S149–59. Szafarz, Ariane. “How Did Crisis-Based Criticisms of Market Efficiency Get It So Wrong?” 2009. Taibbi, Matt. “Glenn Hubbard Leading Academic” Rolling Stone blog, December 12, 2012 at: www.rollingstone.com/politics/blogs/taibblog/glenn-hubbard-leading-academic-and-mitt-romney-advisor-took-1200-an-hour-to-be-countrywides-expert-witness-20121220. Taibbi, Matt. Griftopia: Bubble Machines, Vampire Squids, and the Long Con (New York: Spiegel & Grau, 2010). Taibbi, Matt. “The Real Housewives of Wall Street,” Rolling Stone, April 12, 2011. Talbot, Margaret. “Brain Gain,” The New Yorker, April 27, 2009. Tankersley, Jim, and Michael Hirsh. “Neo-Voodoo Economics,” National Journal, May 20, 2011. Taylor, John. “How Government Created the Financial Crisis,” Wall Street Journal, February 3, 2009.

This was deployed in a myriad of ways to suggest what might seem a string of strident non sequiturs: for instance, some neoliberals actually maintained that the solution to perceived problems in derivatives and securitization was redoubled “innovation” in derivatives and securitization, and not their curtailment.108 Another variant on the Hayekian credo was to insist that the best people to clean up the crisis were the same bankers and financiers who created it in the first place, since they clearly embodied the best understanding of the shape of the crisis. The revolving door between the U.S. Treasury and Goldman Sachs was evidence that the market system worked, and not of ingrained corruption and conflicts of interest. [12] The neoliberal program ends up vastly expanding incarceration and the carceral sphere in the name of getting the government off our backs. Members of the Mont Pèlerin Society were fond of Benjamin Constant’s adage: “The government, beyond its proper sphere ought not to have any power; within its sphere, it cannot have enough of it.”

When he filed his “Executive Branch Financial Disclosure Report” on January 20, 2009, listing a net worth of $17–$39 million, he prompted a flurry of newspaper and blog accounts of his outsized speaker fees and favors done for the financial sector from the late 1990s onward.93 Summers has enjoyed an extremely checkered career in many respects, dating from his controversial tenure as chief economist at the World Bank in 1990, but had nonetheless risen to political prominence due to the long-term patronage of Robert Rubin, formerly co-chair of Goldman Sachs, secretary of the Treasury, and later gray eminence at Citigroup and other Wall Street institutions. During the Clinton administration, Rubin and Summers played a now-infamous role in quashing Brooksley Born at the CFTC in 1998 when she proposed reining in the proliferating markets in credit default swaps. Indeed, many of the most significant neoliberal bank deregulations that led up to the crisis happened during the joint watch of Rubin, Summers, and Greenspan.


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

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

Wired for War: The Robotics Revolution and Conflict in the 21st Century, Penguin, New York, 2009. Solnit, Rebecca, A Paradise Built in Hell: The Extraordinary Communities that Arise in Disaster, Penguin, 2010. —. Men Explain Things to Me, Haymarket Books, 2014. Sprague, Jeb, Paramiltarism and the Assault on Democracy in Haiti, Monthly Review Press, New York, 2012. Taibbi, Matt, The Divide: American Injustice in the Age of the Wealth Gap, Scribe, 2014. —. Griftopia: Bubble Machines, Vampire Squids and the Long Con that Is Breaking America, Scribe, Melbourne, 2010. Trilling, Daniel, Bloody Nasty People: The Rise of Britain’s Far Right, Verso, 2013. Walker, Frank, The Tiger Man of Vietnam, Hachette Australia, Sydney, 2009. Notes Introduction 1Jo Confino, “It Is Profitable to Let the World Go to Hell,” Guardian, January 20, 2015. 2Peter Coy, “The Richest Rich Are in a Class of Their Own,” Business Week, April 3, 2014. 3Ned Resnikoff, “Food Pantries Stretched to Breaking Point by Food Stamp Cuts,” Al Jazeera America, November 24, 2014. 4David Leonhardt and Kevin Quealy, “The American Middle Class Is No Longer the World’s Richest,” New York Times, April 22, 2014. 5Matt Taibbi, “Bank of America: Too Crooked to Fail,” Rolling Stone, March 14, 2012. 6Matt Taibbi, “Bank of America Is a ‘Raging Hurricane of Theft and Fraud,’” Occupy Wall Street day of action, February 29, 2012. 7Justin Wolfers, “All You Need to Know About Income Inequality, in One Comparison,” New York Times, March 13, 2015 8David Halperin, “The Perfect Lobby: How One Industry Captured Washington DC,” Nation, April 3, 2014. 9Cecilia Olivet and Pia Eberhardt, Profiting from Crisis: How Corporations and Lawyers Are Scavenging Profits from Europe’s Crisis Countries (Amsterdam Transnational Institute/Corporate Europe Observatory, March 2014). 10Aditya Chakrabortty, “New Era Estate Scandal: Families at the Mercy of International Speculators,” Guardian, November 20, 2014. 11James V.

