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Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

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But, as Neil Irwin later commented: “Britain . . . was embarking on something that has rarely been attempted . . . cutting spending and raising taxes in a preemptive strike against the risk of a future debt crisis.”15 As Paul Krugman remarked from New York: “It’s one thing to be intimidated by bond market vigilantes. It’s another to be intimidated by the fear that bond market vigilantes might show up one of these days.”16 As the squeeze continued, other motives revealed themselves. Shrinking the state, it turned out, was an aim in itself. The ultimate goal, as David Cameron would put it in his speech to the Lord Mayor’s Banquet three years later, was “something more profound”: to make the state “leaner . . . not just now, but permanently.”17 By 2015 Chancellor Osborne would claim to have slashed £98 billion in annual spending from the UK budget.

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In 2007–2008 it had been the collapse in confidence in mortgage securitization, money markets and the banks that brought down the house and necessitated the bailouts. By 2009 confidence was still the problem. But now it was government deficits and the supposed threat of bond vigilantes that seized the headlines. Given actually prevailing conditions in bond markets at the time, the constraints this anxiety placed on fiscal policy were a triumph of precrisis centrist orthodoxy over the facts of the postcrisis situation. While the bond vigilantes never appeared, millons of jobless would pay the price for the failure to sustain fiscal stimulus. And the effects went beyond the labor market. The purpose of restraining fiscal policy was supposedly to maintain confidence and to create space for a private sector recovery.

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Chief political adviser James Carville was left to ruminate: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”13 In the 1980s and 1990s, the so-called bond vigilantes had their day in the sun. Ten years later they were still in the market. Indeed, the bond funds were bigger than ever. But, as Obama had hinted, domestic investors were not what most worried the Rubinite crowd. Foreign investors were the key concern. The Bush administration’s deficits were financed overwhelmingly by bond buying from abroad.

Why We Can't Afford the Rich by Andrew Sayer

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Thanks to John Allen for drawing this reference to my attention. 58 On how UK privatised train services are still heavily subsidised by the state, with much of the subsidy going to shareholders, see Bowman, A. et al (2013) ‘The conceit of enterprise: train operators and trade narrative’, http://www.cresc.ac.uk/sites/default/files/The%20Conceit%20of%20Enterprise.pdf. 59 Charles Rowley’s Blog, http://charlesrowley.wordpress.com/2012/05/10/bond-market-vigilantes-rule-across-the-eurozone/. 60 Hilferding, R. (2010) Finance capital, London: Routledge, ch 7, http://www.marxists.org/archive/hilferding/1910/finkap/ch07.htm. 61 In the US, the top 0.5%, who dominate bondholding, got half of all the interest payments by the Federal government going to households. See Canterbery (2000). 62 Stevenson, T. (2012) ‘Bond market vigilantes turn on Italy’, Telegraph, 12 November. 63 Time (1989) ‘Top 10 tax dodgers’. She was imprisoned for tax evasion. http://content.time.com/time/specials/packages/article/0,28804,1891335_1891333_1891317,00.html. 64 European Central Bank (2014) ‘Long-term interest rate statistics for EU Member States’, http://www.ecb.europa.eu/stats/money/long/html/index.en.html. 65 Wall Street Journal (2011) 30 September, http://online.wsj.com/article/SB10001424053111904332804576538363789127084.html. 66 Cited in Canterbery (2000). 67 Stevenson (2011). 68 Krugman, P. (2009) ‘Invisible bond vigilantes’, New York Times, 19 November 2009; see also Wolf, M. (2010), ‘Why the Balls critique is correct’, Financial Times, 2 September, http://www.ft.com/cms/s/0/119c59ac-b6c3-11df-b3dd-00144feabdc0.html. 69 Cited in Leyshon, A. and French, S. (2010) ‘“These f@#king guys” (1): the terrible waste of a good crisis’, Environment and Planning A, 42, pp 2549–59.

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Indeed these were policies which the International Monetary Fund (IMF) and World Bank pushed as a condition of support for economies in trouble. When the debtor is in difficulty, the creditor can force the debtor to sell off their assets. This practice of dispossession has been going on for millennia. Bond markets: vigilantes, bogeymen and banks Thank Heaven for the bond markets. They protect us all from the in-built fiscal excesses of democratic politics. (Charles Rowley, Professor of Economics at George Mason University in the US)59 State bonds are nothing but the price of a share in the annual tax yield.

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The 10-year rate on US Treasury bonds touched 8% in 1994. The consequent threat of a credit crunch in the business sector, and higher mortgage rates for prospective home buyers, generated enough political opposition to stop it going through Congress.65 Bondholders – sometimes dramatised as ‘bond market vigilantes’ – can simply bid up interest rates or refuse to lend anew. As James Carville, lead strategist for US President Bill Clinton famously commented, ‘I used to think that if there was reincarnation, I wanted to come back as the President or the Pope. But now I want to be the bond market: you can intimidate anyone.’66 Now, the same credit rating agencies that got things so wrong in rating credit derivatives mark down the credit ratings of countries that refuse to embrace austerity: in the euro-crisis, they drove the cost of borrowing for Greece, Ireland and Portugal, and then Italy, up to unsustainable levels, forcing their governments to think the unthinkable.67 On ‘Black Friday’ (13 January 2012), Standard and Poor’s downgraded the credit rating of nine European countries, prompting complaints that Europe’s future was being determined by American private credit rating agencies.

End This Depression Now! by Paul Krugman

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Invisible Bond Vigilantes I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone. —James Carville, Clinton campaign strategist Back in the 1980s the business economist Ed Yardeni coined the term “bond vigilantes” for investors who dump a country’s bonds—driving up its borrowing costs—when they lose confidence in its monetary and/or fiscal policies. Fear of budget deficits is driven mainly by fear of an attack by the bond vigilantes. And advocates of fiscal austerity, of sharp cuts in government spending even in the face of mass unemployment, often argue that we must do what they demand to satisfy the bond market.

