bonus culture

41 results back to index


pages: 113 words: 37,885

Why Wall Street Matters by William D. Cohan

Alan Greenspan, Apple II, asset-backed security, bank run, Bear Stearns, Bernie Sanders, Blythe Masters, bonus culture, break the buck, buttonwood tree, Carl Icahn, corporate governance, corporate raider, creative destruction, Credit Default Swap, Donald Trump, Exxon Valdez, financial innovation, financial repression, Fractional reserve banking, Glass-Steagall Act, Gordon Gekko, greed is good, income inequality, Joseph Schumpeter, junk bonds, London Interbank Offered Rate, margin call, Michael Milken, money market fund, moral hazard, Potemkin village, quantitative easing, secular stagnation, Snapchat, South Sea Bubble, Steve Jobs, Steve Wozniak, tontine, too big to fail, WikiLeaks

We need to return Wall Street to its days of prudent risk taking, where the leaders of the firms are held personally accountable for their bad behavior or foolish risk taking. That accountability, which used to be a given in the days when Wall Street was a series of undercapitalized private partnerships, has been totally lost in the modern era, when Wall Street has been transformed into behemoth public companies chock-full of other people’s money and when a bonus culture has replaced the partnership culture. It’s been said the three most dangerous words in the English language are “other people’s money.” We need to restore that accountability, and fast. If a banker or trader creates and sells a squirrelly financial product or makes a terrible and risky bet knowing full well when he or she did it that it was likely to go wrong, then there is little question, if convicted, that the expensive art should be sold off the walls in his or her home and that the home itself should be sold and the proceeds given to the victims.

If DLJ were successful, if the public’s capital could be substituted for partners’ capital, if the public’s legal liability for mistakes could be substituted for the partners’ legal liability for mistakes, there would be no telling what the consequences would be both for Wall Street and for everybody who relied on Wall Street to raise capital, to provide liquidity in the buying and selling of stocks and bonds, and to help individuals manage and grow their wealth. Although it was unlikely the founders of DLJ could have anticipated all of what its IPO would unleash over the next nearly fifty years, they must have had some inkling that by substituting a bonus culture—where bankers, traders, and executives demand to be paid for the revenue they generated in their various product lines—for the long-standing partnership culture—where the individual partners of the firm collaborated to make sure only prudent risks were taken in order to ensure there would be annual pretax profits for them to divide—Wall Street would never be the same.

Someone who still has $600 million in cash lying around is unlikely to be nearly as upset as someone who had nothing remaining of a $1.6 billion fortune. It’s like the difference between a chicken and a pig in a ham and egg breakfast: The chicken is interested; the pig is committed. The leaders of Wall Street’s banks need to be totally committed to their firms, not just merely interested. We need to eliminate the bonus culture on Wall Street and return to a compensation system that more closely resembles that of the partnership culture from the years before DLJ filed its IPO in 1969. It wouldn’t be hard to do, either. It just requires the leadership of a Wall Street firm to want to make the change. Unfortunately, gutsy leadership is in short supply on Wall Street these days.


pages: 478 words: 126,416

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

The award by a French court of €4.9 billion against ‘rogue trader’ Jérôme Kerviel – compensation for the losses his inept trading had supposedly inflicted on BNP Paribas – had symbolic significance only. The bonus culture spread throughout financial conglomerates. Even very junior employees in retail banks found themselves chasing aggressive targets to earn bonuses – which would in due course give rise to well-founded claims that products such as mortgages and payment protection insurance had been mis-sold. The bonus culture, and a much-increased level of expectations about pay, spilled over into the rest of the corporate sector. Senior executives of large businesses – often, like Sandy Weill, themselves engaged in deal-making in the new market for corporate control – observed the levels of remuneration being earned in the financial sector, and raised their sights.

The option allowed beneficiaries to participate in the upside but did not require them to share in the downside, a structure that encouraged the risky transformational change that proved so destructive of ICI, GEC and Citibank: the link to share prices – Weill’s ‘nearby computer monitor displaying Citigroup’s changing share price’ – created an intensely short-term focus. What useful business information could a chief executive glean from minute-by-minute fluctuations in the value of the company he ran? The bonus culture in both financial and non-financial sectors, far from aligning the interests of managers and traders with those of shareholders, produced an outcome in which the objectives of managers and traders were materially different from those of the organisations for which they worked. This agency problem – companies being run for the benefit of a group of senior employees – was most acute in the financial sector but also infected the corporate sector more widely.

But the arrival of corporation men such as Welch among the super-rich is a new phenomenon. The ability of the senior employees of large corporations to appropriate significant fractions of corporate revenues for their own purposes mirrors, perhaps, the lavish lifestyle opportunities once exploited by prelates and courtiers. And so the combination of the bonus culture in the financial sector and its associated activities, a new generation of robber baron and the multimillionaire CEO has produced a reversal of the egalitarian trends of most of the twentieth century. ‘We are the 99 per cent’ was the slogan of the ‘Occupy’ protesters, drawing attention to the degree to which a small minority have benefited disproportionately during the era of financialisation.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

Alan Greenspan, algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, critique of consumerism, cryptocurrency, currency risk, democratizing finance, digital capitalism, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Glass-Steagall Act, global macro, Gordon Gekko, high net worth, Hyman Minsky, independent contractor, information asymmetry, initial coin offering, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, Michael Milken, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Ponzi scheme, Post-Keynesian economics, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

Bankers ensure that profits are flowing to them, but if left unpunished will also ensure that their mistakes are paid for by others. Actually, why confine yourselves to profit flows? What if you can get handsomely paid for losses, too? Let’s consider a very interesting report by Andrew Cuomo, attorney general of New York, published in 2009. The report, subtitled ‘Heads I Win, Tails You Lose Bank Bonus Culture’, provides a detailed analysis of the size of bonuses paid out by big US banks during the 2007–9 meltdown. It notes, for instance, that large payouts became a cultural expectation at banks and a source of competition among the firms. For example, as Merrill Lynch’s performance plummeted, the bank severed the tie between pay based on performance and set its bonus pool based on what it expected its competitors would do… Merrill paid out close to $16bn in 2007 while losing more than $7bn and paid close to $15bn in 2008 while facing near collapse.

., ‘If Financial Market Competition Is So Intense, Why Are Financial Firm Profits So High? Reflections on the Current “Golden Age” of Finance’, University of Massachusetts, Amherst, PERI Working Paper Series, No. 134, April 2007. Cuomo, A., ‘No Rhyme or Reason. The Heads I Win, Tails You Lose Bank Bonus Culture’, workplacebullying.org/multi/pdf/Cuomo.pdf, 2009. Darrah, K., ‘The QE reversal’, World Finance, 26 April 2018, www.worldfinance.com/banking/the-qe-reversal. Davíðsdóttir, S., ‘What is Deutsche Bank hiding in Iceland?’, Sigrún Davíðsdóttir’s Icelog, undated, http://uti.is/?s=deutsche. Davidson, A., ‘How AIG fell apart’, Reuters, 18 September 2008, www.reuters.com/article/us-how-aig-fell-apart-idUSMAR85972720080918.

Wolf, ‘Banking remains far too undercapitalised for comfort’, Financial Times, 21 September 2017, www.ft.com/content/9dd43a1a-9d49-11e7-8cd4-932067fbf946. 23. L. Noonan and P. Jenkins, ‘JPMorgan: defying attempts to end “too big to fail”’, Financial Times, 12 September 2018, www.ft.com/content/0eebc7de-b4de-11e8-b3ef-799c8613f4a1. 24. A. Cuomo, ‘No Rhyme or Reason: The Heads I Win, Tails You Lose Bank Bonus Culture’, 2009, p. 2. 25. Ibid., p. 5. 26. I. Kottasowa, ‘9 trillion and counting: how central banks are still flooding the world with money’, CNN Business, 9 September 2016, https://money.cnn.com/2016/09/08/news/economy/central-banks-printed-nine-trillion/index.html. 27. K. Darrah, ‘The QE reversal’, World Finance, 26 April 2018, www.worldfinance.com/banking/the-qe-reversal. 28.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, Large Hadron Collider, light touch regulation, London Whale, Money creation, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

The following year I added 40 per cent over what I thought reasonable and that’s how it played out. By cutting bonuses senior management proves to headquarters they have the bank’s interest at heart – while probably leaving more for the top. Headquarters must be seen by shareholders to be doing the same.’ The bonus culture is a ritual on many levels. ‘The pre-positioning starts in September to October. People fly their kite, signalling to their boss: “Look how well I have done over the past year”; “Remember the account that went so well, I was on board.” When a big deal is announced, people try to get their names mentioned.

The restaurant business in London must love bankers. Some guys would come in on Mondays with the bills from the weekend. Dropping £1,000 on a night out was not surprising.’ Kilian Wawoe was a senior human resources officer in the asset management division of ABN Amro in the Netherlands and Monaco before writing a very critical book about the bonus culture and moving into academia. He had flown business class a lot and this had a peculiar effect on him. ‘Over there, a line of sweaty people and you walk past all that, with your platinum card. Have you noticed that people in business class are far more likely to look at passengers making their way to economy?

What’s more, he said, ‘There just wasn’t any time for self-reflection. I ended up drinking huge amounts. Alcohol is a quick mood changer; it stops you from thinking and dulls you down. Not that I was aware of that at the time.’ I remained quiet, waiting for him to break the silence. This isn’t just due to the bonus culture, he said in a tone that suggested he had thought about this a lot. ‘This is about tribal bonding, about belonging and sticking with your mates. Your sense of worth begins to be formed by what you do. It is often the first question people ask you, right? What do you do? In that time, when I answered that question, I was a superstar.’


pages: 183 words: 17,571

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

After the 2008 crisis, the Center for the Study 147 148 Chapter 7 | Reconstructing Finance of Financial Innovation in London published a very entertaining online book called Grumpy Old Bankers, in which bankers of an earlier era representing many countries opined on how the current generation “lost the plot” and disgraced the profession. Short-term share-price manipulation through leverage and asset securitization is high among their complaints. The Bonus Trap The first bank to openly abandon the “bonus culture” of compensation based upon meeting share-price targets will gain enormous moral capital and legitimacy. Even if initially recognized dimly by the general public, its peers, customers, and shareholders will take notice. As personally greedy as individuals at the top of such institutions may or may not be, the current model of compensation is a nightmare for all large banks.

Old-line Wall Street partnerships, such as Goldman Sachs before it went public in 1999, were essentially the same, as were professional services firms such as McKinsey and “white shoe” law firms. Broken Markets Download from Wow! eBook <www.wowebook.com> Would the “talent” stand for abandoning the bonus culture and stock-based compensation? Even absent the looming threat of government pay policies in the United Kingdom and elsewhere, there is wide recognition that the current model cannot be sustained. The brutal fact of the matter is that good-quality professional management training—from formal settings such as MBA schools to apprenticeships in analyst programs at consulting firms and investment banks—has never been as widely available as it is today.

