credit crunch

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How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, asset allocation, Basel III, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamond, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, fear index, financial engineering, financial innovation, Flash crash, forward guidance, Garrett Hardin, Gini coefficient, Glass-Steagall Act, global reserve currency, high net worth, High speed trading, hindsight bias, hype cycle, income inequality, inflation targeting, interest rate swap, inverted yield curve, Isaac Newton, Jaron Lanier, John Perry Barlow, joint-stock company, joint-stock limited liability company, junk bonds, Kodak vs Instagram, Kondratiev cycle, Large Hadron Collider, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, low interest rates, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, plutocrats, Ponzi scheme, precautionary principle, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tragedy of the Commons, trickle-down economics, two and twenty, Two Sigma, Tyler Cowen, Washington Consensus, wealth creators, working poor, yield curve

Having said that, if you think that markets are magically the solution to everything and have some kind of mystical inherent ability to always be right and to self-regulate in all conditions, all weathers, all extremities, and despite all unforeseen circumstances, well then, you are probably a neoliberal economist. This received wisdom about the superiority of the neoliberal model was destroyed by the recent credit crunch. One of the dogmas of this school is the idea that markets can solve any problem that markets create. What happened in the credit crunch was a flat contradiction of that dogma: markets created a problem that needed financial intervention from states on a historically unprecedented scale. This poses a problem for neoliberalism, and not just because of its faith in the idea that markets can self-regulate.

During the daily process, each bank is asked the rate at which it could borrow money from other banks, “unsecured,” in other words backed only by its own creditworthiness rather than by specific collateral. The banks are asked, in effect, what would your credit be like today, if you had to ask? During the credit crunch, the if aspect of Libor became overpoweringly apparent, since the salient fact about the interbank market was that banks were refusing to lend money to each other. That, in essence, was what the credit crunch was—banks being too scared to lend to each other. In the very dry words of Mervyn King, the then governor of the Bank of England, Libor became “in many ways the rate at which banks do not lend to each other.”

When you hear money people talk about the effect of QE2 on M3, or the supply-side impact of some policy or other, or the effects of bond yield retardation, or of a scandal involving forward-settling ETFs, or MBSs, or subprime and Reits and CDOs and CDSs and all the other panoply of acronyms whose underlying reality is just as complicated as they sound—well, when you hear those things, it’s easy to think that somebody is trying to con you. Or, if not con you, then trying to put up a smoke screen, to obfuscate and blather so that it isn’t possible to tell what’s being talked about, unless you already know about it in advance. During the recent credit crunch, there was a strong feeling that a lot of the terms for the products involved were deliberately obscure and confusing: it was hard to take in the fact that CDSs were on the point of taking down the entire global financial system, when you’d never even heard of them until about two minutes before.


pages: 322 words: 77,341

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, low interest rates, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, off-the-grid, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, statistical model, Tax Reform Act of 1986, The Great Moderation, the payments system, too big to fail, tulip mania, Tyler Cowen, value at risk

“Because it just didn’t smell right.” Funny smells come in a variety of types. The funny smells surrounding the credit crunch were not for the most part to do with fraud—though having said that, a CDO investor who had had a long look at the way mortgages were being originated would have been gagging on fraud-related stench. Mainly, they were funny smells to do with things which were just too good to be true. That is a critically important category of funny smells, and it is the kind which is most relevant in the story of the credit crunch. It is a category of funny smell which involves an element of the willful, or of wishful thinking; or perhaps just of ignoring what’s in front of your nose.

This wasn’t just looking for trouble, it was sending trouble a “save the date” card, followed by a formal invitation, followed by nagging e-mails and phone calls just to make absolutely sure. What links all the banks which have hit trouble—and all the other companies and institutions around the world which have been felled by the credit crunch—is that those bets went bad. Gigantic holes appeared on the left-hand side of their balance sheets, where “Assets” are listed. That suddenly and immediately meant they were at risk from having their liabilities exceed their assets—that is, being insolvent. Those now-worthless assets are for the most part linked in one way or another to the collapse in property prices in the United States and elsewhere.