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And at every uptick in rates over that period, influential voices announced that the bond vigilantes had arrived, that America was about to find itself unable to keep on borrowing so much money. Yet each of those upticks was reversed, and at the beginning of 2012 U.S. borrowing costs were close to an all-time low. Source: Board of Governors of the Federal Reserve System The figure above shows U.S. ten-year interest rates since the beginning of 2007, along with supposed sightings of those elusive bond vigilantes. Here’s what the numbers on the chart refer to: 1. The Wall Street Journal runs an editorial titled “The Bond Vigilantes: The Disciplinarians of U.S.

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As we’ll see, none of them is as deep in debt as Britain was for much of the twentieth century, or as Japan is now, yet they definitely are facing an attack from bond vigilantes. What’s the difference? The answer, which will need a lot more explanation, is that it matters enormously whether you borrow in your own currency or in someone else’s. Britain, America, and Japan all borrow in their respective currencies, the pound, the dollar, and the yen. Italy, Spain, Greece, and Ireland, by contrast, don’t even have their own currencies at this point, and their debts are in euros—which, it turns out, makes them highly vulnerable to panic attacks. Much more about that later. What about the Burden of Debt? Suppose that the bond vigilantes aren’t set to make an appearance and cause a crisis.

Stolen: How to Save the World From Financialisation by Grace Blakeley

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They did what they always do: they claimed that they didn’t have a choice. The Bond Vigilantes In 1983, Edward Yardeni, an economist at a major US brokerage house, coined the term “bond vigilantes”.31 These vigilantes, Yardeni claimed, would “watch over” domestic governments’ policies to determine “whether they were good or bad for bond investors”. In other words, in the era of capital mobility, it was up to states to prove to investors that their country was worth investing in. If states were found wanting, the vigilantes would flee, pockets stuffed full of cash. Yardeni’s bond vigilantes are a personification of the logic of market discipline.

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Neoliberal politicians were not terrified into submission by the bond vigilantes, they worked with these investors to rebuild the global economy in the interests of global capital, just as they had rebuilt their domestic economies along the same lines.33 The bond vigilantes provided cover. States would deregulate financial markets, making investors more powerful, thereby allowing governments to invoke the logic of market competition to justify their imposition of neoliberal policies on an unwilling populace. By the 1980s, the bond vigilantes had made it possible for politicians like Thatcher and Reagan to claim that there was no alternative to neoliberalism — any attempt at socialist experimentation would be severely punished by the markets, just look at Mitterrand’s France.

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By the 1980s, the bond vigilantes had made it possible for politicians like Thatcher and Reagan to claim that there was no alternative to neoliberalism — any attempt at socialist experimentation would be severely punished by the markets, just look at Mitterrand’s France. Illiberal Technocracy The bond vigilantes supported a project that aimed to place fiscal policy outside of the realm of political debate. In the era of capital mobility, states would have no choice other than to do as the markets wished. But whilst it contained an element of truth, states that had control over their own monetary policy still retained much more power than this discourse suggests. The bond vigilantes knew that much more had to be done to place economics outside of the realm of politics. Developments in academic economics would provide the perfect justification.

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

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It was President Clinton’s adviser James Carville who mused that in a future life he’d want to return as a trader in government bonds. ‘You can intimidate everybody,’ he chuckled. The term ‘bond vigilante’ was coined by the US economist Ed Yardeni in 1983 to describe traders who would sell off the debt and demand higher yields (averaging 11 per cent) to compensate for the perceived risk of higher inflation and higher deficits in President Reagan’s America. The bond vigilantes were unleashed again on President Clinton, when in 1993 he introduced his wife’s plan for extra health-care spending (‘HillaryCare’), and ten-year US Treasury bond yields shot up to 8 per cent.

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Harris, 2007 And for those born even later than that too, I dedicate this book to the incompetence of the generation of European political leaders born in the 50s and 60s Contents Cover Welcome Page Dedication Introduction Chapter 1 How the Euro Stole the Greek Sun Chapter 2 Of Fiscal Criminals and Bond Vigilantes Chapter 3 The Real Northern Rock Chapter 4 12/11: The Chinese Root Canals of Crisis Chapter 5 The House Trap Chapter 6 Three Funerals, Two Banking Systems and a Wedding Chapter 7 The Formula that Created the Shadow Banking System Chapter 8 The Gates of Hell Chapter 9 Mervyn’s Magic Money Machine Chapter 10 The Reluctant Imperium Chapter 11 Ground Control to Eurotower Chapter 12 The Great Carbon Wars Chapter 13 Lent in Larnaca: The Cypriot Job Epilogue New Default Lines Ten ideas to chew on Acknowledgements About this Book About the Author An Invitation from the Publisher Copyright Introduction Economics is not meteorology.

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On a real fault line in San Francisco you will hear from the hippyish man who wrote the formula which was said to have broken Wall Street, but is still being used to define the safety of the Western banking system, and may well be holding the world economy back. There’s the Indian motorbike magnate who thinks climate change is principally a colonial ruse. There are the oil pipelines that threaten the fracture of a fragile nation. There is the constant dance and fight between fiscal criminals and bond vigilantes that has led to curious and patchy austerity. There is the desperate need for central bankers to communicate control in uncertain times. And then there are the migratory journeys within China that were a proximate cause of everything. In Cyprus, all the strands – bad banks, bad politicians and a dysfunctional Eurozone – coalesced into three weeks of high drama in March 2013.

The Corona Crash: How the Pandemic Will Change Capitalism by Grace Blakeley

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Similar conclusions were drawn in the UK.8 In fact, ever since the ‘Greenspan put’ that followed the 1987 stock market crash, investors have counted on the fact that policymakers will hold interest rates down in the wake of a market crash.9 Central banks proved unable (some did not even try) to unwind the asset purchasing programmes implemented in response to the 2008 credit crunch. Part of the reason for the ongoing necessity of unorthodox monetary policy was the refusal of many governments – obsessed with the threat posed by the bond vigilantes and their maxims about ‘sustainable’ rates of borrowing – to use government spending to boost productivity and investment.10 But another, even more significant, factor was the sheer weakness of the global ‘recovery’ from the financial crisis itself. Global capitalism had become so sclerotic that policymakers were forced to prop it up with extremely loose monetary policy, which could only influence growth through the roundabout and unsustainable mechanism of artificially boosting lending and asset prices.