., 139 Finance-driven economy, 1, 72 anti-capitalism, 2 capitalism, 1 chronic debt crisis, 22 corporate America, 20 current movie artificial bank earnings, 7 asset prices, 6 banking implosions, 6 borrowers and investors connection, 10 borrowing demand, 7 catastrophic financial bubble, 10 civilization, 10 corporatism, 9 democratic crony capitalism, 9 Dodd-Frank act, 8 economic growth and social stability, 10 financial repression, 9 Glass-Steagall Act, 8 human ingenuity, 10 interbank funding markets, 6 low interest rates and easy money, 6 market collapse, 10 money market, 6 overexuberence, 6 overinvestment and speculation, 6 pre-crisis conditions, 8 printing money, 7 private capital, 7 167 168 Index Finance-driven economy (continued) profitability, 7 quantitative easing, 8 recovery, 8 regulation, 8 regulatory capital rules, 8 resources and tools, 9 shell-shocked enterprises and households, 8 end of employment, 21–22 financial leverage magic and poison CEO class, 14–15 consumer debt, 15–16 disconnection problem, 11–12 market bargain, 10 real economy, 10 wealth financialization, 13–14 working capital, 11 global financial crisis, 2 Great Moderation, 16–18 Great Panic, 18–19 household sector agony, 19–20 investor class, 22 Marx, Karl asset bubble, 5 cash nexus, 4 dot-com bubble, 5 economic revolution, 3 First World War, 4 free markets, 3 French Revolution, 3 globalization, 3 Great Depression, 5 liberalism, 3 normalcy, 4 overproduction and speculation, 3 Wall Street, 4, 5 revolutionary socialism, 2 sovereign debt, 8, 22 Finance reconstruction, 142 bank bashing, 146 “bankers”, 142 business model, challenges, 145 Citigroup, 145 cyclical businesses, 143 government management, 142 legitimacy bonus culture, 148–150 privileged opportunity, longestablished bank, 146 short-term share-price manipulation, 148 state and legal systems, 147 stock price, 147 mark-to-market price, 144 “producers”, 143 profession, definition, 163 prudence, 145, 161–163 root-and-branch transformation, 145 talent pool, 144 “the race for talent”, 143 trust cash management, 160 Financial Market Meltdown, 159 FSA, 159 hackneyed term, 159 information asymmetry, 159 non-bank financial service provider, 161 oversold/up-sold products, 159 utility Anglo-Saxon-type banking systems, 156 big data tools, 158 bills-of-exchange market, 150 branch and payment services, 157 clearinghouse creation, 158 core banking, 154 economic value transmission, 150 exchange of claims, 151 fee-income growth, 155 fiat money system, 151 financial intermediation, 150 financial transactions, 157 flexible contractor/subcontractor relationship, 158 information technology, 156 “liquidity premium”, 152 multidivisional/M-form organization, 153 non-interest income, 155 old-media companies, 157 Index overhead value analysis, 154 “privileged opportunity”, 152 quill pen–era practice, 158 sheer utility value, 155 silos, product business, 153 transaction accounts, 152 venture capital industry, 142 “War for Talent”, 143 Financial crises, 23 affordable housing, 24 banking “transmission” mechanism, 43 Basel III process, 50–51 basel process, 27–28 consumer banking(see Consumer banking) Dodd-Frank, 49–50 domestic banking system, 38 European Union, 51–53 FDIC, 40 finance-driven economy’s leverage machine, 43 Financial Market Meltdown, 25 GDP, 38 Government Policy and Central Banks, market meltdown(see Regulation process) government policy failure, 45 “government-sponsored” public companies, 24 Great Depression, 44 GSEs, 24 legal missteps, 47–48 New Deal, 43 panic-stricken markets, 40 political missteps, 45–47 Ponzi scheme, 42 postwar financial order, 25–27 printing money, 38 private profits and socialized losses, 40 private-sector demand, 43 public-sector demand, 42 quantitative approach, 25 TARP, 39 too-big-to-fail institutions, 41 Triple A bonds, 41 US Federal Reserve System, 38 Financial liberalization, 89 Financial Market Meltdown, 25, 61, 89, 109, 159 Financial repression, 9, 78, 111 Financial Services Authority (FSA), 60, 159 Food and Drug Administration (FDA), 69 Fordism, 68 Free-market capitalism, 89 Free markets, 3 French Revolution, 3 Front-end trading systems, 107 FSA.See Financial Services Authority G GDP, 11 “Giro” payments systems, 151 Global imbalance, 96 Globalization, 3 Global whirlwinds, 93 Asia, finance movement cultural differences, 110–111 Financial Market Meltdown, 109 Interest Equalization Tax, 109 language, law, and business culture, 109 primacy, 109 austerity(see Austerity) British Empire, 30 Chimerica, 97 China and United States cross-Pacific economy, 97 foreign interference and aggression, 98 headline growth rates, 97 repression revolution and series, 97–98 Second World War, 98 Smoot-Hawley Tariff, 98 surpluse trade, 97 sustainable development, 98 Chinese ascendancy, 113 clearing and settlement bottleneck, 106–107 Dynastic China, 112 169 Download from Wow!


pages: 355 words: 92,571

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

Continuing revelations of unethical and criminal behaviour since the financial crisis suggest that the stock of moral capital has fallen to a much lower level than has prevailed in recent decades. The facts that so many big institutions were the subject of morally hazardous bailouts and so few people have gone to jail in the wake of the crisis, along with the persistence of the bonus culture in banking and in the wider corporate sector, mean that the improvement in commercial morality that Galbraith expected to take place in downturns did not happen to the extent it should have during the Great Recession. Despite the protestations of bankers that they are embracing an ethical approach to running the business, little appears to have changed.

The banker Carl Fürstenberg, who ran the Berliner Handels-Gesellschaft in the late nineteenth and early twentieth centuries, famously remarked: ‘Shareholders are stupid and impertinent – stupid because they give their money to somebody else without any effective control over what this person is doing with it, and impertinent because they ask for a dividend as a reward for their stupidity.’217 Fürstenburg’s first point is relevant to the wider corporate sector today because there is another sense in which quoted companies in the Anglosphere have become dysfunctional. The bonus culture that has come to dominate top pay over the past ten to fifteen years was supposed to help align the interests of management with those of shareholders. Instead, it has introduced systematically distorted incentives into the corporate world. Rewards increasingly take the form of shares or share options and are performance related.

Wilson) 1, 2 Alberti, Leon Battista 1 Alessandri, Piergiorgio 1 Allen, Maurice 1 Ambassadors, The (Henry James) 1 Americans for Tax Reform 1 Anatomy of Change-Alley (Daniel Defoe) 1 Angell, Norman 1 Anglosphere 1, 2 Arab Spring 1 Aramaic 1 arbitrage 1 Argentina 1 Aristotle 1, 2, 3, 4, 5, 6, 7, 8, 9 art 1 Asian Tiger economies 1 Atlas Shrugged (Ayn Rand) 1 Austen, Jane 1 Austrian school 1 aviation 1 Babbitt (Sinclair Lewis) 1 Bair, Sheila 1 Balloon Dog (Orange) (sculpture) 1 Balzac 1 Bank for International Settlements 1, 2, 3, 4, 5, 6 Bank of England 1, 2, 3, 4, 5 bank runs 1 bankers 1, 2 bankruptcy laws 1, 2 Banks, Joseph 1 Banksy 1 Barbon, Nicholas 1, 2, 3 Bardi family 1 Barings 1 Baruch, Bernard 1, 2 base metal, transmutation into gold 1 Basel regulatory regime 1, 2, 3 Baudelaire, Charles 1 Baum, Frank 1 behavioural finance 1 Belgium 1, 2 Bell, Alexander Graham 1 Benjamin, Walter 1 Bernanke, Ben 1, 2, 3 Bi Sheng 1 Bible 1 bimetallism 1 Bismarck, Otto von 1 Black Monday (1987) 1 black swans 1 Blake William 1, 2, 3 Bloch, Marcel 1 Bloomsbury group 1, 2 Boccaccio 1 bond market 1 bonus culture 1 Bootle, Roger 1 Boston Tea Party 1 Boswell, James 1 Boulton, Matthew 1 Bowra, Maurice 1 Brandeis, Louis 1 Bretton Woods conference 1 British Land (property company) 1 British Rail pension fund 1 Brookhart, Smith 1, 2 Brunner, Karl 1 Bryan, William Jennings 1 Bubble Act (Britain 1720) 1 bubbles 1, 2, 3 Buchanan, James 1 Buffett, Warren 1, 2, 3 Buiter, Willem 1 Burdett, Francis 1 van Buren, Martin 1 Burke, Edmund 1, 2 Burns, Robert 1 Bush, George W. 1, 2 Butler, Samuel 1 Candide (Voltaire) 1 Carlyle, Thomas 1, 2, 3 Carnegie, Andrew 1 Carville, James 1 cash nexus 1 Cash Nexus, The (Niall Ferguson) 1 Cassel, Ernest 1, 2 Catholic Church 1, 2, 3 Cecchetti, Stephen 1 Centre for the Study of Capital Market Dysfunctionality, (London School of Economics) 1 central bankers 1 Cervantes 1 Chamberlain, Joseph 1 Chancellor, Edward 1 Chapter 11 bankruptcy 1 Charles I of England 1, 2 Charles II of England 1 Chaucer 1 Cheney, Dick 1 Chernow, Ron 1 Chicago school 1, 2 Child & Co. 1 China 1, 2 American dependence on 1, 2 industrialisation 1, 2, 3 manufacturing 1 paper currency 1 Christianity 1, 2, 3, 4, 5 Churchill, Winston 1 Cicero 1, 2 Citizens United case 1 Cleveland, Grover 1 Clyde, Lord (British judge) 1 Cobden, Richard 1, 2, 3, 4 Coggan, Philip 1 Cohen, Steven 1 Colbert, Jean-Baptiste 1, 2 Cold War 1 Columbus, Christopher 1 commodity futures 1 Companies Act (Britain 1862) 1 Condition of the Working Class in England (Engels) 1 Confucianism 1, 2, 3 conquistadores 1 Constitution of Liberty, The (Friedrich Hayek) 1 Coolidge, Calvin 1, 2, 3 Cooper, Robert 1 copyright 1 Cort, Cornelis 1 Cosimo the Elder 1 crash of 1907 1 crash of 1929 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 creative destruction 1, 2 credit crunch (2007) 1, 2, 3 cum privilegio 1 Cyprus 1, 2 Dale, Richard 1, 2 Dante 1 Darwin, Erasmus 1 Das Kapital (Karl Marx) 1 Dassault, Marcel 1 Daunton, Martin 1 Davenant, Charles 1, 2, 3 Davies, Howard 1 debt 1 debt slavery 1 Decameron (Boccaccio) 1 Defoe, Daniel 1, 2, 3, 4, 5, 6, 7, 8 Dell, Michael 1 Deng Xiaoping 1, 2 derivatives 1 Deserted Village, The (Oliver Goldsmith) 1, 2, 3 Devil Take the Hindmost (Edward Chancellor) 1 Dickens, Charles 1, 2, 3, 4, 5, 6, 7, 8, 9 portentously named companies 1 Die Juden und das Wirtschaftsleben (Werner Sombart) 1 A Discourse of Trade (Nicholas Barbon) 1 Ding Gang 1 direct taxes 1, 2 Discorsi (Machiavelli) 1 diversification 1 Dodd–Frank Act (US 2010) 1, 2, 3 ‘dog and frisbee’ speech 1 dot.com bubble 1, 2, 3, 4 Drayton, Harley 1 Dumas, Charles 1, 2 Dürer, Albrecht 1 Duret, Théodore 1, 2 Dutch East India Company 1 Duttweiler, Gottlieb 1 Dye, Tony 1 East of Eden (film version) 1 Economic Consequences of the Peace (Keynes) 1, 2 Edison, Thomas 1, 2 efficient market hypothesis 1 electricity 1 Eliot, T.


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

This is exactly how Wall Street bonus culture is intended to work. However, Murphy’s conclusion comes with an important caveat. His results only apply to the top level of banking executives—they don’t translate to other employees. Lower-level employees with lower levels of wealth also had much less to lose from risk-taking. The financial penalties that matter to a high net worth individual may not matter to someone with little wealth or stake in a company. Did low-level employees of financial firms take excessive risks in pursuit of potential profit? As we’ve seen with rogue traders, the Wall Street bonus culture isn’t sufficient to prevent low-level employees from taking excessive risk; other forms of monitoring and risk management are needed.

Here is a possible counternarrative, but one that will require further evidence to verify or refute. Despite its inaccuracy, this narrative about Wall Street’s bonus culture is difficult to dislodge from people’s minds, precisely because it conforms to people’s heuristic about how the world works. We’re prone to confirmation bias. If we believe that Wall Street wheeler-dealers are all crooks, this narrative about Wall Street’s bonus culture not only confirms this heuristic, but also reinforces it. More subtly, if we believe that “people respond to incentives”—the economist’s heuristic—we’ll be satisfied with an explanation that confirms this heuristic without ever bothering to dig deeper into the details to check whether our heuristic has been applied correctly.