This might especially be the case in Europe, where banks and governments have delayed the reckoning with bad assets and bank insolvency for as long as they can. If the global economic crisis can be reduced to one single phenomenon, it is this: the fact that nobody knows which banks are solvent. Because banks are crucial to the creation and operation of credit, a bank crisis leads directly to a credit crunch. It’s also why the huge amounts of money being pumped into the banking sector by governments are tending not to do the thing they were supposed to do, that is, restart lending to businesses and consumers. That’s because—and here we can have that very rare thing, a brief moment of sympathy for the banksters—the banks are being given two totally incompatible goals.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Abraham Maslow, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, bread and circuses, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, disinformation, diversification, double helix, Edward Glaeser, financial deregulation, financial engineering, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, general purpose technology, George Akerlof, Gini coefficient, Glass-Steagall Act, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, language acquisition, Large Hadron Collider, liberal capitalism, light touch regulation, Long Term Capital Management, long term incentive plan, Louis Pasteur, low cost airline, low interest rates, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, meritocracy, Mikhail Gorbachev, millennium bug, Money creation, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, plutocrats, power law, price discrimination, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, Savings and loan crisis, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, systems thinking, tail risk, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, three-masted sailing ship, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, work culture , working poor, world market for maybe five computers, zero-sum game, éminence grise

The Treasury has also provided some illustrative examples of the scale of the cumulative loss in wealth that today’s crisis has exposed, and it points to similar cumulative losses of output.2 Economic growth needs to accelerate to 3.25 per cent in the decades ahead – which would be a heroic achievement, given the structure of the economy and the rebalancing that must take place – in order for national output to reach its predicted level had the credit crunch and the recession not taken place. Even if that proves possible, full recovery will not be achieved before 2031. If the gap between where Britain thought it was going to be and where it actually will be is added up year by year from now until 2031, the total loss of output because of the crisis will be £2.3 trillion. But there is a more plausible scenario. If growth remains at 2.75 per cent (its average level in the years leading up to the credit crunch), then it might never recover sufficiently to converge with the old trajectory.

The institute cites Japan as a warning of what might happen – as does Richard Koo, chief economist of Japan’s Nomura Research Institute.7 For more than a decade of his professional life, Koo has been exploring the fallout of Japan’s 1989–92 credit crunch on the $5 trillion Japanese economy. His prognosis is alarming, and confirms the McKinsey analysis: the Americans, the British and especially the mainland Europeans are far too complacent, Koo thinks. We do not recognise the sea-change in the behaviour of firms and economies after asset price bubbles, credit crunches and subsequent attempts to reduce leverage. The consensus expectation of a return to business as usual, albeit at lower growth rates, is at the optimistic end of what will happen.

Of course, the deficit must be reduced, but governments need to reserve the right to curtail the cutting if deleveraging by the private sector becomes too aggressive. If they do not, the cumulative impact could be disastrous. Richard Koo’s thinking is informed by his close analysis of Japan’s credit crunch and post-credit crunch recession. He observes that Japanese firms in the 1990s and early 2000s changed their behaviour dramatically. They were no longer profit maximisers but debt minimisers. Between 1970 and the early 1990s, during the long ‘yang’ (sun or light) economic upswing, Japanese companies had steadily built up their debts to finance investment and growth.


pages: 471 words: 97,152

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, business cycle, buy and hold, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, Future Shock, George Akerlof, George Santayana, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, junk bonds, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Michael Milken, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Paul Samuelson, Phillips curve, plutocrats, Post-Keynesian economics, price stability, profit maximization, public intellectual, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, W. E. B. Du Bois, We are all Keynesians now, working-age population, Y2K, Yom Kippur War

The demand for the exotic products collapsed, and the credit crunch began. The credit crunch began for three separate reasons. First, and most obviously, a standard mode of financing had collapsed. Those who originated loans (mortgages, for instance) could no longer expect to be able to package them and pass them on easily to unsuspecting third parties. Now if they were going to originate those loans either they would have to keep them ultra-safe before they passed them on, or they would have to keep them themselves.5 The second reason for the credit crunch involves the relation between capital loss and leverage.

The first such target— and the only one that would be needed in a normal recession—would be a monetary policy and a fiscal policy that would be jointly sufficient to return the economy to full employment. But because of the severe credit crunch, which has been induced by the low state of confidence, such a stimulus is not enough. Indeed, in the face of the credit crunch, it might take very large increases in government expenditures or tax reductions to reach full employment. So we argue that government macroeconomic policy should have a second, intermediate target. Credit flows should also be targeted at the level that would normally prevail at full employment.