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Much of its outstanding debt is owed to Chinese state-owned banks – as a relatively new large lender, it is unclear how China will respond to calls from Africa for debt restructuring. Meanwhile, on the other side of the South Atlantic, Argentina under left-wing Peronist president Alberto Fernández, elected in 2019, is undergoing its ninth sovereign default. Like other economies in the Global South, international institutions have allied with the bond vigilantes to bludgeon Argentina into imposing policies that benefit international investors and harm working people. The threat that the Fernandez government might impose restrictions on capital mobility was causing significant concern among investors even before the pandemic. They sought to discipline the struggling state into submission by selling Argentinian assets.

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It is unlikely that either Argentina or Zambia will be able to escape the current crisis on its own. States in debt distress of this scale need cheap, long-term, unconditional lending to fund investment that can boost productivity and competitiveness. But the structure of the imperialist international system – built in the interests of the ‘bond vigilantes’ – militates against this.23 The Global South is now fighting a battle against nature on two fronts: not only tackling the spread of the coronavirus but also dealing with the effects of climate breakdown. The challenge these states face was made abundantly clear when Cyclone Amphan struck India and Bangladesh in May 2020.

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

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Unfortunately, while putting one’s fiscal house in order may play well with foreign investors, it could also sabotage a fledgling recovery. On the whole, however, these countries are better off taking the pain now rather than running the risk of defaulting on their debt. Though the United States and Japan will likely avoid the bond market vigilantes for some time to come, they too may one day incur their wrath. The United States continues to run unsustainable current account deficits and has an aging population and plenty of unfunded entitlement spending on Social Security and health care. Japan has an even bigger aging population and has already racked up significant debts.

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In 2009 rating agencies downgraded the debt of several advanced countries, and debt auctions in the United Kingdom, Greece, Ireland, and Spain found far fewer buyers than anticipated. It was a less-than-friendly reminder that unless advanced economies start to put their fiscal houses in order, the rating agencies—and in particular, the dreaded “bond vigilantes”—will bring them to heel. That prospect puts many advanced economies in a bind. The recent crisis and the ensuing recession have led to a serious erosion in their fiscal position. Stimulus spending programs and lower tax revenues have hit hard. So has the decision to socialize the losses in the financial sector, effectively shifting them onto taxpayers’ backs.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

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Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination—specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy. Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off. What reason do we have to believe that any of this is true?

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As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.” Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.”

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Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.” Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately. But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview.

The Levelling: What’s Next After Globalization by Michael O’sullivan

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Toffler, bank run, banking crisis, barriers to entry, Bernie Sanders, Big Tech, bitcoin, Black Swan, blockchain, bond market vigilante , Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, business process, capital controls, carbon tax, Celtic Tiger, central bank independence, classic study, cloud computing, continuation of politics by other means, corporate governance, credit crunch, CRISPR, cryptocurrency, data science, deglobalization, deindustrialization, disinformation, disruptive innovation, distributed ledger, Donald Trump, driverless car, eurozone crisis, fake news, financial engineering, financial innovation, first-past-the-post, fixed income, gentrification, Geoffrey West, Santa Fe Institute, Gini coefficient, Glass-Steagall Act, global value chain, housing crisis, impact investing, income inequality, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, knowledge economy, liberal world order, Long Term Capital Management, longitudinal study, low interest rates, market bubble, minimum wage unemployment, new economy, Northern Rock, offshore financial centre, open economy, opioid epidemic / opioid crisis, Paris climate accords, pattern recognition, Peace of Westphalia, performance metric, Phillips curve, private military company, quantitative easing, race to the bottom, reserve currency, Robert Gordon, Robert Shiller, Robert Solow, Ronald Reagan, Scramble for Africa, secular stagnation, Silicon Valley, Sinatra Doctrine, South China Sea, South Sea Bubble, special drawing rights, Steve Bannon, Suez canal 1869, supply-chain management, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, tulip mania, Valery Gerasimov, Washington Consensus

Amromin, De Nardi, and Schulze, “Inequality and Recessions.” 18. B. M. Smith, The Equity Culture: The Story of the Global Stock Market (Farrar, Straus and Giroux, 2003), 5. 19. J. Carville, “The Bond Vigilantes,” Wall Street Journal, February 25, 1993, A1. 20. M. Fox, “‘Bond Vigilantes’ Are Saddled Up and Ready to Push Rates Higher, Says Economist Who Coined the Term,” February 9, 2018, US Markets, CNBC, https://www.cnbc.com/2018/02/09/bond-vigilantes-saddled-up-and-ready-to-make-a-comeback-ed-yardeni.html. 21. One such proposal comes from Mike Konczal and J. W. Mason of the Roosevelt Institute: Konczal and Mason, “A New Direction for the Federal Reserve: Expanding the Monetary Toolkit,” November 30, 2017, http://rooseveltinstitute.org/expanding-monetary-policy-toolkit/. 22.

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Markets are important warning mechanisms, especially when it comes to bad economic policy. Famously, Bill Clinton’s political adviser James Carville said that if he were to be reincarnated, he would like to return as “the bond market” because it is so powerful.19 In the past, market strategists, such as Ed Yardeni, have spoken of “bond vigilantes,” referring to the fact that the bond market curbed excessive borrowing (and inflation) by governments by penalizing them for reckless borrowing with higher bond yields.20 A good example of the role bond markets play in signaling economic health is the information in bond yields across the eurozone countries.

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

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Hyperinflations typically start when a fiscal deficit gets monetized, so the vigilantes are right to be alert to the dangers. But, the bond disaster story has to go through the path of better growth and a better outlook for some time. The process, even if the vigilantes are right, is likely to take a good deal longer than generally assumed. Bond Vigilantes Bond vigilante is a term given to bond market participants who, in reaction to inflationary monetary and fiscal policies, effectuate a “protest” in U.S. Treasury markets, pushing up yields. From the fall of 1993 to the fall of 1994, 10-year Treasury yields climbed from 5.2 percent to over 8.0 percent, in part because of concerns about the federal deficit.