Some narratives are mistaken, incorrect, or deliberately untrue. Where facts can be verified or refuted, we should do so expeditiously and relentlessly. Here are two examples of popular narratives that may not be as accurate as they sound. NOT ENOUGH SKIN IN THE GAME? One popular narrative of the financial crisis blames the “bonus culture” of Wall Street for creating a climate of excessive risk-taking. Much of the public was outraged that executives in the financial industry received generous bonuses after the world came to the brink of financial ruin. Why was the U.S. government bailing out the banks, if the money was immediately going into the wallets of the people whose risky decision making caused the crisis?


pages: 164 words: 57,068

The Second Curve: Thoughts on Reinventing Society by Charles Handy

"Friedman doctrine" OR "shareholder theory", Abraham Maslow, Airbnb, Alan Greenspan, basic income, Bernie Madoff, bitcoin, bonus culture, British Empire, call centre, Clayton Christensen, corporate governance, delayed gratification, Diane Coyle, disruptive innovation, Edward Snowden, falling living standards, future of work, G4S, greed is good, independent contractor, informal economy, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kickstarter, Kodak vs Instagram, late capitalism, mass immigration, megacity, mittelstand, Occupy movement, payday loans, peer-to-peer lending, plutocrats, Ponzi scheme, Robert Solow, Ronald Coase, shareholder value, sharing economy, Skype, Social Responsibility of Business Is to Increase Its Profits, Stanford marshmallow experiment, Steve Jobs, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Veblen good, Walter Mischel

The difference is that the new wealth is owned and earned, not by the landowners of old, but by the ‘working rich’, mainly the top executives of corporate firms, along with a few bankers and the occasional sports star, who together make up just .01 per cent of the population. Piketty calls this situation ‘meritocratic extremism’. That is a polite term for excessive greed. I have never seen the sense of the bonus culture. To me it seems demeaning to have to be bribed to do your best in your job. When I worked in one of the corporate elephants it was assumed that your salary was the appropriate rate for your work and you were expected to do it to the best of your ability. Success was eventually rewarded by promotion and, with it, an increased salary.

As I have argued in Essay 7 it was the new, and mistaken, priority given to shareholder value in the 1970s that made money the main point of business, leading to the share options and bonuses which distorted the priorities of the managers, and to the harmful emphasis on the short term. The replacement of the bonus culture by profit-sharing, and share-option schemes by wider share ownership, would turn things around. Money would be the prize but not the point. There is a difference. Ask any prize-winner, be they Nobel or gold medallist. Nevertheless, as it is, the recipients of the high pay awards see these as the fruits of enterprise, well deserved and just.


pages: 430 words: 109,064

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

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business cycle, business logic, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Glass-Steagall Act, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

The excess relative wage—the difference between average finance wages and what one would predict based on educational differences—reaches a peak of around 40 percentage points in the 2000s. See Figure 11 in ibid. 78. Andrew Cuomo, “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture,” July 2009, available at “Cuomo Report Details Wall St. Bonuses,” DealBook Blog, The New York Times, available at http://dealbook.blogs.nytimes.com/2009/07/30/cuomo-report-blasts-wall-street-bonus-culture/. 79. Claudia Goldin and Lawrence F. Katz, “Transitions: Career and Family Life Cycles of the Educational Elite,” American Economic Review: Papers and Proceedings 98 (2008): 363–69. 80. Steve Lohr, “Wall St.

In the first half of 2009, Goldman Sachs set aside $11.4 billion for employee compensation—an annual rate of over $750,000 per employee and near the record levels of the boom. Even if the government’s strategy was to let the banks earn their way out of their problems, that strategy was being undermined by a bonus culture that diverted the excess profits to employees rather than to capital reserves. High risk and huge payouts—nothing changed, except a strengthened government guarantee. Defending the huge bonuses in St. Paul’s Cathedral in London in October 2009, Goldman Sachs executive Brian Griffiths went Gordon Gekko one better by invoking Jesus: “The injunction of Jesus to love others as ourselves is a recognition of self-interest.… We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”72 Goldman CEO Lloyd Blankfein even claimed to be “doing God’s work” (because banks raise money for companies who employ people and make things).73 The rest of us were not so lucky.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

accounting loophole / creative accounting, affirmative action, Alan Greenspan, An Inconvenient Truth, bank run, banking crisis, behavioural economics, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, carbon tax, Cass Sunstein, central bank independence, classic study, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, general purpose technology, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Paradox of Choice, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Robert Solow, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, social contagion, South Sea Bubble, Steven Pinker, tacit knowledge, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, the strength of weak ties, Tragedy of the Commons, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, vertical integration, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

It spread to the public sector too, partly as a genuine response forced by competition for able people in the job market but partly just because of the example set by banks and other companies that were being feted by politicians and the media. It has been corrosive. Bankers have even started to act as though, despite their enormous bailouts from taxpayers, they can get straight back to the high salary and high bonus culture. They seem to have an extraordinary psychological blind spot about the moral outrage their excessive incomes have caused. But their Gilded Age is over. Whether it will be a calm or a turbulent end is yet to be seen. FIVE Trust On wednesday 10 september 2008, Lehman Brothers was worth about $5 billion on the New York Stock Exchange.

The bonuses far in excess of salaries, and the spending on big houses, fast cars, and designer clothes they funded, did create a climate of greed. People in other professions who are in reality in the top 1 percent or even 0.1 percent of the income distribution were made to feel poor by the bankers.4 Banking bonus culture validated making a lot of money as a life and career goal. It made executives working in other jobs, including not only big corporations but the public sector too, believe that they deserved bonuses. Remuneration consultants, a small parasitic group providing a fig leaf justification for high salaries, helped ratchet up the pay and bonus levels throughout the economy.

Courtesy of Shutterstock. 259 INDEX Addams, Jane, 131 AEG Live, 197 Affluent Society, The (Galbraith), 190, 230–31 aging population: baby boom generation and, 4, 106, 109; demographic implosion and, 95–100; measurement and, 206; policy recommendations for, 267, 280, 287, 296; posterity and, 89–90, 94–95, 105–6, 109, 112–13; retirement age and, 94, 97–99, 106–7, 112 Alesina, Alberto, 128, 135–36, 171 All Consuming: How Shopping Got Us into This Mess and How We Can Find Our Way Out (Lawson), 26 altruism, 48, 118–22 André, Carl, 27 anomie, 48, 51 anxiety, 1, 25, 47–48, 136–38, 149, 174 Aristotle, 50 Arrow, Kenneth, 81–82, 220, 236–37, 310n25 Arthur Anderson, 145 asymmetric information, 17; institutions and, 248, 254, 262–63; measurement and, 186; values and, 214, 219–20, 229 Australia, 12, 271; Bureau of Statistics and, 274; diversity and, 172; fairness and, 126, 130, 143; measurement and, 188, 202, 206–7; time surveys and, 206–8; trust and, 140 Austria, 239 Axelrod, Robert, 118–19 baby boom generation, 4, 106, 109 bailouts: banks and, 1, 88, 91, 99–100, 145, 267; stimulus packages and, 91, 100–3, 111 Bank of England, 1–2, 174 bankruptcy, 289; Lehman Brothers and, 1, 85, 87–88, 145, 211, 275–76; Northern Rock and, 1, 146; posterity and, 87; trust and, 145–46 banks, 2; bailouts and, 1, 88, 91, 99–100, 145, 267; Baker on, 244; bonus culture of, 87–88, 115, 139, 143–44, 193, 221, 223, 277–78, 295; capital reduction and, 256; competition and, 277; Economy of Enough and, 22, 28; fairness and, 115, 133, 139, 143–44; flaunting of wealth by, 277; Gilded Age of, 144; greed and, 277–78; higher capital requirements for, 277; immorality of, 90, 277–78; interconnected network of, 277–78; interest rates and, 281, 283; lobbyists of, 87–88, 276; measurement and, 193, 200; needed policy recommendations for, 277–78; politicians and, 87–88, 286; posterity issues and, 85–91, 94, 99–102; recovery and, 3, 103; reform and, 277–79, 283, 296; regulation of, 7; runs on, 1; state–owned, 252; structural fragility of, 6; trust and, 88–89, 145–50, 158, 161–64, 174, 176, 257; values and, 211, 213, 217, 223, 226–28, 233 “Battle for Seattle” riot, 211 Baumol, William, 189–94, 206–7 BBC, 226, 247, 288 behavioral economics, 282; fairness and, 116–17, 121; rational choice theory and, 214–15.


pages: 225 words: 11,355

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 value of a broker to an investment bank is simply to make more trades happen and get clients to put more money into the firm. Brokers only survive by being ‘‘producers,’’ meaning they get clients to trade as much as possible. This is probably not a good idea for most of us, but it is how brokers hang on to their jobs and get paid a bonus. The Bonus Culture Two points now need to be underlined. Most investment bank pay is bonus, just like many sales jobs. Think of David Mamet’s Glengarry, Glen Ross or Danny DeVito in Tin Men, and you have the picture. Second, the investment banking model is by its very nature riddled with conflicts between what is good for the bank and what is good for the client.

See also Discount Houses bills of exchange, 32–35, 37–39, 77, 82–84, 87, 94–95, 105, 121 Bill of Exchange Act of 1882, 119 BIS (Bank for International Settlements), 108. See also Basle Committee black swans, 69 balance sheet lending, 36, 90 ‘‘bonds,’’ xi, xiv, 7, 17, 20, 25, 42–43, 49, 51–55, 64–67, 73, 78, 82, 87–88, 93, 106–107, 142, 151; coupons, 43–45; pricing, 44–46; trading, 45; vs. stocks, 48 bonus culture, 21 booms and bubbles, xx, 3, 17–18, 27, 46, 63, 67, 98, 109, 114, 126, 131, 137, 145, 149, 153, 157, 165, 175 borrowing, xix, 2, 4–5, 41, 56, 62, 66, 71, 79, 112–114, 146, 149, 151, 154, 161, 165, 169, 175 branch banking, 89 Bretton Woods, 115, 154–155 broker, 19–28, 46, 82, 87, 89–91, 96, 107, 110, 120, 130, 142, 159, 176 Building and Loan.


pages: 438 words: 84,256

The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival by Charles Goodhart, Manoj Pradhan

asset-backed security, banks create money, Berlin Wall, bonus culture, Boris Johnson, Branko Milanovic, Brexit referendum, business cycle, capital controls, carbon tax, central bank independence, commodity super cycle, coronavirus, corporate governance, COVID-19, deglobalization, demographic dividend, demographic transition, Deng Xiaoping, en.wikipedia.org, Fall of the Berlin Wall, financial independence, financial repression, fixed income, full employment, gig economy, Gini coefficient, Greta Thunberg, housing crisis, income inequality, inflation targeting, interest rate swap, job automation, Kickstarter, long term incentive plan, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Martin Wolf, mass immigration, middle-income trap, non-tariff barriers, offshore financial centre, oil shock, old age dependency ratio, open economy, paradox of thrift, Pearl River Delta, pension reform, Phillips curve, price stability, private sector deleveraging, quantitative easing, rent control, savings glut, secular stagnation, shareholder value, special economic zone, The Great Moderation, The Wealth of Nations by Adam Smith, total factor productivity, working poor, working-age population, yield curve, zero-sum game

Germany’s Population Ageing and the Current Account (Deutsche Bundesbank, No. 33/2019). Smithers, A. (2009). Wall Street Revalued: Imperfect Markets and Inept Central Bankers. Hoboken, NJ: Wiley. Smithers, A. (2013). The Road to Recovery: How and Why Economic Policy Must Change. Chichester, UK: Wiley.Crossref Smithers, A. (2019). Productivity and the Bonus Culture. Oxford: Oxford University Press. Wood, J. (2019). Retirees Will Outlive Their Savings by a Decade. World Economic Forum. Available at https://www.weforum.org/agenda/2019/06/retirees-will-outlive-their-savings-by-a-decade/. World Economic Forum. (2018). How We Can Save (for) Our Future. Available at https://www.weforum.org/whitepapers/how-we-can-save-for-our-future.