The sum of all executive bonuses in 2014, averaging roughly $173,000 each, came to around double the earnings of all Americans working fulltime on the minimum wage.7 It is an ideology that thrives despite guaranteeing social disharmony. The US model of reducing the role of government while increasing the influence of largely private power has never been so rapacious, though the problem is global. For-profit colleges burden students with huge debts and worthless credentials while receiving federal student aid. Goldman Sachs, a firm with a large measure of responsibility for the economic meltdown in 2008, now invests in social-impact bonds—a system that enriches the company if former prisoners stay out of jail but reduces the accountability of governments and prioritizes private profit. The corporation also makes money from higher education, pressuring underprivileged students to take on debt while giving scant attention to the standard of teaching.8 Republicans in Michigan have pushed for the privatization of public school teachers, using a skewed logic that advocates cutting public schools and selling off facilities at the lowest price.

35, 112–13, 139–40, 221 detention centers access 252–3, 299, 359n31 Australia 271, 274, 276, 278–9, 280–5, 285–305, 356n2, 357n11 conditions 66–71, 79, 299–304, 334n14, 357n11 costs 96, 281–3, 304 economic logic of privatization 289–99 Greece 64–71, 76, 77–80, 96, 98, 336n14 guards 64–5, 68–9 house rules 232–4 medical care 77–80, 266, 295 price-gouging 292 privatization 13, 98, 230–5, 245–51, 280–5, 289–99 racism 65, 259–60, 294 sexual abuse 252–8 size 76 staff numbers 294 staff pain and suffering 296–8 United Kingdom 230–5, 245–51, 252–8, 263–7 United States of America 211–28 workers’ health and safety 298 working conditions 297–8 Detention Watch Network 216, 222, 227–8 diabetes 14 Digicel 122 Dilley, Texas 221 disaster capitalism, definition 6–9 disaster, definition 9 disaster economics 322n18 disaster relief NGO-ization of 137–41 privatization 108–9 Droneshield 205 drones (UAVs) 97–8 drug abuse 37–9, 102 drug trade, Afghanistan 37–9 Dubai 45 Duma, William 186 Dungavel detention centre 266 Dupuy, Alex 133 Dutton, Peter 281 Duvalier, Francois (“Papa Doc”) 109–10 Duvalier, Jean-Claude (“Baby Doc”) 110–12 DynCorp 16, 26–7, 124 ecological damage, copper mining 173 Ecolog International 29 economic empowerment 162 economic exploitation, Haiti 132, 133–6 Economist 117 eco-system damage, Haiti 130 Eldorado Gold 100 Elie, Patrick 119–22 El Refugio 223 embassies, security of 30 embedded journalism 10, 26, 324n5 enlightened dictatorship 2 environmental destruction 157–8, 173, 273–4 Eppright, Fred 136 equality 311 Equatorial Guinea 14 Etienne, Yanick 126–8 Eurasian Minerals 120 Eurobank 101 European Central Bank 72 European Commission 72, 73 European Court of Human Rights 68 European External Border Surveillance System 97 European Refugee Fund 66 European Union asylum seeker numbers 96 development aid 324n3 and drones 97–8 and Greece 12 questions of identity 103–4 refugee crisis 95–8 Euro, the, Greece and 84 Evans, Tim 306 Evergreen Aviation 34 Evros 66–7 executions 199 Executive Outcomes 180 exploitation 107–8 Extractive Industries Transparency Initiative (EITI) 190–1 extraordinary rendition 16, 34 extremism 25 ExxonMobil