This is the money they need to meet their payrolls and to pay their suppliers. It is not the only source of such current finance, but if it falls by as much as 25% while business has stayed pretty much constant, that means that something is wrong. There really must be a credit crunch. Previous chapters have explained why this credit crunch has occurred. The old system of finance changed. In the old days, for the most part, those who originated loans kept them in their own portfolios. But then the proponents of the “new finance” discovered all kinds of ways to package these loans (to “securitize” them) and to divide up those securities.


pages: 561 words: 87,892

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

"World Economic Forum" Davos, Admiral Zheng, Alan Greenspan, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, Great Leap Forward, guns versus butter model, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, junk bonds, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low interest rates, low skilled workers, market clearing, Martin Wolf, mass immigration, Meghnad Desai, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, Savings and loan crisis, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, We are all Keynesians now, women in the workforce, working-age population, Y2K, Yom Kippur War

Moreover, because unconventional policies lower the cost of government borrowing – they operate partly through central-bank purchases of either government or quasi-government debt, thereby increasing the supply of money – there is no great pressure on the US government to put its fiscal house in order. If the long-term costs of the credit crunch are persistently high budget deficits funded through resort to the printing press, holders of dollars elsewhere in the world have every right to be very worried indeed. US PROBLEMS AND SIXTEENTH-CENTURY SPAIN The US response to the credit crunch may be the last throw of the dice for a country that, for too long, has been able to live beyond its means. To understand what’s at stake, it’s worth going all the way back to the sixteenth century when, for a while, Spain was, like the US today, an all-conquering nation.

In practice, however, these cross-border capital flows are sometimes a source of inefficiency given that many of the biggest players are nation states that choose not to pursue commercial objectives but, instead, focus on meeting the interests of their various internal constituents: the US government is the world’s biggest borrower while the Chinese, Saudis and Russians are among the world’s biggest savers. It may be that the data simply do not exist to measure, calibrate and analyse these growing interactions between the developed and emerging worlds, but that does not mean to say they can be ignored. Regrettably, as with the 2007/8 credit crunch, they too often are. Even when they are taken into account, it’s often just one-way traffic. Plenty of economists spend their time trying to work out how developments in the United States affect the rest of the world. Few spend their time asking how the rest of the world and, in particular, the emerging nations affect the US.

Too often, economists end up lost in a mathematical world of esoteric equations which cannot provide answers to the really big questions affecting society. At the British Academy in the summer of 2009, the great and the good of the UK economics profession met to discuss the drafting of a letter to Her Majesty the Queen intended to explain why economists had failed to spot the credit crunch. The letter subsequently delivered to Buckingham Palace ended as follows: In summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.


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

Having tried, with this historical digression, to convince the reader that describing former senior bankers as financially incompetent is not, ipso facto, an oxymoron, I can return to the narrative of more recent events. In the summer of 2008, the life-threatening phase of the credit crunch appeared to be ending. U.S. growth in the second quarter had just been revised upwards from 1.2 percent to 1.8 percent13 and the biggest worry was no longer the credit crunch but the threat of inflation caused by overly rapid growth in China, India, and other emerging nations. The credit crunch was turning out to be less damaging than generally expected for several reasons. One was the continuing growth of Asia and the seemingly inexhaustible supply of excess savings in that part of the world.

The risk of such breakdowns had been recognized by both regulators and bankers in the early days of the credit crunch and had been successfully handled (albeit at huge cost to bank shareholders) in 2007, when the mortgage-oriented hedge funds and Special Investment Vehicles set up by Bear Stearns, Citibank, UBS, HSBC, and many other major banks were bailed out by their sponsoring institutions. These bailouts were expensive to the bank shareholders but prevented systemic collapse by maintaining the integrity of all the links in the chain of mutual obligations in the financial system. This was a crucial lesson of the early phase of the credit crunch that the U.S. Treasury and the Fed recognized in the Bear Stearns deal but, in the autumn of 2008, decided to recklessly ignore.

As oil prices soared to $150 a barrel, central banks felt unable to cut interest rates as sharply as they otherwise would have to offset the deflationary effects of the pre-Lehman credit crunch. The market fundamentalism of regulators and accountants thus gravely weakened the world economy and banking system. But disaster could still have been avoided had it not been for the third and greatest blunder: the U.S. government’s refusal to intervene directly in the financial system when the credit crunch began. Such direct intervention was what saved Britain after the Northern Rock collapse, the most serious run on a major bank anywhere in the advanced capitalist world since the Great Depression.


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

That cut can come in three forms: banks can charge a higher interest rate to the people to whom they lend than they pay to the people from whom they borrow, or they can simply charge a fee for bringing lender and borrower, or issuer and investor, together. Over the last twenty years, they have increasingly added a third activity: trading assets. This contributed to the credit crunch that started in 2007. There is no doubt that financial institutions perform an immensely valuable service: imagine life without cashpoint cards, credit cards, mortgages and car loans. Even those Britons who do not have a bank account would never be paid if the companies for which they work did not have one.