On Falling Neutral Real Rates, Fiscal Policy, and the Risk of Secular Stagnation (Brookings Papers on Economic Activity, BPEA Conference Drafts). Smithers, A. (2009). Wall Street Revalued: Imperfect Markets and Inept Central Bankers. Hoboken, NJ: Wiley. Smithers, A. (2013). The Road to Recovery: How and Why Economic Policy Must Change. Chichester, UK: Wiley.Crossref Smithers, A. (2019). Productivity and the Bonus Culture. Oxford: Oxford University Press. Chapter 7 Autor, D. H. (2019). Work of the Past, Work of the Future. AEA Papers and Proceedings, 109, 1–32. Boehm, C., Flaaen, A., & Pandalai-Nayar, N.(2019, May). Multinationals, Offshoring and the Decline of U.S. Manufacturing (National Bureau of Economic Research Working Paper 25824).


pages: 98 words: 27,201

Are Chief Executives Overpaid? by Deborah Hargreaves

banking crisis, benefit corporation, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bonus culture, business climate, corporate governance, Donald Trump, G4S, Jeff Bezos, Jeremy Corbyn, late capitalism, loadsamoney, long term incentive plan, Mark Zuckerberg, Martin Wolf, opioid epidemic / opioid crisis, performance metric, principal–agent problem, profit maximization, Ronald Reagan, shareholder value, Snapchat, trade liberalization, trickle-down economics, wealth creators

This was the conclusion of a review by lawyer Anthony Salz into wrongdoing at Barclays bank in 2013. Mr Salz said Barclays was too focused on profits and bonuses rather than the interests of customers. Instead of managing bankers, Mr Salz suggested that senior management had depended too much on the bonus culture to reward them, creating an overwhelming focus on money.5 Excessive risk-taking by bankers in pursuit of higher bonuses was also implicated in the failings of the banking system in 2008, which caused the financial crisis – the consequences of which we are still dealing with today. But not all bankers and top bosses are bonusobsessed.


pages: 526 words: 158,913

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America by Greg Farrell

"World Economic Forum" Davos, Airbus A320, Apple's 1984 Super Bowl advert, bank run, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, bonus culture, call centre, Captain Sullenberger Hudson, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, glass ceiling, Glass-Steagall Act, high net worth, junk bonds, Ken Thompson, Long Term Capital Management, mass affluent, Mexican peso crisis / tequila crisis, Michael Milken, Nelson Mandela, plutocrats, Ronald Reagan, six sigma, sovereign wealth fund, technology bubble, too big to fail, US Airways Flight 1549, yield curve

Alphin knew Thain well enough to understand that the incessant conversations they had about money, about compensation, had nothing to do with greed. John Thain was not a greedy person. He was a dedicated family man who put his wife and kids before everything else. Alphin came to view Thain’s focus on money as symptomatic of Wall Street’s out-of-control bonus culture. Taken in narrow terms, Thain was right to ask for a certain level of compensation. But nobody in New York seemed to understand the bigger picture. Alphin didn’t go to an Ivy League school, and he wasn’t even the top student at the school he did attend, but he understood a few things about Wall Street.

Bank of America could never have bought Merrill Lynch if the people up there hadn’t been so obsessed with their own bonuses that they were blind to the dangers of what they were doing. The people at Merrill Lynch came crawling to Charlotte because of their own self-inflicted wounds. The whole reason John Thain worked for Ken Lewis, and not the other way around, was that bonus culture they had up there in New York. And even Thain, with all his degrees from Harvard and MIT, couldn’t see it. That’s what twenty-five years on Wall Street would do to a man. FROM JANUARY 12 TO 14, Bank of America’s share price slipped, in heavy trading, from just under $13 a share to just over $10, amid general uncertainty over the economy and the impending shift of power in the White House from President Bush to President-elect Obama.

Given his lack of experience in risk management, and the strong support he enjoyed in the executive suite, it stands to reason that Semerci felt his mandate was to grow revenues as quickly as possible. In fact, not only was Semerci not a rogue trader, he was far closer to being the model employee of the recent boom era. He was a product of Wall Street’s bonus culture, which rewards employees according to how much revenue they produce for their firm. He rose quickly at Merrill Lynch because he demonstrated an uncanny ability to sell complex financial products to institutional investors and banks around the world. Up until his promotion, Semerci had been rewarded for his ability to produce, to deliver results in the near term, without regard for the long-term consequences of his actions.


pages: 350 words: 103,270

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Black Swan, Black-Scholes formula, bonus culture, book value, break the buck, buy and hold, capital asset pricing model, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delayed gratification, diversification, Edmond Halley, facts on the ground, fear index, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, Greenspan put, implied volatility, index fund, interest rate derivative, interest rate swap, Isaac Newton, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, money market fund, Myron Scholes, Nick Leeson, Northern Rock, offshore financial centre, Paul Samuelson, price mechanism, proprietary trading, regulatory arbitrage, rent-seeking, Richard Thaler, risk free rate, risk tolerance, risk/return, Ronald Reagan, Salesforce, Savings and loan crisis, seminal paper, shareholder value, short selling, statistical model, subprime mortgage crisis, The Chicago School, Thomas Bayes, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, yield curve, zero-sum game

The upshot was that the governments of America, Britain, and other countries injected billions of equity into their biggest banks—such as RBS and Citigroup—as well as guaranteeing their debt. And yes, any investor or creditor not on the same level as the government got a free ride—all the hedges constructed by the bankers continued to function, and the bonus culture supported by the hedging continued to function. It was politically embarrassing, for example, when Merrill Lynch and Citigroup, which together lost $54 billion and received government bailouts of $55 billion, paid out bonuses of $9 billion.32 A year later, with the government guarantees still supporting the system, nearly all the banks started reporting record profits.

By contrast, AIG’s holding company was not an insurer. 31. Of the $57 billion in debt that Sigma had outstanding in June 2007, all but $6 billion had been paid back by October 2008. 32. See the report by New York attorney general Andrew Cuomo, No Rhyme or Reason: The “Heads I Win, Tails You Lose” Bank Bonus Culture, 2009, http://www.ag.ny.gov/media_center/2009/july/pdfs/Bonus%20Report%20Final%207.30.09.pdf. Epilogue 1. For example, see the report Global Banks—Too Big to Fail?, published by J.P. Morgan Chase in February 2010, www.jpmorgan.com. 2. See U.K. Office of Budget Responsibility prebudget report, June 2010, http://budgetresponsibility.independent.gov.uk/index.html. 3.


pages: 829 words: 187,394

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

"World Economic Forum" Davos, 3D printing, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, asset allocation, asset-backed security, assortative mating, autonomous vehicles, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, bitcoin, blockchain, bond market vigilante , bonus culture, book value, Bretton Woods, BRICs, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cashless society, cloud computing, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, commodity super cycle, computer age, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cryptocurrency, currency peg, currency risk, David Graeber, debt deflation, deglobalization, delayed gratification, Deng Xiaoping, Detroit bankruptcy, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, double entry bookkeeping, Elon Musk, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, everywhere but in the productivity statistics, Extinction Rebellion, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global reserve currency, global supply chain, Goodhart's law, Great Leap Forward, green new deal, Greenspan put, high net worth, high-speed rail, housing crisis, Hyman Minsky, implied volatility, income inequality, income per capita, inflation targeting, initial coin offering, intangible asset, Internet of things, inventory management, invisible hand, Japanese asset price bubble, Jean Tirole, Jeff Bezos, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, land bank, large denomination, Les Trente Glorieuses, liquidity trap, lockdown, Long Term Capital Management, low interest rates, Lyft, manufacturing employment, margin call, Mark Spitznagel, market bubble, market clearing, market fundamentalism, Martin Wolf, mega-rich, megaproject, meme stock, Michael Milken, Minsky moment, Modern Monetary Theory, Mohammed Bouazizi, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, Northern Rock, offshore financial centre, operational security, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, peer-to-peer lending, pensions crisis, Peter Thiel, Philip Mirowski, plutocrats, Ponzi scheme, price mechanism, price stability, quantitative easing, railway mania, reality distortion field, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk free rate, risk tolerance, risk/return, road to serfdom, Robert Gordon, Robinhood: mobile stock trading app, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, Second Machine Age, secular stagnation, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, stock buybacks, subprime mortgage crisis, Suez canal 1869, tech billionaire, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Haywood, time value of money, too big to fail, total factor productivity, trickle-down economics, tulip mania, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, Walter Mischel, WeWork, When a measure becomes a target, yield curve

Rollinger and C. Ulf (Stuttgart, 2004). Simpson, Herbert D., ‘Real Estate Speculation and the Depression’, American Economic Review, 23 (1), March 1933. Smith, Adam, An Inquiry into The Nature and Causes of the Wealth of Nations [1776] (London, 1875). Smithers, Andrew, Productivity and the Bonus Culture (Oxford 2019). Soddy, Frederick, Wealth, Virtual Wealth and Debt (London, 1933). Somary, Felix, The Raven of Zürich: The Memoirs of Felix Somary (London, 1986). Sombart, Werner, Der Bourgeois: zur Geistesgeschichte des Modernen Wirtschaftsmenschen [1912] (Munich, 1920). Spitznagel, Mark, The Dao of Capital: Austrian Investing in a Distorted World (Hoboken, NJ, 2013).