LNG pipeline 166 Facebook 308 Fahim (Afghan engineer) 46–8 Farage, Nigel 236 Farmer, Paul 113–14, 139 fascism 85 Fatal Assistance (aid) 118–19 Ferguson, Missouri, riots in 203 Fiji 346–7n41 Financial Times 6, 191, 242 Finn, Noel 255 fiscal policy 84 Fisher, Nigel 122 Flores, Anton 223 Flynn, Michael T. 55 Fonteyne, Jean-Pierre 357n4 food aid 3, 145–6 food and drink multinationals 14 Foreign Policy 6, 45, 123 fossil fuel industry 8–9 Four Horseman International 60 fracking 8–9 France 99, 120, 311 fraud 240–1 Friedmann, Alex 216, 222 Frontex 67, 96, 97 Frontex Plus 95 Funk, McKenzie 9 Fyssas, Pavlos, murder of 90 G4S 13, 16, 23, 57, 230–5, 235, 240, 248, 255, 256–8, 258–60, 264, 277, 278, 280, 282, 283–4, 289, 290 Gaddafi, Muammar 16, 30 Gap 132 Garoute, Hans P. 147–9 Gates Foundation 202 General Atomics 31 GEO Group 124, 197, 199, 200, 201, 202, 227, 255, 266 Georgia Detention Watch 223 Georgia Latino Alliance for Human Rights (GLAHR) 224 Georgia, USA 199–200 immigrants 211–28 Stewart immigration detention centre 211–22 Germany 75, 84, 239 Gertler, Dan 120 Ghana 339n38 Ghani, Ashraf 27, 32, 45, 62 Gibney, Matthew J. 284 Gilbert, Sylvie 190 Glass, Charles 27 global capitalism, Klein’s critique of 7–8 Global Detention Project 68 global financial crisis, 2008 3, 72, 239, 309 Global Solutions Limited (GSL) 289–90 Golden Dawn 12, 71, 72, 74, 75, 78, 80, 104 aims 91–2 anti-Semitism 90–1 appeal 87 and the Greek Orthodox Church 88 iconography 89–90, 92 and immigration 88–9, 92 leadership 86, 91 Luqman trial 94 opposition 93–5 patriotism 88 popularity 85–6 and privatization 92–3 relationship with police 86 supporters 86, 87 violence 92, 94 worldview 87–93 Goldman Sachs 4 Gopal, Anand 32–3, 46–7 Gopnik, Adam 196 Government Accountability Office (US) 35 government, role of 4 Grainger 206 Grayling, Chris 261–2 Grayson, John 235, 262 Greece 4, 12, 64–104 ANEL (Independent Greeks) 73 anti-Semitism 93 asylum seeker infrastructure 66–8, 76–7 asylum seekers 64–71, 75–7, 77–80, 89 Asylum Service 66–7 austerity 71–5, 99–103, 307–8 closed hospitality centers 67–8 corruption 64, 72 debt crisis 71–5, 84 detention centers 64–71, 76, 77–80, 96, 98, 334n14 economic policies 12, 73 election, 2015 72–3, 91, 101 and the Euro 84 Eurozone exit 95 foreign investment 100–1 and Germany 75 Golden Dawn 12, 71, 72, 74, 75, 78, 80, 85–95, 104 healthcare system 80–4 Health Ministry 82 immigrants 74, 88–9, 92 immigration policy 96 medical care, asylum seekers 77–80 Ministry of Public Order and Citizen Protection 76 police brutality 83 potato movement 78 poverty rate 98–9 press freedom 74, 75 pressure on 73 privatization 72, 98, 100–2, 307–8 privatization of the detention network 77 questions of identity 103–4 racism 71, 80 reception centers 67 refugee crisis 95–8 sovereignty 104 suicide rate 102 Syntagma Square protest, 2014 70 Syriza 12, 72–5, 83, 91, 95, 103 unemployment 67, 99 Greek Council for Refugees 66 greenhouse gases 1–2 Green Prison 204 green technology, prisons 204 Greenwald, Glenn 219 Greg (PMC contractor) 60–1 Greiner, Robert 15 GTL 210 Guantánamo Bay 28, 240 Guardian 75, 261 Guatemala 134 Gulf War, First 25 Gulf War, Second 60 Gurkhas 20, 22, 25 Habib-Ur-Rahman 46–8 Hadawal, Khan Afzal 61 HADOM 140 Haidari, M.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