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And, for defending a view initially expressed back in April, when yields generally were 50 to 100 basis points lower. A very well played “away” game. Bravo! SOURCE : Drobny Global Monitor, October 30, 2009. What, then, happens if we have inflation or hyperinflation, as some are predicting? These are the new “bond vigilantes” (see box). They have a point, but you do not want to skip any steps here. The path to hyperinflation may well involve an initial period of healthy-looking recovery. It takes a long time for hyperinflation to take root. Things can look good for a while at first. Hyperinflations typically start when a fiscal deficit gets monetized, so the vigilantes are right to be alert to the dangers.

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And the common attribute has been the decision to not allow their currency to rise, which funnels the resulting liquidity into rising asset prices, such as the stock market and real estate. This is the real quantitative easing, and over the past decade it sent oil from $10 a barrel to $150. Where were all the bond vigilantes then? Now that everyone has whipped themselves up into a frenzy of inflation paranoia, the moment may have passed. The desire for Americans to save more will reduce Asian surpluses and therefore the Asian money printing will abate. The interesting thing about today is that the renminbi is not rising; it has flat lined since the middle of 2008 just before everything fell apart (see Figure 13.11).

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

Countries that ran large fiscal deficits needed to turn to the markets for their financing; those that combined fiscal deficits with trade deficits needed to rely on international investors. In theory, investors could punish irresponsible governments by pushing up interest rates. Indeed, that is what happened in the 1980s when real interest rates were very high, as investors reacted to their losses of the 1970s. The ‘bond market vigilantes’ would keep errant governments in line, and head off an inflationary rebound. By itself, this was a crucial difference from the Bretton Woods era. Capital controls meant that, until the late 1960s, the markets played a limited role in disciplining governments. Instead, the key role was played by trade.

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And the rise of China (and other Asian nations) removed a further constraint. The inflationary burst in the 1970s caused a lot of pain for investors in government bonds; the nominal value of their holdings was repaid but the real value (purchasing power) deteriorated greatly. As they spotted this was happening, the bond market vigilantes mentioned in Chapter 6 naturally reacted by demanding a higher interest rate on bonds to compensate them for the risk. James Carville, an adviser to President Clinton, was astonished to find that his administration’s economic plans would have to take account of these vigilantes. ‘I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter,’ he said.

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This required them to sell their own currencies and buy dollars, which they held in the form of foreign-exchange reserves. Those reserves were invested in developed-world government bonds (mostly US Treasury bills). The system had thus created a very wealthy group of investors who were effectively uninterested in the price of, and return from, their investments. The bond-market vigilantes had been swamped. There was a savings glut that forced up asset prices. The result was an odd system that seemed to suit both sides. The Chinese had a flourishing export market; the Americans were able to fund their consumption at low cost. There were occasional grumbles. American politicians feared that the Chinese were stealing US manufacturing jobs; the Chinese occasionally lectured the Americans on the need to safeguard the value of the Treasury bond market.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 11, Asian financial crisis, bank run, Bernie Madoff, Bernie Sanders, blockchain, bond market vigilante , book value, Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, collective bargaining, COVID-19, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, decarbonisation, deindustrialization, discrete time, Donald Trump, eurozone crisis, fiat currency, floating exchange rates, Food sovereignty, full employment, gentrification, Gini coefficient, global reserve currency, global supply chain, green new deal, high-speed rail, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, Jeff Bezos, liquidity trap, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, Mason jar, Modern Monetary Theory, mortgage debt, Naomi Klein, National Debt Clock, new economy, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, open economy, Paul Samuelson, Phillips curve, Ponzi scheme, Post-Keynesian economics, price anchoring, price stability, pushing on a string, quantitative easing, race to the bottom, reserve currency, Richard Florida, Ronald Reagan, San Francisco homelessness, shareholder value, Silicon Valley, Tax Reform Act of 1986, trade liberalization, urban planning, working-age population, Works Progress Administration, yield curve, zero-sum game

That backstop reassures investors, who understand that the central bank has ironclad control over its short-term interest rate, along with substantial influence over rates on longer-dated securities.7 Greece gave up that backstop when it adopted the euro. It could literally run out of money, and everyone knew it. That’s why it couldn’t keep the bond vigilantes at bay. The term bond vigilantes refers to the power of financial markets (or, more accurately, investors in financial markets) to force sharp movements in the price of a financial asset like government bonds so that the interest rate swings unexpectedly. Ultimately, the European Central Bank did keep the vigilantes at bay, but not without helping to impose painful austerity on the Greek people.8 By 2010, many European countries, including Greece, were ensnared in a full-blown debt crisis.

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Statistically, the federal funds futures market is where the most accurate predictions are made.) This gives central banks reasonably strong influence over long-term rates. To exercise even stronger control, central banks can effectively set rates across the yield curve, as Japan has done. 8. The term bond vigilantes refers to the power of financial markets (or, more accurately, investors in financial markets) to force sharp movements in the price of a financial asset like government bonds so that the interest rate swings unexpectedly. Ultimately, the European Central Bank did keep the vigilantes at bay, but not without imposing painful austerity on the Greek people.

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

Alan Greenspan, banking crisis, banks create money, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, bond market vigilante , Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency risk, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, Glass-Steagall Act, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, junk bonds, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Michael Milken, mobile money, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nixon triggered the end of the Bretton Woods system, Paul Volcker talking about ATMs, Ponzi scheme, profit motive, proprietary trading, prudent man rule, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, Savings and loan crisis, seigniorage, shareholder value, Silicon Valley, SoftBank, Solyndra, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

Of course, there are limits to this neat trick of impoverishing the thrifty to feed the government and its dependents by reducing the value and income of savings. Inflation often breaks out suddenly with little or no warning, and can run unchecked as it did in the 1970s during the so-called Great Inflation that wiped out most of the value of American savings in a few years. Then, the so-called bond vigilantes simply refused to buy government debt on the terms offered. Eventually, Regulation Q, which capped interest rates, was abolished as savers abandoned the banking system, and the heroic actions of Paul 81 82 Chapter 4 | Life After Finance Volcker broke the back of inflation by inducing a deep and painful recession.