., 163–4 Röpke, Wilhelm, 97, 100, 299 Rothbard, Murray, 30 Rothermere, Lord, 93 Roubini, Nouriel, 207, 254 Rousseff, Dilma, 258 Rucellai, Giovanni, 21 Rueff, Jacques, 85, 91, 115‡, 251 Ruskin, John, 180–81 Sainsbury’s (British grocery chain), 160 Saint-Simon, Louis de Rouvroy, Duke of, 50–51, 52, 57 Samuelson, Paul, 246–7 Sarkozy, Nicolas, 292 Savills (property consultants), 174 saving: bonus of compound interest, 190; China’s savings glut, 268–9; as deferred gratification, 29, 188–90; and interest, xxiv, 44, 77, 188–93, 194–9, 205–6; interest as ‘wages of abstinence’, xxiv, xxv, 188–91; savings glut hypothesis, 115–16, 117, 126, 128–9, 132, 191, 252; Terborgh on, 125* savings & loan crisis, US, 111, 145 Say, Jean-Baptiste, 99 Sbrancia, Maria Belen, 290 Scandinavian banking crisis (early 1990s), 136 Schacht, Hjalmar, 82, 92, 312 Schäuble, Wolfgang, 299 Scheidel, Walter, 204 Schumpeter, Joseph, 16, 32, 46, 95, 218; Capitalism, Socialism and Democracy (1942), 126, 140, 296–7; ‘creative destruction’ idea, xx, 140–43, 153, 296–7; on deflation, 100; History of Economic Analysis, xviii; view of intellectuals, 297 Schwartz, Anna, 98, 99, 105, 116 Schwarzman, Steven, 207 Sears (department store), 169–70 secular stagnation, 77, 124–8, 131, 132–9, 151, 205–6 Sée, Henri Eugene, Modern Capitalism (1928), 28* Seneca the Younger, 20–21 Senior, Nassau, 188, 191 Senn, Martin, 193 shadow banks: in Canada, 174–5; in China, 266, 270, 282*, 283–5, 286; collapse in subprime crisis, 221, 283; illiquid products, 226–7; re-emergence after 2008 crisis, 221, 227, 231, 233; structured finance products, 116, 227, 283–5; Trust companies as precursors of, 84*; types of, 221; ‘Ultra-short’ bond exchange-traded funds (ETFs), 227 Shaftesbury, Anthony Ashley Cooper, Earl of, 27 ‘shareholder value’ philosophy, 163–6, 167, 170–71 Shaw, Edward, 286 Shaw, Leslie, 83, 83* Shiba Inu (cryptocurrency), 308 Shin, Hyun Song, 254, 263 Shiyan, Hubei province, 275 Silicon Valley, 148, 151, 173, 176, 204 Silver, Morris, 7, 11 Singer, Paul, 185, 246 Smith, Adam, 14, 174; on monopolies, 162, 298; view of interest, 27, 27*, 31, 183; on wealth, 181; The Wealth of Nations (1776), xxii, 27–8, 27*, 31 Smithers, Andrew, Productivity and the Bonus Culture (2019), 152* Smoot–Hawley Act (1930), 261 socialism, 188, 297, 298 Soddy, Frederick, 181, 242 Solon the ‘Lawgiver’, 9, 18 Solow, Bob, 128 Somary, Felix, 94–5, 308 Sombart, Werner, Modern Capitalism, 22* Soros, George, 148*, 273, 283 South Africa, 258 South America: loans/securities from, 77, 79–80; precious metals from, 49, 168; speculation in bonds from, 64, 65–6, 91; trade during Napoleonic Wars, 70 South Korea, 267 South Sea Bubble (1720), 62, 65*, 68, 69, 307 Soviet Union, 278 Spain, 144–5, 147, 168, 213, 253, 279; mortgage bonds (cédulas), 117 Special Purpose Acquisition Companies (SPACs), 307 speculative manias, xxiii; Borio on, 135; and cryptocurrencies, 177–9; ‘hyperbolic discounting’ during, 176–7; in period from 1630s to 1840s, 64–6, 67–72, 73, 74, 75–6, 77–8, 79–80; technology companies in post-crisis years, 176–9; before Wall Street Crash (1929), 91 see also Mississippi bubble Spencer, Grant, 177 Sraffa, Piero, 42 St Ambrose, 18 St Augustine, 18–19, 202 St Bonaventure, 19 Stable Money League/Association, 87, 96 Standard Oil, 157 state capitalism, 280, 284, 292–5, 297, 298 Stefanel (Italian clothing company), 147 Stein, Jeremy, 231, 233 Steuart, Sir James, 53, 273 ‘sticky prices’ theory, 87* Strong, Benjamin, 82–3, 86–8, 90*, 92, 93, 98, 112 Stuckey’s Bank, 63, 66–7 subprime mortgage crisis, xxii, 114, 116, 117–18, 131, 211, 292; produces ‘dash for cash’, 227; unwinding of carry trades during, 221, 227 Suetonius, The Twelve Caesars, 12 Suez Canal, 78 Sumerian civilization, 4, 6, 8, 15 Summers, Larry, 124–5, 127, 129, 185, 230, 230*, 235, 302 Sumner, William Graham, ‘Forgotten Man’, xx, xxii, 198 Susa, Henry of, 25 Svensson, Lars, 247 Sweden, 174, 241, 242, 244, 245, 247, 294 Sweezy, Paul, 156 Swiss National Bank, 172–3, 293–4 Switzerland, 172, 174, 226, 233, 241, 244, 245 Sydney (Australia), 175 Sylla, Richard, 4, 11, 68, 109 Tacitus, 20–21 Tasker, Peter, 271 Tawney, R.H., 201 tax structures, 164; offshore tax havens, 210 Taylor, John, 116–17, 129, 252 Tencent, 283 Tencin, Claudine Alexandrine Guérin, Madame de, 51 Terborgh, George, 125–6, 127 Tesla, 176–7 Theranos, 149 Thiel, Peter, 263 Third Avenue (investment company), 227–8 Thornton, Daniel, 192 Thornton, Henry, 41–2, 66*, 70, 75 Thornton, Henry Sykes, 66* Tiberius, Roman Emperor, 12 time, concept of, xviii; and act of saving, 188–90; canonical ‘hours’, 21; and Lewis Carroll, 309; in era of ultra-low interest rates, 59, 177; Franklin on, xviii, 22, 28; and Hayek, 32; interest as ‘time value of money’, xxiv, xxv–xxvi, 10, 14–15, 16, 20, 22, 26–7, 28–32; Lord King’s ‘paradox of policy’, 194, 230*; the Marshmallow Test, 29, 189; and medieval scholars, 19–20; Renaissance writings on, 21; secularization of, 21–2; speculators’ misunderstanding of, 59; and thought in ancient world, 20–21; time as individual’s possession, 20, 21, 25; ‘time in production’, xxiv, 14–15, 16, 22, 95, 95†, 141; ‘time preference’ theory, xxiv*, 28–32, 42, 95, 188–9; Thomas Wilson’s ideas, 26–7, 28, 30 Time-Warner, 167 Tooke, Thomas, 69 Toporowski, Jan, 167 Torrens, Robert, 66 Toys ‘R’ Us, 169 trade and commerce: in ancient world, 6, 7–8, 12, 14, 15; Atlantic trade, 59; business partnerships (commenda, societas), 26; commercial classes/interests, 35, 36–7, 38–40, 41, 43, 44, 66–7; commercial importance of time, xviii, 15–16, 21, 22; emergence of modern trade cycle, 62–4; expansion of in Middle Ages, 19, 21–3, 25–6; international trade, 6, 15, 23, 24, 59, 252–3, 261–2; and Italian Renaissance, 21; in medieval Italy, 21–3; mercantile/shipping loans, 6, 12, 14, 22–3, 26, 219 TransAmerica Life Insurance, 199* Trichet, Jean-Claude, 239 Trollope, Anthony, The Way We Live Now, 73 Truman, Harry, 84 The Truman Show (Peter Weir film, 1998), 185–7 Trump, Donald, 185, 261, 262, 291–2, 299, 304, 310 trusts/monopolies: in early twentieth century Europe, 159; Lenin on, 159–60; merger ‘tsunami’ after 2008 crisis, 160–63, 161*, 168–70, 182–3, 237, 298; ‘platform companies’, 161; Adam Smith on, 162, 298; in US robber baron era, 156, 157–9, 203 tulip mania (1630s), 68 Tunisia, 255 Turgot, Anne-Robert Jacques, 15, 28–9, 30, 218 Turkey, xxiii, 252, 258–60, 263 Turkmenistan, 262 Turner, Adair, 292 TXU (energy company), 162 Uber, 149, 150 ‘unicorn’ start-up companies, 148–50, 153, 155, 173, 176–7 Union Pacific Railroad, 157, 158 United States: as bubble economy, 184–7; credit expansion of 1920s, 87–91, 92–4, 96–8, 112, 203; Democrats’ Green New Deal policy, 302; economic expansion (1929–41), 143; economy in Bretton Woods era, 291, 302; financial crisis (1873), 157; foreign securities/loans in 1920s, 91; inflation in 1970s, 108–9; Knickerbocker Panic (1907), 83–4; large-scale immigration into, 78; loan of farm animals in, 4; long-term interest rates (1945–2021), 134; loss of manufacturing jobs to China, 261*, 261; low economic vitality in post-crisis decade, 124, 150–53, 191; monetary policy in 1900s, 83–4, 83*; post-Second World War recovery, 126; public debt today, 291–2, 291*; recessions of early 1980s, 109–10, 151; reversal of global capital flows (late-1920s), 93; robber baron era, 156–9, 203; shift from manufacturing towards services, 167–8, 182; and zombification, 146, 152–3, 155 see also Federal Reserve, US United States Steel Corporation, 157–8 Universities Superannuation Scheme, UK, 196 Useless Ethereum Token, 178 usury: attacked from left and right, 17; attitudes to in ancient world, 17–18, 19, 20–21, 219; in Britain, 24, 26–7, 34, 40, 42, 65‡, 65; Church law forbids, 18–19, 23–4; definitions in Elizabethan era, 26–7; etymology of word, 5; Galiani on, 218–19, 220, 221; and Jews, 18; Marx on, 16, 200–201; medieval Church acknowledges risk, 25–6; Old Testament restrictions on, 17; Proudhon-Bastiat debate on, xvii–xix, xxi, xxii, xxv, 9; in Renaissance world, 22–3; scholastic attack on, 18–20, 23–4, 25 Valeant Pharmaceuticals, 161, 168–9 Vancouver, 175 Veblen, Thorstein, Theory of Business Enterprise (1904), 158, 159, 166 Velde, François, 58*, 59 Venice, 22, 23 Vinci, Leonardo da, Salvator Mundi, 208–9 VIX index, 228–9, 254 La Voix du Peuple, xvii–xix volatility, 153, 228–30, 233, 234, 254, 304, 305 Volcker, Paul, 108–9, 121, 145, 184, 240 Voltaire, 57 Wainwright, Oliver, 209 Waldman, Steve, 206 Waldorf Astoria, New York, 285–6 Wall Street Crash (October 1929): Fed’s response to, 98, 100, 101, 108; Fisher and Keynes fail to foresee, 94–5; Hayek’s interpretation of, 101, 105; low real rates in 1920s USA, 87–91, 89, 92–4, 96–8, 203; low/stable inflation at time of, 134; monetarist view of, 98–9, 101, 105, 108; predictions/warnings of, 93–5, 96, 101, 105, 308; reversal of international capital flows (late-1920s), 93, 93*, 261 WallStreetBets, 307, 309 Walpole, Horace, 62–3 Warburg, Paul, 94 Warsh, Kevin, 228 wealth: ‘Buddenbrooks effect’, 216; conspicuous consumption by mega-rich, 54–5, 208–10, 212; definitions of, 179–82, 216; elite displays as signs of inequality, 209–10, 212; virtual wealth bubbles, 179, 180, 181–2, 185, 193–5, 206, 215, 216–17, 217†, 229–30, 237; wealth illusion, 193–5, 198 Welch, Jack, 170, 171 Wells, H.

fn7 An IMF paper found that ‘increases in interest rates significantly affect job destruction, while reductions in interest rates fail to stimulate job creation’ (Pietro Garibaldi, ‘The Asymmetric Effects of Monetary Policy on Job Creation and Destruction’, IMF Working Paper, April 1997, p. 580). fn8 See Andrew Smithers, Productivity and the Bonus Culture (Oxford, 2019). Smithers argues that equity-linked incentives caused senior executives of listed companies to become overly obsessed with their current share price and reluctant to invest for the longer term. fn9 Claudio Borio, ‘A Blind Spot in Today’s Macroeconomics?’, BIS speech, 10 January 2018.


pages: 573 words: 115,489

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, biodiversity loss, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, degrowth, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Glass-Steagall Act, green new deal, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, low interest rates, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Murray Bookchin, Naomi Klein, negative emissions, new economy, ocean acidification, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, retail therapy, Richard Thaler, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, TED Talk, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game

Practices like short-selling were suspended; increased capital adequacy requirements were called for; there was, briefly, a grudging acceptance of the need to cap executive remuneration (bonuses) in the financial sector.33 Admittedly, this last concession was born more of political necessity in the face of huge public outcry over the bonus culture than through recognition of a point of principle. Within only a few months of the crisis, huge executive bonuses were being paid again. As early as December 2008, Goldman Sachs paid out $2.6 billion in end-of-year bonuses in spite of its $6-billion-dollar bailout by the US government, justifying these on the basis that they helped to ‘attract and motivate’ the best people.34 Many such responses were seen as short-term interventions, designed to facilitate the restoration of business as usual.

.), Summers (2014: 68). 33 Taken from a speech by the UK Prime Minister to the United Nations in New York, Friday 26 September 2008. See www.ft.com/cms/s/0/42cc6040-8bea-11dd-8a4c-0000779fd18c.html. 34 See, for example, www.guardian.co.uk/business/2008/dec/17/goldmansachsexecutivesalaries (accessed 14 March 2016). Five years later, the bonus culture was still alive and well. Around 2,600 employees at British banks were paid a total of £3.4 billion in bonuses in 2013, an average £1.3 million pounds each and almost 50 times the average annual salary in Britain. From 2015, however, the European Union has introduced a cap on bonuses, which may now at most be 100 per cent or exceptionally (with shareholder approval) 200 per cent of annual salary.


pages: 160 words: 46,449

The Extreme Centre: A Warning by Tariq Ali

Affordable Care Act / Obamacare, Berlin Wall, bonus culture, BRICs, British Empire, centre right, deindustrialization, Dr. Strangelove, Edward Snowden, Fall of the Berlin Wall, financial deregulation, first-past-the-post, full employment, Great Leap Forward, labour market flexibility, land reform, light touch regulation, means of production, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, mortgage debt, negative equity, Neil Kinnock, North Sea oil, obamacare, offshore financial centre, popular capitalism, reserve currency, Ronald Reagan, South China Sea, The Chicago School, The Wealth of Nations by Adam Smith, trade route, trickle-down economics, Washington Consensus, Westphalian system, Wolfgang Streeck

Clinging to the fraying coattails of the ‘labour movement’ is a recipe for inaction. Politics, not sociology, is the need of the decade. The People’s Vow 1. We won’t let the poor suffer any longer for errors made by bankers and politicians. Our movement will endorse higher wages and deeper investment over greed and the backslapping bonus culture. Social justice campaigners everywhere, whether in Edinburgh, London, Cardiff, Dublin or Barcelona, can expect our full support because our challenges are international. Together with trade unions, community groups, charities and academic experts, we will prepare a people’s budget to save Scottish public services. 2.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business logic, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, foreign exchange controls, Glass-Steagall Act, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, long term incentive plan, low interest rates, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, proprietary trading, quantitative easing, risk free rate, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, vertical integration, wikimedia commons, yield curve

He had influenced the Americans and led the European banking rescue but his own and his party’s reputation for economic management was ruined. The opposition parties piled on the pressure. The Liberal Democrats’ Treasury spokesman, Vince Cable, who had been chief economist at Shell before entering politics, captured the public mood: ‘These people never learn. The bonus culture generated excessive and dangerous risk for the taxpayer and there is a real danger of this happening all over again.’2 The Treasury Select Committee became the court of public opinion. The Labour MP John McFall, a witty Scotsman, and former chemistry teacher with an eye for the mood of the man and woman in the street, had become its chairman in 2001.