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

Schumpeter: His Life and Work, Cambridge, U.K., Polity Press. Swedberg, R. (2000). Max Weber and the Idea of Economic Sociology, Princeton, NJ, Princeton University Press. Swedberg, R. (2003). “Answer to Geoffrey Ingham.” Journal of Classical Sociology 3 (3): 311–14. Szabo, N. (2008). “Bit Gold.” http://unenumerated.blogspot.co.uk/2005/12/bit-gold.html, accessed November 2, 2012. Taibbi, M. (2010). Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, New York, Spiegel and Grau. Thaler, R. (1999). “Mental Accounting Matters.” Journal of Behavioral Decision Making 12 (3): 183–206. Thiemann, C., F. Theis, et al. (2010). “The Structure of Borders in a Small World.” PLoS ONE 5 (11): e15422. doi:15410.11371/journal.pone.0015422. Thilenius, G. (1921). “Primitives Geld.” Archiv für Anthropologie 18: 1–34.

Although Lehman’s was a U.S. bank, its global interests were such that its bankruptcy had major ramifications for financial systems in a number of countries. The breadth, severity, and complexity of the Lehman case reflected a series of structural changes within the global banking system that had been underway for some time. The major banks had been growing inexorably in size—Lehman was the fourth largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch)—but the financial sector as a whole had been expanding relative to the real economy. In Britain at the beginning of the twentieth century, the largest three banks had assets worth 7 percent of GDP; by mid-century, the figure reached 27 percent, and by 2007, 200 percent of GDP (Haldane 2011: 10; Haldane 2012: 14). These changes form part of a broad underlying trend whereby the financial sector has grown significantly in size relative to the real economy.

See also impossible gift; true gift Girard, René, 43–44 Giscard d’Estaing, Valéry, 99 global bank, 69 global city, 241, 242–43 globalization, 66, 122, 215, 251, 279, 302; in Baudrillard, 197; and empire, 238–41; of finance, 120; in Hardt and Negri, 237–38, 241; in Harvey, 243; of money, 216, 242–43; in Sassen, 242–43 Godelier, Maurice, 390 Godschalk, Hugo, 350 Goethe, Johann, 92, 138, 211, 267, 314, 328, 331; on the primal plant, 332; on the Urphänomen, 328 Goffman, Alice, 293 gold, 42, 52, 55, 66, 96, 188, 299, 375; artificial, 56n; and banknotes, 36n; as a ‘barbarous relic,’ 22; and Bitcoin, 362, 368; and capital, 69; and credit money, 73–74; decoupled from dollar, 45–46, 99, 298; demonetization of, 74, 88; discovery of, 63; and fiat money, 62; in the First World War, 225–26; in Marx, 53, 58–59, 62–63; and the monetary base, 69; New World, 223; and paper money, 185; price of, 22; and primitive accumulation, 63, 66; and religion, 45–46; reserves of, 74; and Peter Schlemihl, 186; and the sea, 222; and slavery, 43 gold bug, 26, 185 gold standard, 22, 36n, 46, 55, 62, 73, 192, 348, 349; compared with the euro, 79; and imperialism, 73n31; in Polanyi, 280–81 golden calf, 271, 333, 340 Goldman Sachs, 114 Goldscheid, Rudolf, 321n Goldthorpe, John, 73n30 Goodhart, Charles, 15n2, 20–21 Google Wallet, 377, 378, 381 Gordon, Barry J, 93n11 gourde, 302 Goux, Jean-Joseph, 39–43, 182, 185, 191 Graeber, David, 94–102; on adornment as money, 205, 282; on bullion versus credit money, 96–97, 225n16; on the human versus commercial economy, 97; on money and violence, 96–97; on primitive accumulation, 98; on society, 101 Grameen America, 358 Grameen Bank, 357–58 grammatology, 41.