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He did that by jacking rates up as high as 20 percent.When the smoke cleared, perhaps as much as 70 percent of the wealth of savers and investors had been liquidated. Right now, there are voices saying that a little more inflation would be a good thing for the economy, but perhaps because financial repression is firmly in place there is no sign of bond vigilantes riding to the rescue. This would all be bad enough, but the trajectory of public debt is pointing skyward in the developed world. Consider the McKinsey Global Institute analysis “Debt and Deleveraging: The Global Credit Bubble and Its Economic Consequences” (January 2010), as updated in 2011.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

These double-dip recessions were also attributable to policy changes—generally big fiscal tightening not compensated by looser monetary policy. 2 The rate on long-term bonds is arguably even more important than the overnight rate, and many financiers believe this to be the central bankers’ Achilles heel. Bond rates, unlike short rates, are set by private investors in a competitive market. These investors are supposedly focused on the risks of inflation and government bankruptcy. They are often called “bond market vigilantes” because they can override the decisions of bureaucrats and take ultimate control over financial conditions. These issues are discussed further on pages 215-218 when we consider inflation and currency depreciation. In trying to work out who actually controls long-term interest rates, both theory and experience suggest that the overnight rate set by the central bank is more important than bond marker sentiment.

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In trying to work out who actually controls long-term interest rates, both theory and experience suggest that the overnight rate set by the central bank is more important than bond marker sentiment. This was spectacularly confirmed in December 2008, when the Fed’s decision to print and push overnight rates down to zero was widely denounced as an inflationary debasement of the dollar, but Treasury bond yields, instead of rising as the bond-market vigilantes had expected, dropped almost immediately from 3.9 percent to 2.1 percent. For a remarkably frank admission by one of the world’s top monetary theorists of the astonishing confusion in academic economics about the respective roles of central banks and private investors in setting short-term and long-term rates, see Ben Friedman, “What We Still Don’t Know about Monetary and Fiscal Policy,” Brookings Papers on Economic Activity 2 (2007). 3 The exceptional size of the output gap is partly a result of unusually deep recessions in every major economy and partly due to the fact that these recessions occurred at the same time.

The Production of Money: How to Break the Power of Banks by Ann Pettifor

Alan Greenspan, Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, bond market vigilante , borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, green new deal, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land bank, Leo Hollis, light touch regulation, London Interbank Offered Rate, low interest rates, market fundamentalism, Martin Wolf, mobile money, Money creation, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, Post-Keynesian economics, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

Western Europe’s return to prosperity was also achieved without capital account convertibility … In short, when we penetrate the fog of implausible assertions that surrounds the case for free capital mobility we realize that the idea and the ideology of free trade and its benefits … have been used to bamboozle us into celebrating the new world of trillions of dollars moving daily in a borderless world.12 Just as a well-managed banking system ends society’s dependence on robber barons at home, so should a well-developed and sound banking system end society’s and the economy’s reliance on international, mobile capital. With a managed domestic banking system, operated in the interests of both industry and labour, then government, industry and labour need not depend on, or fear, ‘bond vigilantes’ or ‘global capital markets’. Our society’s subjection to the predations of these markets is a tragedy entirely of our own making. We, or at least our elected representatives and public authorities, including central bankers, allowed the capital mobility genie to escape from the bottle of domestic regulation.

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bond market vigilante , bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, foreign exchange controls, Glass-Steagall Act, guns versus butter model, Hyman Minsky, index fund, intangible asset, interest rate swap, inverted yield curve, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", joint-stock company, junk bonds, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, low interest rates, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, proprietary trading, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

Governments duly cut back, albeit with the help of some dodgy accounting tricks. This attention to deficits owes something to a general realization by politicians that running up debts on the never-never is a short-sighted strategy. Gradually, interest payments on previous debts consume an increasing proportion of the annual budget. And the rise of the so-called ‘bond market vigilantes’ has also made it more difficult for profligate governments. Countries have to raise money from the international markets and in these days of free capital flows, investors will be quick to sell the government bonds of a nation if it suspects its finances are deteriorating. That will increase the cost of raising new money and make the government’s finances even worse.

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

Alan Greenspan, asset-backed security, bank run, banking crisis, Bernie Madoff, bond market vigilante , bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, deal flow, disintermediation, diversification, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Greenspan put, Home mortgage interest deduction, inverted yield curve, Isaac Newton, joint-stock company, junk bonds, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, low interest rates, margin call, market clearing, mass immigration, Money creation, money market fund, moral hazard, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Phillips curve, plutocrats, Ponzi scheme, profit maximization, proprietary trading, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, Suez canal 1869, systems thinking, tail risk, The Great Moderation, the long tail, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, We are all Keynesians now, Y2K, yield curve

The second creates inflation—too many dollars chasing too little stuff—which erodes the real value of the income received from the coupon. At some point, as happened in the United States during the 1970s, investors will stop buying ‘‘risk-free’’ government bonds. Bond investors hate to fund runaway government spending. This makes those so-called bond vigilantes, who keep a hawk’s eye on government spending and loose money, very powerful. Governments that can’t borrow except at crushing interest rates are in real trouble. Bond Yields If it is working well, the bond market sets all other interest rates. This means that for any ‘‘tenor’’—the length of time the government wants the money—what it is required to pay is a benchmark against which all other interest rates are pegged.