Elaine Moore, ‘Barclays tops FSA customer complaints’, Financial Times, 28 September 2011 16. Patrick Jenkins and Megan Murphy, ‘Protium assets return to haunt Barclays’, Financial Times, 27 April 2011 17. Barclays Annual Report 2011, pp. 20, 175 18. Today Business Lecture 2011, news.bbc.co.uk 19. ‘Financial crisis: the Bank of England’s surprising bonus culture’, Prospect, 11 August 2009 20. A Boardroom Row, 2012 1. Barclays Annual Report 2011, p. 14 2. Statement on banking by the Chancellor of the Exchequer, 9 February 2011, gov.uk 3. Barclays plc Remuneration Report 2010, p. 14, barclays.com 4. Jill Treanor, ‘Barclays hands five bankers £110 million’, Guardian, 7 March 2011 5.


pages: 237 words: 50,758

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

Andrew Wiles, Asian financial crisis, Bear Stearns, behavioural economics, Berlin Wall, Boeing 747, bonus culture, British Empire, business process, Cass Sunstein, computer age, corporate raider, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Goodhart's law, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, junk bonds, lateral thinking, Long Term Capital Management, long term incentive plan, Louis Pasteur, market fundamentalism, Myron Scholes, Nash equilibrium, pattern recognition, Paul Samuelson, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, Suez canal 1869, tacit knowledge, Thales of Miletus, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

The complexity of the relationship between the whole and the parts is an important reason why obliquity—the process of adaptation and discovery—is, as it was for the foresters, the best means of promoting the health of the whole. Yellowstone blazed, and Lehman failed, because those who imposed direct solutions to problems did not appreciate the complex relationships among objectives, goals and actions. Extinguishing all fires made the forest more vulnerable, and the bonus culture destroyed the organization that fostered it. Obliquity recognizes the futility of reengineering, the impracticality of employing “serene and lucid minds” to conceive, as Le Corbusier visualized, a plan that “ignored all current regulations, all existing usages and channels.” Le Corbusier developed grandiose plans for the redevelopment of cities, most spectacularly the Plan Voisin, which would have razed most of central Paris to create a planned urban environment.7 This rebuilding never happened.


pages: 193 words: 47,808

The Flat White Economy by Douglas McWilliams

access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Chuck Templeton: OpenTable:, clean tech, cloud computing, computer age, correlation coefficient, Crossrail, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, Kickstarter, knowledge economy, loadsamoney, low skilled workers, mass immigration, Metcalfe’s law, military-industrial complex, Network effects, new economy, offshore financial centre, Pareto efficiency, Peter Thiel, Productivity paradox, Robert Metcalfe, Robert Solow, Shenzhen special economic zone , Silicon Valley, smart cities, special economic zone, Steve Jobs, vertical integration, working-age population, zero-sum game

The lifestyle trickled down from the traders to the people who serviced their requirements. Stories abounded of supporters of London football clubs waving their wage packets at visiting Liverpool supporters, chanting “Bet you’re on the dole!”. Shops, bars, restaurants and other service providers in London benefitted financially but suffered morally from the mega-bonus culture that infiltrated London in those days. People think of the heyday of the “loadsamoney” culture being the 1980s. But the financial merry-go-round in the city didn’t actually come to a shuddering halt until the great financial crisis of 2007/08. Bonuses continued to rise and London’s economy, driven by financial services, grew much faster than the rest of the UK.


pages: 524 words: 143,993

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

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

Getting back to full employment through stimulus policies would not resolve the difficulties of the US, but it would reduce the immediate misery. One cannot let the best be the enemy of the good. Andrew Smithers of London-based Smithers & Co. suggests yet another structural constraint. In The Road to Recovery he argues that the bonus culture distorts the behaviour of corporate management, particularly in English-speaking countries, in a destructive direction.44 Above all, it focuses managerial attention on ways to raise reported earnings and share prices in the short run, since managers are unlikely to be in charge very long. Their goal is to cash out as successfully as possible and as quickly as possible.

It would also be possible to raise corporation tax while increasing investment incentives. Again, the effect would be to encourage distribution of any profits over and above those needed for investment. In addition to these changes, as Andrew Smithers has argued, there is a powerful case for attacking the bonus culture, which leads management to under-invest in capital goods and over-invest in share buybacks.17 The fourth area is changes in financial contracts. The idea would be to create debt contracts that automatically adjust to circumstances. Index-linked debt is an example: the nominal value depends on the rate of inflation.


pages: 261 words: 64,977

Pity the Billionaire: The Unexpected Resurgence of the American Right by Thomas Frank

Affordable Care Act / Obamacare, Alan Greenspan, bank run, Bear Stearns, big-box store, bonus culture, business cycle, carbon tax, classic study, collateralized debt obligation, collective bargaining, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Deng Xiaoping, false flag, financial innovation, General Magic , Glass-Steagall Act, housing crisis, invisible hand, junk bonds, Kickstarter, low interest rates, money market fund, Naomi Klein, obamacare, Overton Window, payday loans, profit maximization, profit motive, road to serfdom, Robert Bork, Ronald Reagan, shareholder value, strikebreaker, The Chicago School, The Myth of the Rational Market, Thorstein Veblen, too big to fail, union organizing, Washington Consensus, white flight, Works Progress Administration

And it was unmistakably bad: the bailouts were the avenues by which our government obligingly moved the financial industry’s losings over to the taxpayers. In different times, the TARP might have become the rallying point of a revitalized Left. After all, the bailouts were clearly of a piece with the misbehavior that had come before: the deregulation of the banks, the bonus culture, the wrecking of the supervisory state. Business-friendly conservatives had been behind each of these, and then business-friendly conservatives had knitted together the TARP for the same rotten reason: to give the bankers whatever they wanted. Reformers might have depicted the TARP as the final chapter in the great book of fraud, the episode in which Wall Street used the captured state to transfer its debts to the public.


pages: 280 words: 79,029

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, impact investing, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, low interest rates, margin call, Mark Zuckerberg, McMansion, Minsky moment, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Thales of Miletus, the long tail, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

Handelsbanken sailed through the financial crisis with a model founded on what it calls the “church-tower principle,” the idea that branch managers should do business only as far as they can see from the local spire. Decision making is extremely decentralized; the branches make all the credit decisions, and there are no detailed budget targets for them to meet. Customers do not spend years of their lives waiting in call-center lines; they call up and speak to a person whose name they know. There is no bonus culture, either. If Handelsbanken’s return-on-equity goals are met, then a portion of the profits is funneled into the bank’s pension scheme, which is its largest shareholder. It’s all wonderfully Swedish. But personalized service and relationship banking are also expensive. The Handelsbanken model works because it is selective about the types of customers it takes on.


pages: 253 words: 79,214

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

When traders lose money, they may get fired but don’t have to pay past bonuses back. That creates skewed incentives. The demise of Bear Stearns and Lehman Brothers illustrated the problems. It was not that the bankers didn’t suffer; a lot of them had their wealth tied up in company shares, which were virtually wiped out. But the bonus culture may have encouraged them to dream up complicated instruments like derivatives that earned high fees in the short term but were very dangerous to the health of the banks in the medium term. Their key weakness proved, like Northern Rock (see Chapter 3), to be their dependence on the wholesale markets for capital.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, cross-border payments, Double Irish / Dutch Sandwich, financial deregulation, financial engineering, haute couture, information security, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing, two and twenty

But to suggest that all taxpayers should stop trying to reduce bills – I’m sorry, that’s not how things operate.’‌6 Indeed it wasn’t how things operated in a world where salaries for Big 4 accountancy firm tax partners were now hitting the high hundreds of thousands on the back of tax avoidance. No area of the tax code was safe from the accountants’ loophole-detectors. So it was no surprise when the same firms that were picking apart corporate tax laws spotted the booming bonus culture as another fat meal ticket. Rich pickings Just as with corporate taxation in the 1990s, employment tax laws had been put at the service of free market capitalism. Successive governments from the 1980s had introduced, and then repeatedly enhanced, an array of tax breaks to ‘incentivize’ the payment of wages in the form of shares.


pages: 310 words: 85,995

The Future of Capitalism: Facing the New Anxieties by Paul Collier

"Friedman doctrine" OR "shareholder theory", accounting loophole / creative accounting, Airbnb, An Inconvenient Truth, assortative mating, bank run, Bear Stearns, behavioural economics, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, commodity super cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, fake news, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, Jeremy Corbyn, job satisfaction, John Perry Barlow, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

* Currently, the best practical measurement of well-being is by means of a ten-step scale depicting a ‘ladder of life’, from worst- to best-imagined circumstances. This turns out to be a more stable measure than direct questions about happiness, which are influenced by the mood of the moment. Results for the ladder of life are reported in the World Happiness Report, 2017. * An example is the introduction of the bonus culture into public service. * Here is one of its founders, William James: ‘A social organism of any sort whatever, large or small, is what it is because each member proceeds to his own duty with a trust that the other members will simultaneously do theirs. Whenever a desired result is achieved by this cooperation of many independent persons, its existence as a fact is a pure consequence of the precursive faith in one another of those immediately concerned.


pages: 312 words: 93,836

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History by Alexis Stenfors

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, bonus culture, capital controls, collapse of Lehman Brothers, credit crunch, Credit Default Swap, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, fixed income, foreign exchange controls, game design, Gordon Gekko, inflation targeting, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, loss aversion, mental accounting, millennium bug, Nick Leeson, Northern Rock, oil shock, Post-Keynesian economics, price stability, profit maximization, proprietary trading, regulatory arbitrage, reserve currency, Rubik’s Cube, Snapchat, Suez crisis 1956, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, work culture , Y2K

Banks need professionals who want to serve in these ‘war zones’ but who also have a natural survival instinct. Bonuses often form a significant part of a trader’s compensation, as a key incentive, even though they tend to be paid out ‘only’ once a year. Although it could be argued that an aggressive bonus culture can result in reckless risk taking, more significant in my opinion is that the risk taking itself can lead to sensations of achievement and thrill impossible to achieve otherwise. Daily, or even intra-daily, swings in profits and losses quickly become intertwined with the confidence, self-esteem, ego or arrogance of a trader.


pages: 537 words: 99,778

Dreaming in Public: Building the Occupy Movement by Amy Lang, Daniel Lang/levitsky

activist lawyer, Bay Area Rapid Transit, bonus culture, British Empire, capitalist realism, clean water, cognitive dissonance, collective bargaining, corporate governance, corporate personhood, crowdsourcing, David Graeber, deindustrialization, different worldview, facts on the ground, gentrification, glass ceiling, housing crisis, housing justice, Kibera, late capitalism, lolcat, mass incarceration, military-industrial complex, Naomi Klein, Nelson Mandela, Occupy movement, oil shale / tar sands, out of africa, plutocrats, Port of Oakland, Rosa Parks, Saturday Night Live, Slavoj Žižek, social contagion, structural adjustment programs, the medium is the message, too big to fail, trade liberalization, union organizing, upwardly mobile, urban renewal, War on Poverty, We are Anonymous. We are Legion, We are the 99%, white flight, working poor