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader by Colin Lancaster

"World Economic Forum" Davos, Adam Neumann (WeWork), Airbnb, Alan Greenspan, always be closing, asset-backed security, beat the dealer, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, Black Monday: stock market crash in 1987, bond market vigilante , Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, buy the rumour, sell the news, Carmen Reinhart, Chuck Templeton: OpenTable:, collateralized debt obligation, coronavirus, COVID-19, creative destruction, credit crunch, currency manipulation / currency intervention, deal flow, Donald Trump, Edward Thorp, family office, fear index, fiat currency, fixed income, Flash crash, George Floyd, global macro, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Growth in a Time of Debt, housing crisis, index arbitrage, inverted yield curve, Jeff Bezos, Jim Simons, junk bonds, Kenneth Rogoff, liquidity trap, lockdown, Long Term Capital Management, low interest rates, low skilled workers, margin call, market bubble, Masayoshi Son, Michael Milken, Mikhail Gorbachev, Minsky moment, Modern Monetary Theory, moral hazard, National Debt Clock, Nixon triggered the end of the Bretton Woods system, Northern Rock, oil shock, pets.com, Ponzi scheme, price stability, proprietary trading, quantitative easing, Reminiscences of a Stock Operator, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, Sharpe ratio, short selling, short squeeze, social distancing, SoftBank, statistical arbitrage, stock buybacks, The Great Moderation, TikTok, too big to fail, trickle-down economics, two and twenty, value at risk, Vision Fund, WeWork, yield curve, zero-sum game

A wave of new debt will be hitting the markets shortly. Despite the extreme risk aversion and a historic repricing in stocks and credit, ten-year yields are climbing. Holy hell. This either means that risk parity funds are unwinding, or maybe, just maybe, folks are thinking about the fiscal dimensions of this mess. The last time the bond vigilantes had any relevance was eight years ago during the European crisis. This was when fiscal and budgetary concerns had a brief but disruptive day in the sun. They’ve since been relegated to the far stretches of the market discourse as heads of state promised and delivered more spending, central banks unleashed their alphabet soups of stimulus, and the world settled into this new-normal paradigm.

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

., mid-eighteenth-century) times because it would be nullified by bankers’ foreign exchange operations and arbitrage – that is, bankers had learned to compare and assess a currency against competing currencies from around the world and could use bills of exchange rather than currency to finance trade. It is an excitingly modern thought in that Montesquieu anticipates twentieth-century public choice theory’s emphasis on the benefits of market constraints on self-serving politicians’ and bureaucrats’ freedom of action. It also looks forward to the activities of so-called bond market vigilantes, modern institutional investors such as pension funds, insurance companies and hedge funds that shun government debt markets and so force up interest rates when they fear policymakers will resort to inflation by printing money and monetising debt. Yet the underlying idea is still very much of its time in the conclusion Montesquieu draws from it relating to the workings of human passions and interests: ‘And it is fortunate for men to be in a situation in which, though their passions may prompt them to be wicked [méchants], they have nevertheless an interest in not being so.’

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

Alan Greenspan, Albert Einstein, Apollo 11, Asian financial crisis, asset-backed security, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Madoff, bond market vigilante , British Empire, business cycle, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, currency risk, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, Ford Model T, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, junk bonds, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, low interest rates, market clearing, mass immigration, Minsky moment, moral hazard, mortgage debt, Neil Armstrong, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, risk free rate, Savings and loan crisis, seminal paper, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

Wilful manipulation of government bond yields also means that the anchor for all asset values is slowly corroding. That surely means that capital will increasingly be at risk of being misallocated as a result of mispricing within financial markets, undermining long-term growth prospects. Most obviously, quantitative easing has allowed governments to avoid being penalized by the so-called bond market vigilantes. We have ended up with both incredibly low interest rates and incredibly large amounts of government debt. In the modern era, only Japan has previously managed to pull off that trick. Yet its economy has gone from one disappointment to the next. LIVING WITH POLICY PAINKILLERS LONG TERM As with Vicodin, excessive use of policy painkillers may eventually prove dangerously addictive.

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"there is no alternative" (TINA), "World Economic Forum" Davos, 9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Alan Greenspan, Albert Einstein, Alfred Russel Wallace, Anthropocene, Anton Chekhov, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, bitcoin, bond market vigilante , Bretton Woods, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, 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, digital divide, disintermediation, disruptive innovation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial engineering, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, geopolitical risk, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, Great Leap Forward, Greenspan put, happiness index / gross national happiness, high-speed rail, 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), it is difficult to get a man to understand something, when his salary depends on his not understanding it, It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, Kevin Roose, knowledge economy, knowledge worker, Les Trente Glorieuses, light touch regulation, liquidity trap, Long Term Capital Management, low interest rates, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, middle-income trap, Mikhail Gorbachev, military-industrial complex, Minsky moment, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, PalmPilot, passive income, peak oil, peer-to-peer lending, pension reform, planned obsolescence, 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, Robert Solow, Ronald Reagan, Russell Brand, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, Stephen Fry, systems thinking, 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, uber lyft, 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

Current levels of government debt are only sustainable if growth returns quickly to high levels. Given that recent economic growth has been debt-fueled, reduction in credit growth slows economic activity, making the borrowings unsustainable, feeding a deadly negative-feedback loop. As the global economy stagnated, weak countries were targeted by bond vigilantes, making it difficult to finance and forcing up their financing costs. Nations were forced to implement austerity programs, cutting spending and increasing taxes to stabilize public finances and reduce debt, trapping them in recessions or low growth, which only aggravated the problems. With the basic strategy ineffective, the focus shifted to keeping interest rates near zero and creating inflation to increase nominal GDP, that is, unadjusted for price increases.

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

3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic management, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, bond market vigilante , business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Charles Babbage, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, data science, debt deflation, deep learning, deskilling, digital divide, disruptive innovation, diversified portfolio, driverless car, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Ford Model T, Fractional reserve banking, Freestyle chess, full employment, general purpose technology, Geoffrey Hinton, 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, Kiva Systems, knowledge worker, labor-force participation, large language model, liquidity trap, low interest rates, low skilled workers, low-wage service sector, Lyft, machine readable, machine translation, 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, post scarcity, precision agriculture, price mechanism, public intellectual, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Robert Solow, Rodney Brooks, Salesforce, Sam Peltzman, secular stagnation, self-driving car, Silicon Valley, Silicon Valley billionaire, 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, the long tail, Thomas L Friedman, too big to fail, Tragedy of the Commons, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, union organizing, Vernor Vinge, very high income, warehouse automation, warehouse robotics, Watson beat the top human players on Jeopardy!, women in the workforce

Richburg, “Getting Chinese to Stop Saving and Start Spending Is a Hard Sell,” Washington Post, July 5, 2012, http://www.washingtonpost.com/world/asia_pacific/getting-chinese-to-stop-saving-and-start-spending-is-a-hard-sell/2012/07/04/gJQAc7P6OW_story_1.html, and “China’s Savings Rate World’s Highest,” China People’s Daily, November 30, 2012, http://english.people.com.cn/90778/8040481.html. 34. Mike Riddell, “China’s Investment/GDP Ratio Soars to a Totally Unsustainable 54.4%. Be Afraid,” Bond Vigilantes, January 14, 2014, http://www.bondvigilantes.com/blog/2014/01/24/chinas-investmentgdp-ratio-soars-to-a-totally-unsustainable-54–4-be-afraid/. 35. Dexter Robert, “Expect China Deposit Rate Liberalization Within Two Years, Says Central Bank Head,” Bloomberg Businessweek, March 11, 2014, http://www.businessweek.com/articles/2014–03–11/china-deposit-rate-liberalization-within-two-years-says-head-of-chinas-central-bank. 36.