– Oxford English Dictionary Index #ows see Occupy Wall Street Abraham, Julie 13 access to Occupy sites 197, 216-20 Accounting Working Group 120 Achtenberg, Emily 13 ACT UP 19, 21 administrative structures see general assemblies; spokes councils and working groups advertising 31-2 affiliations, rejection of 99, 101-3, 299 see also co-optation Afghanistan 16, 225 age diversity see children; young people and older people agriculture 49, 225 AIM see American Indian Movement Alberta tar sands 45, 152, 165 Albuquerque, US 147, 195 alcohol policies 281 Algeria 9, 21 All of Us, or None 272 American Indian Movement (AIM) 150 American Library Association 61, 62 Amig@s de Mumia de Mexico 65 amplification bans see people’s microphone Anderson, Marian 90 Anonymous (masked occupiers) 175, 186, 277, 291, 293 Anonymous (poem) 14 anti-globalization protests 44, 58, 64, 229 anti-war campaigns 67, 228, 243, 296, 297 Anzaldúa, Gloria 169 Aoki, Richard 195 aphorisms 197, 199-200 Appel, Hannah Chadeyane 99, 112, 253, 260 Arab Spring 58, 68, 102, 204, 236 Argentina 20, 21 arrest counts 238, 257 arts and culture 175-96 music 90, 111 performance art 28 poetry 14, 28 posters 28, 148, 181-3, 194-6, 204, 311 projections 192-3 puppetry 27, 28-9, 192-3, 263, 265, 266 writing and language 39-42, 277, 305 Ashraf, Hena 158 Atlanta, US 145, 147 Auden, WH 41 Austin, US 240 Australia 296 Bady, Aaron 125, 133, 197, 206 Baiocchi, Gianpaolo 277, 298 Bakersfield, US 57 Baldwin, James 15 Baltimore 47, 54 Bank of America 148, 215, 251 banks 59, 64, 73, 302 bailouts 67, 271 and housing foreclosures 226, 250-2, 271 Belgium 296 Bellafante, Gina 110 Benjamin, Walter 234, 236 Bierce, Ambrose 197 Black Panthers 19, 195, 240 Blair Mountain rebellion 73 blocking 113-14, 129, 130, 141, 158 Bocafloja 65 Boggs, Grace Lee 57, 164 bonus culture 27, 49, 271 Boston, US 108-10, 125, 128, 148, 165, 271, 272-3, 275, 291 Brazil 20, 28, 277, 278, 282 Britain 70, 292-3, 295 London 277, 279, 291, 294 northern England 277, 280-2 Brookfield 254 Brown, Adrienne Maree 72, 79, 85 Bryson, Jack 95 Burma 224 Bush, George W 39, 297 Cairo, Egypt 9, 70, 295, 297 Camp David 225 camping as protest 23, 277, 295-7 Canada 141, 164, 166, 167, 229, 296 capitalism 8, 32, 38, 54, 128 Captain Swing 277, 293 Carvalho, Alexandre 28, 29 Cassie (at Occupy LA) 216 Centro Cultural La Piramide 65 Centro Social Okupado ‘Casa Naranja’ 65 Cervantes, Melanie 148, 195 change identifying problem 221-2 see also living practices; politics and urban communities Chávez, César 194 Cheryl (at Occupy LA) 216, 218, 220 Chicago, US 20, 230, 231 children 110, 155, 240, 258 facilities for 92, 126, 240, 258 China 9 Chittister, Joan 57 Chomsky, Noam 28 Chris (at Occupy Wall Street) 155 Cindy (at Occupy LA) 220 City Life Vida Urbana 250, 272 civil rights movement 17, 19, 47, 56, 147, 195, 204 class/race inequalities 105, 142, 157-60, 166-7, 171-4, 223 Clegg, Nick 282 Clifton, Lucille 166 Climate Camps 296 climate change 45 Colbert, Steven 163 Colectivo Cordyceps 65 Colectivo Noticias de la Rebelion 65 Colectivo Radio Zapatista 65 colonialism 16, 50, 151-2, 164-5, 285 Colorlines.com 148 Columbus, Christopher 109, 150 Comfort Working Group 22, 30 Community Relations Working Group 115 Comrades from Cairo 70-1 conflict resolution 125, 126-7 consensus 47, 83, 85, 97, 105, 112, 117, 147, 230-1, 232, 266, 301 conversations, political 36, 37, 72, 76-8, 81, 110 co-optation 72, 97-8, 169, 225, 229 core values of Occupy/Decolonize 8, 21, 24-5, 45-6, 83, 277, 289 corporations grievances against 49-50 political influence 15, 18, 43, 49-51, 76, 144, 271 and social oppression 148, 165-7, 224 tax avoidance 98 see also banks and under named corporations Council of Elders 47, 56-7 Crane, Helga 89 crises 43, 59, 83, 270 alternatives to 152-3 Czech Republic 9, 64 Dake, Elizabeth 128 Dallas 257-8 Darth Vader 31 Davidson, Charles 98 Davis, Angela 194 Davis, Troy 155, 156 deaf sign language 218 @debcha 222 debt, foreign 21, 284-6 debt, personal 47, 50, 52-3, 242, 247, 271 decision-making 83, 85, 301 see also general assemblies: process declarations and statements 17, 18, 47, 49-51, 54, 56-7, 61-2, 157-60, 309 Decolonize LA 99, 104-7 Decolonize Toronto 166 definitions of Occupy 310 Dellums, Ron 172 demands 8, 21, 273, 299 rejection of 17-19, 47, 68, 81, 167, 203, 234, 239-40 Demarco (at Occupy Oakland) 94-5 Democracia Real Ya (DRY) 299 democracy 68, 70-1 see also participatory democracy Denmark 296 Denver, US 57, 141, 150-3, 165 Derrida, Jacques 33 Detroit, US 57, 72, 82, 83, 85-7, 118, 147, 201 direct action 225-52 Direct Action Working Group 75, 115, 169 disabled people 197, 216-20, 284 disadvantage, criminalization of 284-5 disguises 291-2 disruptive behavior 22-3, 96, 98, 119, 121-3, 127, 301 diversity of Occupy/ Decolonize participants 80, 93, 109-10, 136, 147, 155, 267 age see children; young people and older people gender see LGBTQ and women race see indigenous peoples; people of color and white people Dix, Carl 115 Dixon, Bruce A 141, 143 donations 30, 60, 92, 110, 114, 156, 241, 256, 257 Dongas 102 doublethink 282 drumming 115, 156, 261, 266 DRY see Democracia Real Ya Dueñas, Jose 171 Dwayne (puppeteer, at Occupy Wall Street) 265, 266 Earth First!


pages: 305 words: 98,072

How to Own the World: A Plain English Guide to Thinking Globally and Investing Wisely by Andrew Craig

Airbnb, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, bitcoin, Black Swan, bonus culture, book value, BRICs, business cycle, collaborative consumption, diversification, endowment effect, eurozone crisis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Future Shock, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, Long Term Capital Management, low cost airline, low interest rates, Market Wizards by Jack D. Schwager, mortgage debt, negative equity, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, passive income, pensions crisis, quantitative easing, Reminiscences of a Stock Operator, road to serfdom, Robert Shiller, Russell Brand, Silicon Valley, smart cities, stocks for the long run, the new new thing, The Wealth of Nations by Adam Smith, Yogi Berra, Zipcar

Social changes such as large-scale immigration from new EU countries such as Poland, higher divorce rates, and more young people wanting to move out of their parents’ homes to live alone have created a higher demand for many types of property. “Prime” central London property has also been particularly strong given the explosion in the British financial service industry and its bonus culture and, in addition, the vast numbers of global rich who see London as an excellent long-term investment due to its strong legal system, favourable tax treatment of foreign nationals, and perfect geographical placement for international business. Interest rates Perhaps even more important than these factors, however, has been the price and supply of money.


pages: 304 words: 99,836

Why I Left Goldman Sachs: A Wall Street Story by Greg Smith

Alan Greenspan, always be closing, asset allocation, Bear Stearns, Black Swan, bonus culture, break the buck, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, East Village, fear index, financial engineering, fixed income, Flash crash, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, high net worth, information asymmetry, London Interbank Offered Rate, mega-rich, money market fund, new economy, Nick Leeson, proprietary trading, quantitative hedge fund, Renaissance Technologies, short selling, short squeeze, Silicon Valley, Skype, sovereign wealth fund, Stanford marshmallow experiment, statistical model, technology bubble, too big to fail

Now that the chickens had come home to roost, we were showing hedge funds how to profit from Greece’s chaos; and on the other side of the Chinese wall, our investment bankers were trying to win contracts from the European governments to advise them on how to fix the mess. This complex and conflicted scenario was deflating for many people on the trading floor, and I had many conversations about it with colleagues. People saw the hypocrisy but nobody did anything about it. The bonus culture was just too entrenched. The numbers themselves militated against change. There was a time in Goldman Sachs’s history when bonuses were very subjective. At the end of each year, your manager made an assessment based not just on how much business you’d brought in, but also on how good you were for the organization.


pages: 367 words: 108,689

Broke: How to Survive the Middle Class Crisis by David Boyle

anti-communist, AOL-Time Warner, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, gentrification, Goodhart's law, housing crisis, income inequality, Jane Jacobs, job satisfaction, John Bogle, junk bonds, Kickstarter, knowledge economy, knowledge worker, low interest rates, market fundamentalism, Martin Wolf, Mary Meeker, mega-rich, Money creation, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Ocado, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, scientific management, Slavoj Žižek, social intelligence, subprime mortgage crisis, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, work culture , working poor

Speculation is now so much more profitable than the ordinary business of business that it is increasingly hard to raise money to do anything else. Companies have long since begun to outsource all functions except the finance one. They have begun to hollow themselves out, just as the economy begins to hollow itself out — all sound and fury, signifying increasingly little. There is also financial corrosion. The bonus culture has pushed up the price of homes, and is still doing so: bonuses may be lower but City salaries are higher. It has fuelled inflation and shifted the attention of the economy increasingly onto satisfying the luxury needs of the Übermenschen. At the same time, the emphasis on financial markets has been lowering salaries elsewhere.


pages: 457 words: 125,329

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, bank run, banks create money, Basel III, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, clean tech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, Evgeny Morozov, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Glass-Steagall Act, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, independent contractor, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, John Bogle, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, margin call, Mark Zuckerberg, market bubble, means of production, military-industrial complex, Minsky moment, Money creation, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, Post-Keynesian economics, profit maximization, proprietary trading, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Robert Solow, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, Solyndra, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two and twenty, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, you are the product, zero-sum game

Once banks' profitability has been swelled by the market power that allows them to extract rents from other sectors, their top employees can in turn exert internal labour-market power to channel a share of those rents to themselves, helping to give the financial sector its unique and entrenched bonus culture. On top of monopoly rent, financial markets give investment banks and other professional ‘players' another significant route to high financial returns, divorced from the high risk that is traditionally understood to justify those returns. Financial markets instantly adjust the price of company shares and bonds to the future profits those companies are expected to make.


pages: 413 words: 117,782

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

activist fund / activist shareholder / activist investor, algorithmic trading, Bear Stearns, Berlin Wall, Bob Litterman, bonus culture, book value, BRICs, business process, buy and hold, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, eat what you kill, Emanuel Derman, financial innovation, fixed income, friendly fire, Glass-Steagall Act, Goldman Sachs: Vampire Squid, high net worth, housing crisis, junk bonds, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, proprietary trading, radical decentralization, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, subprime mortgage crisis, systems thinking, The Nature of the Firm, too big to fail, value at risk

He then said he ran what the senior partner called a relatively important business, and yet he hadn’t remembered meeting before. By the time the senior partner got off the elevator, he had made up his mind it was time to get out and retire. Working with other people’s money also coincided with changing attitudes toward risk management. With the change to a bonus culture, there was more incentive to take risks, and because the partners were no longer personally liable for covering losses, the constraints on risk-taking (not just financial but also reputational) were loosened. Those in areas such as proprietary trading had the opportunity to make more money than banking partners if they made the firm significant amounts of money.