Shutdown: How COVID Shook the World's Economy by Adam Tooze

2021 United States Capitol attack, air freight, algorithmic trading, Anthropocene, Asian financial crisis, asset-backed security, Ayatollah Khomeini, bank run, banking crisis, Basel III, basic income, Ben Bernanke: helicopter money, Benchmark Capital, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, blue-collar work, Bob Geldof, bond market vigilante , Boris Johnson, Bretton Woods, Brexit referendum, business cycle, business process, business process outsourcing, buy and hold, call centre, capital controls, central bank independence, centre right, clean water, cognitive dissonance, contact tracing, contact tracing app, coronavirus, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, currency manipulation / currency intervention, currency peg, currency risk, decarbonisation, deindustrialization, Donald Trump, Elon Musk, energy transition, eurozone crisis, facts on the ground, failed state, fake news, Fall of the Berlin Wall, fear index, financial engineering, fixed income, floating exchange rates, friendly fire, George Floyd, gig economy, global pandemic, global supply chain, green new deal, high-speed rail, housing crisis, income inequality, inflation targeting, invisible hand, It's morning again in America, Jeremy Corbyn, junk bonds, light touch regulation, lockdown, low interest rates, margin call, Martin Wolf, mass immigration, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, oil shale / tar sands, Overton Window, Paris climate accords, Pearl River Delta, planetary scale, Potemkin village, price stability, Productivity paradox, purchasing power parity, QR code, quantitative easing, remote working, reserve currency, reshoring, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, shareholder value, Silicon Valley, six sigma, social distancing, South China Sea, special drawing rights, stock buybacks, tail risk, TikTok, too big to fail, TSMC, universal basic income, Washington Consensus, women in the workforce, yield curve

With the vaccine campaign rolling out and a summer reopening in sight, the Treasury estimated that the UK’s total crisis spending would come to a massive 16 percent of GDP.31 When taxes rose, it would be corporations that would be hit first and hardest. And there was another key thing missing in 2020 from the austerity scenario: any talk of bond market panic. In 2010, against the backdrop of the Greek crisis, it had been easy to conjure up the specter of bond market vigilantes. In 2020, one might have thought that the outsize deficits and the knife-edge Brexit talks would have spooked financial markets, but nothing of the sort. The giant borrowing drive was flanked by an openhanded monetary policy courtesy of the Bank of England. The bank steadfastly denied that its pattern of bond purchases had anything to do with fiscal policy.

Wall Street: How It Works And for Whom by Doug Henwood

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, bond market vigilante , book value, borderless world, Bretton Woods, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, capital controls, Carl Icahn, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, disinformation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, Glass-Steagall Act, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, junk bonds, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, long and variable lags, Louis Bachelier, low interest rates, market bubble, Mexican peso crisis / tequila crisis, Michael Milken, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, planned obsolescence, plutocrats, Post-Keynesian economics, price mechanism, price stability, prisoner's dilemma, profit maximization, proprietary trading, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Savings and loan crisis, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, stock buybacks, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

This story may be a plant, an attempt to calm the markets through leaking; Bradsher is a reporter who has had no trouble serving as a frictionless conduit for administration or Fed propaganda. But it does fit with events; challenging the Wall Street demand for slower growth would be political dynamite — just the kind of fight a not-feared-on-Wall-Street Democrat would shy away from. The bond-market vigilantes have won. Postscript. This book is being prepared for publication two-and-a-half years after that diary was written. Growth continued to be strong for the rest of ENSEMBLE 1994, consistently surprising Wall Street, which was touting an imminent slowdown, and the Fed tightened several more times. 1994 turned out to be the bond market's worst year in modern history, and perhaps ever; higher U.S. interest rates helped throw Mexico into crisis.

More: The 10,000-Year Rise of the World Economy by Philip Coggan

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, Suez canal 1869, TaskRabbit, techlash, Thales and the olive presses, Thales of Miletus, 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 Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

If capital was free to move, it could be invested in the most profitable opportunities around the world, and this would improve economic growth in the long term. Investors would also act as a source of discipline on spendthrift governments, demanding higher yields before lending them money. Politicians began to fear the “bond market vigilantes”. The asset management industry matured in this era. Fund managers look after the money of individuals and institutions, and offer the benefits of diversification. By pooling assets, they can spread their portfolios across a wide variety of securities and reduce the risk that any one investment goes wrong.

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

Alan Greenspan, Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Black Swan, bond market vigilante , book value, Branko Milanovic, bread and circuses, break the buck, Bretton Woods, BRICs, business climate, business cycle, capital asset pricing model, carbon tax, commoditize, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, foreign exchange controls, Fractional reserve banking, full employment, German hyperinflation, Great Leap Forward, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, land bank, land reform, liquidity trap, Long Term Capital Management, lost cosmonauts, low interest rates, McMansion, mega-rich, military-industrial complex, Money creation, money market fund, moral hazard, mortgage tax deduction, naked short selling, negative equity, offshore financial centre, Ponzi scheme, price stability, proprietary trading, pushing on a string, quantitative easing, RAND corporation, rent control, rent stabilization, reserve currency, risk free rate, riskless arbitrage, Ronald Reagan, Savings and loan crisis, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, stocks for the long run, Tax Reform Act of 1986, The Great Moderation, the scientific method, time value of money, too big to fail, Two Sigma, upwardly mobile, War on Poverty, Yogi Berra, young professional

Although having DNA similar to pathogens seen in wartime debt buildups, this season’s strain encoded itself with the pattern of socialism: entitlements, bloated and intrusive government, and punitive taxation exclusively directed at the top brackets. Its vector of transmission is fiat currency. Our culture leaves the body politic and the investment community with no antibodies to recognize this threat. In earlier eras such as the 1980s, the bond vigilantes watched the money supply and government outlays closely. At the turn of the century, leading bankers looked over their shoulder for signs of the next wave of panic from others who might have lent speculatively, and they kept their balance sheets in good shape for that rainy day. Today, those who took defensive action through short selling or exchanging their money for commodities were instead pilloried in public hearings and damned for being speculators.

A Generation of Sociopaths: How the Baby Boomers Betrayed America by Bruce Cannon Gibney

1960s counterculture, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, American Society of Civil Engineers: Report Card, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Lives Matter, bond market vigilante , book value, Boston Dynamics, Bretton Woods, business cycle, buy and hold, carbon footprint, carbon tax, Charles Lindbergh, classic study, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate personhood, Corrections Corporation of America, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, dark matter, DeepMind, Deng Xiaoping, Donald Trump, Downton Abbey, Edward Snowden, Elon Musk, ending welfare as we know it, equal pay for equal work, failed state, financial deregulation, financial engineering, Francis Fukuyama: the end of history, future of work, gender pay gap, gig economy, Glass-Steagall Act, Haight Ashbury, Higgs boson, high-speed rail, Home mortgage interest deduction, Hyperloop, illegal immigration, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, junk bonds, Kitchen Debate, labor-force participation, Long Term Capital Management, low interest rates, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, McMansion, medical bankruptcy, Menlo Park, Michael Milken, military-industrial complex, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Armstrong, neoliberal agenda, Network effects, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shock, operation paperclip, plutocrats, Ponzi scheme, price stability, prosperity theology / prosperity gospel / gospel of success, quantitative easing, Ralph Waldo Emerson, RAND corporation, rent control, ride hailing / ride sharing, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, school choice, secular stagnation, self-driving car, shareholder value, short selling, side project, Silicon Valley, smart grid, Snapchat, source of truth, stem cell, Steve Jobs, Stewart Brand, stock buybacks, survivorship bias, TaskRabbit, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, War on Poverty, warehouse robotics, We are all Keynesians now, white picket fence, Whole Earth Catalog, women in the workforce, Y2K, Yom Kippur War, zero-sum game

That the bond market holds great power is no secret to either Wall Street or the Treasury Department, and shouldn’t be to politicians. After all, it is the bond market—the collection of all buyers, individuals, banks, other nations, etc.—that supplies money in the first place. When disappointed, “bond market vigilantes” have punished the Treasury market. James Carville, Bill Clinton’s chief political operative, found himself entirely surprised by the power of the bond market and once expressed a desire to be reincarnated not as the “president or the pope or a .400 baseball hitter… but as the bond market.”36 Vigilante justice is inflicted through higher interest rates, and this requires a quick refresher on bonds.

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

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, 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, democratizing finance, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, 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, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

As the Manchester CRESC group observed, “Leverage was the driving force behind the privatization of gains and the socialization of losses.”36 * * * Figure 6.2: European Public and Private Debt, 2000–2010 * * * * * * Source: Bank for International Settlements Alternatively, one might discern in its vaulting ambition the financial logic of the Structured Investment Vehicle used to hide crushing liabilities, only now being imposed on the state itself. In the meantime, as bond vigilantes conduct their attacks and government insolvency looms, states are forced by neoliberal parties and international agencies to engage in myriad forms of “austerity,” which include fire sales of viable legacy state assets and crude attempts to lower wages and renege on social insurance schemes. Indeed, this narrative that the crisis is all the fault of the government conforms so faithfully to the standard neoliberal script, trumpeted relentlessly from the think-tank shell of the Russian doll since early in the crisis, that it is hard to imagine that the tactical political economy of market-maker of last resort was not engineered to conjure this outcome.

The Price of Time: The Real Story of Interest by Edward Chancellor

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In the second decade of the new millennium, the bond market showed several bubble characteristics: abnormal valuations; a ‘this-time-is-different’ mindset among investors; moral hazard induced by continuous central bank interventions; massive bond issuance; and a widespread myopia that blinded investors to the prospect of losses. The bond vigilante, ever alert to the risks of fixed-income investing and demanding protection in the form of adequate interest compensation, was laid to rest. No capitalist was ever more supine than the millennial fixed-income investor. How else could one explain thirty-year Swiss bonds paying less than zero, or Eurozone sovereign debt being styled a ‘negative haven’ just months after the region emerged from its debt crisis?

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

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• The central bank is the backstop that can resist or accommodate inflationary pressures. Improved central bank credibility was one major reason for anchoring long-term inflation expectations. We simply do not know what it takes to unmoor those expectations, what it takes to get the genie back in the bottle if this happens, and if the Fed has the stomach for it. Bond vigilantes worry about the Fed’s priorities and its independence. Even if the unmooring of inflation expectations to the upside is scary, the impact of global deflation, if it occurs, is even worse. Debt deflation and hyperinflation are the worst destroyers of wealth. Most policymakers now fear the former more than the latter, which makes inflation (though not hyperinflation) the more likely medium-term outcome.

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

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On December 18, 1980, Greenspan dined with Stockman and several senior Republicans at the Century Club in Manhattan. Stockman had spent the day trying to sell Reaganomics to Wall Street, and had met with a skeptical reception. Spooked by the supply-siders, investors anticipated big deficits; to compensate for the consequent inflation, they were driving up interest rates on bonds. Stockman promised the bond vigilantes that Reagan’s tax reduction would be offset by commensurate reductions in spending. “The tax cut has to be earned through the sweat of the politicians,” he promised.6 The reaction from the other diners at the Century Club showed what Stockman was up against. “The Street’s delirious!” snarled Jude Wanniski, one of Jack Kemp’s tax-cutting allies.