pages: 388 words: 125,472

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

anti-communist, Asian financial crisis, autism spectrum disorder, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, disinformation, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, Jon Ronson, laissez-faire capitalism, land bank, light touch regulation, low interest rates, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Nixon triggered the end of the Bretton Woods system, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, Overton Window, plutocrats, popular capitalism, post-war consensus, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, subprime mortgage crisis, Suez crisis 1956, The Wealth of Nations by Adam Smith, transfer pricing, Tyler Cowen, union organizing, unpaid internship, Washington Consensus, We are all Keynesians now, wealth creators, Winter of Discontent

‘There were very few women on floors, and when they walked past desks, there was lots of leering.’ The ideology promoted by the outriders – that individual self-enrichment was the key to economic growth – was championed by the financial sector like no other. ‘Greed is the primary driver,’ says Darren. ‘There’s an awful lot of focus on the bonus culture. You’re working with money every day: you’ve got a daily measure of your success, which is how much did you make today, then this week, then this year, constantly thinking, talking about money. They think they made that pie, and they have the right to a big chunk of it.’ As a closeted gay man and a ‘reluctant investment banker’ from a working-class background in Romford, Essex, Jim had a similar experience, finding himself in a sector awash with primitive forms of prejudice.


pages: 320 words: 87,853

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

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

I borrowed this model from health care, where a swarm of contractors scrutinizes billing records to detect fraud and 212 THE BLACK BOX SOCIETY abuse. But another health care model, designed to prevent overbilling and overtreatment, is simply to pay physicians salaries, rather than “per-procedure.” Imagine if this approach were to supersede the bonus culture of Wall Street (where, for most key players, annual pay is peanuts compared to the bounty available in a banner year of spectacularly successful risks). Sure, in health care, there are worries that salary-based pay will lead to shirking. But given how destructive financial innovation has been over the past decade, maybe bankers ought to work less, at least until they can better prove how their sector contributes to real productivity.82 Restoring Trust For too long, we have assumed that the core aim of fi nancial regulation is disclosure.83 When every consumer understands the consequences of his actions, we like to believe, and when every investor has the same key data about a security as its seller, the fi nancial playing field will fi nally be leveled.


pages: 484 words: 136,735

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

Politicians forced to support private banks with public money could no longer deny that government safety nets are a natural and necessary feature of social reality, whether in financial markets, or fire fighting, or the provision of defibrillators in public places.5 Banks driven to the brink of failure could no longer pretend that their reckless disregard for risk and “eat what you kill” bonus culture was purely a private matter between their shareholders, directors, and employees. Investors ruined by relying on theories of efficient and rational financial markets could no longer pretend that market-based financial regulations and accounting rules were always more reliable than political and regulatory judgments.6 The upshot was that the market fundamentalist opposition between government and private enterprise could no longer be seriously maintained.


pages: 515 words: 132,295

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

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, Bear Stearns, behavioural economics, Big Tech, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, data science, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, electricity market, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial intermediation, Ford Model T, Frederick Winslow Taylor, George Akerlof, gig economy, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, guns versus butter model, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Bogle, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, low interest rates, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, proprietary trading, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, scientific management, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, TED Talk, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, Tragedy of the Commons, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, vertical integration, zero-sum game

Nonetheless, they do enrich executives, who took from 66 percent to 82 percent of their compensation in stock between 2006 and 2012.26 “It is surely difficult to praise buybacks as being good for shareholders when they are made at such disadvantageous times,” says Andrew Smithers, a British economist and financial consultant. (His book The Road to Recovery makes a convincing case that buybacks and the bonus culture are responsible for slow growth not just in the United States but in many rich countries, because they encourage executives to pay themselves, rather than investing in things that will actually make their companies more profitable.) “Buying overpriced shares is a way of destroying value and spending more money when the market is most overpriced is particularly egregious.”27 What this means on a practical level is that the common claim of corporate leaders—that tight credit conditions, a lack of consumer demand, and an uncertain regulatory environment have kept them from investing their cash hoard back into the real economy—is at best a half-truth.


pages: 491 words: 131,769

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

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

For starters, when employees of financial firms are compensated with restricted stock, provisions should be in place that force them to hold these shares for an even longer period of time than is now customary. Currently, many vesting periods are limited to a few years; they should be extended. Employees should be restricted from selling the stock until their retirement, or at the very least, for well over a decade. That’s a good first step, but a small one. The bigger issue is the bonus culture of Wall Street, in which employees are compensated when their bets pay off, but are not penalized when those bets cost the firm money. This system encourages risk taking that generates oversize “alpha” returns in the short term, with little consideration of long-term consequences. One way to fix this mess would be to create bonus pools that aren’t calculated on short-term returns but are based on a longer time horizon—say, three years or so.


pages: 486 words: 150,849

Evil Geniuses: The Unmaking of America: A Recent History by Kurt Andersen

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, airline deregulation, airport security, Alan Greenspan, always be closing, American ideology, American Legislative Exchange Council, An Inconvenient Truth, anti-communist, Apple's 1984 Super Bowl advert, artificial general intelligence, autonomous vehicles, basic income, Bear Stearns, Bernie Sanders, blue-collar work, Bonfire of the Vanities, bonus culture, Burning Man, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Cass Sunstein, centre right, computer age, contact tracing, coronavirus, corporate governance, corporate raider, cotton gin, COVID-19, creative destruction, Credit Default Swap, cryptocurrency, deep learning, DeepMind, deindustrialization, Donald Trump, Dr. Strangelove, Elon Musk, ending welfare as we know it, Erik Brynjolfsson, feminist movement, financial deregulation, financial innovation, Francis Fukuyama: the end of history, future of work, Future Shock, game design, General Motors Futurama, George Floyd, George Gilder, Gordon Gekko, greed is good, Herbert Marcuse, Herman Kahn, High speed trading, hive mind, income inequality, industrial robot, interchangeable parts, invisible hand, Isaac Newton, It's morning again in America, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jeff Bezos, jitney, Joan Didion, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kevin Roose, knowledge worker, lockdown, low skilled workers, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, Menlo Park, Naomi Klein, new economy, Norbert Wiener, Norman Mailer, obamacare, Overton Window, Peter Thiel, Picturephone, plutocrats, post-industrial society, Powell Memorandum, pre–internet, public intellectual, Ralph Nader, Right to Buy, road to serfdom, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Saturday Night Live, Seaside, Florida, Second Machine Age, shareholder value, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Stewart Brand, stock buybacks, strikebreaker, tech billionaire, The Death and Life of Great American Cities, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, union organizing, universal basic income, Unsafe at Any Speed, urban planning, urban renewal, very high income, wage slave, Wall-E, War on Poverty, We are all Keynesians now, Whole Earth Catalog, winner-take-all economy, women in the workforce, working poor, young professional, éminence grise

Until around then, investment banks were legally partnerships, consisting of people mainly investing their own personal wealth in deals, and thus they were strongly inclined to be prudent—eager to make more money, of course, but as eager as anyone not to lose what they had. But then, Cohan explains, “one Wall Street partnership after another became a public corporation. The partnership culture gave way to a bonus culture, in which employees felt free to take huge risks with other people’s money in order to generate revenue and big bonuses. Risk management on Wall Street [became] a farce, with risk managers being steamrolled by bankers, traders, and executives focused nearly exclusively on maximizing annual profits—and the size of their annual bonuses.


pages: 554 words: 168,114

Oil: Money, Politics, and Power in the 21st Century by Tom Bower

"World Economic Forum" Davos, addicted to oil, Alan Greenspan, An Inconvenient Truth, Ayatollah Khomeini, banking crisis, bonus culture, California energy crisis, corporate governance, credit crunch, energy security, Exxon Valdez, falling living standards, fear of failure, financial engineering, forensic accounting, Global Witness, index fund, interest rate swap, John Deuss, Korean Air Lines Flight 007, kremlinology, land bank, LNG terminal, Long Term Capital Management, margin call, megaproject, Meghnad Desai, Mikhail Gorbachev, millennium bug, MITM: man-in-the-middle, Nelson Mandela, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, Oscar Wyatt, passive investing, peak oil, Piper Alpha, price mechanism, price stability, Ronald Reagan, shareholder value, short selling, Silicon Valley, sovereign wealth fund, transaction costs, transfer pricing, zero-sum game, éminence grise

“I wouldn’t be long [or short] in the spot this month,” Dyer would say, and thousands of contracts would be influenced. “Dyer’s fast,” Moorhouse told his colleagues. “He sees opportunities others don’t.” Renowned for his energetic trawling of the Internet for information, and for always demanding answers, Dyer had a reputation for pushing to the edge but not beyond. Motivated by the bonus culture, his rivals were not enthralled. “He’s loaded the bullets in the gun in Cushing and he’s socking the rest of the world,” complained a London trader. “He’s coining it going up and coining it coming down.” Charlie Tuke was a wary fan: “If he emptied his tanks, his players on the other side didn’t like him.”


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, book value, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, George Akerlof, Glass-Steagall Act, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, junk bonds, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, Paul Volcker talking about ATMs, peer-to-peer lending, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

See also Robert Jenkins, “A Bank Run for the Benefit of Its Owners? Dream On,” Financial Times, January 8, 2012, and Jenkins (2012c). 34. Only two major banks have publicly disclosed clawbacks (see “ ‘Likely’ JPMorgan Clawbacks Rare on Wall Street,” CNNMoney, CNN, June 13, 2012). On governance and bonus cultures, see also “Hit Bankers Where It Really Hurts, in Their Bank Accounts,” Bloomberg, July 13, 2012, which also mentions a potential role for the Sarbanes-Oxley Act. 35. On possible regulation of compensation structures, see Bebchuk and Spamann (2010), Bebchuk et al. (2010), Wolf (2010), and Bhagat and Bolton (2011).


pages: 741 words: 179,454

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

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "there is no alternative" (TINA), "World Economic Forum" Davos, affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, carbon credits, Carl Icahn, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, deal flow, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Dutch auction, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial engineering, financial independence, financial innovation, financial thriller, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, global reserve currency, Goldman Sachs: Vampire Squid, Goodhart's law, Gordon Gekko, greed is good, Greenspan put, happiness index / gross national happiness, haute cuisine, Herman Kahn, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, 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.", job automation, Johann Wolfgang von Goethe, John Bogle, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Phillips curve, planned obsolescence, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, Reminiscences of a Stock Operator, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk free rate, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, stock buybacks, survivorship bias, tail risk, Teledyne, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, two and twenty, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Dissatisfied with his number, a young banker protested that it “was not a bonus! It’s a tip!” A tip or gratuity is a noncontractual payment for special service, sometimes related to the relative status of the parties. No doctor or surgeon expects to or receives a tip for doing their job properly. The bonus culture encouraged moral hazard—a focus on narrowly quantifiable outcomes while ignoring wider risks and costs. Elite bankers and traders took risks with other people’s money, aware that if they won the bet they would get a significant share of profits, while suffering no permanent damage if they lost.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, benefit corporation, Black Swan, blood diamond, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, company town, compensation consultant, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Glass-Steagall Act, Gordon Gekko, Greenspan put, hiring and firing, Ida Tarbell, income inequality, independent contractor, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, Money creation, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, Paul Volcker talking about ATMs, pension reform, performance metric, Pershing Square Capital Management, pirate software, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, rolling blackouts, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, stock buybacks, subprime mortgage crisis, The Chicago School, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

During the Reagan era, similar pseudoscientific rationale was provided by the themes of shareholder capitalism, and especially by Ayn Rand. The outcome is that business leaders are constantly driving one another to garner more income. As Diane Coyle, visiting professor at the University of Manchester, wrote: “[The] banking bonus culture validated making a lot of money as a life and career goal…. Remuneration consultants … helped ratchet up the pay and bonus levels throughout the economy.”13 “Too much” became “never enough.” In hindsight, it’s clear that CEOs pursuing their own magnified self-interest within this new environment enabled business leaders to engage in de facto class warfare as they strove to seize a larger share of the gains from growth.