These policies were often made a condition for countries requiring aid from the International Monetary Fund, the Washington-based organization that underpins the global financial system. The period since 2000 has seen the Washington consensus come under attack. First, the US model looks not quite as attractive as it did in the late 1990s. The dotcom bubble burst in 2000 and then a housing boom ended in a credit crunch in 2007 and 2008. Critics argue that the American financial free-for-all leads to recurrent crises. Meanwhile, emerging countries like China and Russia showed it was possible to achieve rapid economic growth while still retaining a fair degree of government control. Having seen what the IMF could do to debtor countries, many developing nations focused on building up trade surpluses, so they would not be dependent on foreign money.

Having seen what the IMF could do to debtor countries, many developing nations focused on building up trade surpluses, so they would not be dependent on foreign money. Now it is the US which is dependent on the Asians and the oil producers to finance its deficit. Some argue that this imbalance created the conditions for the credit crunch. Americans used cheap money from abroad to speculate on their property market. GLOBALIZATION What is globalization? It is one of those terms that is often used, but more rarely defined. Broadly speaking, it is a trend whereby trade, investment and culture have become ever more international.


pages: 223 words: 10,010

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

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

Forbes counted a record number of 1210 billionaires in 2011, up by 28 per cent over 2007. Their combined wealth has risen from $3,500 billion in 2007 to $4,500 billion in 2010. Little more than a thousand individuals commanded a sum equivalent to a third of the output of the American economy. In the UK, the City bonus pool in 2010 came close to pre-credit crunch levels. The average pay of the chief executives of Britain’s largest 100 companies rose by 55 per cent in the first six months of 2010 to stand at almost £5 million. Big business is enjoying surging profit levels, with many of the nation’s largest conglomerates sitting on near-record levels of cash, most of it standing idle.

Some of these have done much better than others—especially those working in well paid white collar professions outside of the corporate and City super-elite—such as lawyers, accountants and medics. But most have ended up in the slow lane of earnings growth, with earnings that have fallen way behind the growth of the economy.73 While incomes continued to rise sharply amongst the very top income groups in the decade before the credit crunch, real income growth amongst those lower down the income scale started to slow and at an accelerating rate. During Labour’s first term in power, much of the workforce enjoyed faster rises in take-home pay than in the previous 15 years. As a result, the wage share recovered some of its lost ground between 1996 and 2001.

In the three decades to 2008, the number of jobs in manufacturing fell from just over 7 to just over 3 million.103 As shown in figure 3.2, by 2007, manufacturing in the UK accounted for nearly 13 per cent of national output, down from a third in 1979. The share of output accounted for by finance, in contrast, doubled from around 5 per cent in the mid-1970s to slightly over ten per cent by 2008.104 The expansion of finance accelerated from the second half of the 1990s. In the three years to 2007—before the onset of the credit crunch—financial services accounted for a third of overall GDP growth (another third came from residential and commercial property) and had grown to play a bigger role in the economy than in any other comparable nation.105 Thus financial services accounts for 7.5 per cent of the US economy, 6.7 per cent in Japan, 4.6 per cent in France and 3.8 per cent in Germany.


Corbyn by Richard Seymour

anti-communist, banking crisis, battle of ideas, Bernie Sanders, Boris Johnson, Brexit referendum, British Empire, call centre, capital controls, capitalist realism, centre right, collective bargaining, credit crunch, Donald Trump, eurozone crisis, fake news, first-past-the-post, full employment, gender pay gap, gentrification, housing crisis, income inequality, Jeremy Corbyn, knowledge economy, land value tax, liberal world order, mass immigration, means of production, moral panic, Naomi Klein, negative equity, Neil Kinnock, new economy, non-tariff barriers, Northern Rock, Occupy movement, offshore financial centre, pension reform, Philip Mirowski, post-war consensus, precariat, quantitative easing, race to the bottom, rent control, Snapchat, stakhanovite, systematic bias, Washington Consensus, wealth creators, Winter of Discontent, Wolfgang Streeck, working-age population, éminence grise

It required years of painful rethinking and a fundamentally new view of the universe, replacing deterministic laws with probabilistic laws of motion, to account for the new data. Likewise, recent crises call for a paradigm shift, a fundamental rethinking of how politics works. This should really have been initiated after the credit crunch. Not only did economists fail to predict the cataclysmic event, the worst crisis for capitalism since the 1930s; also, their theories denied it could happen. Elaborate mathematical models, based on the assumption of efficient, self-regulating markets, were developed to guide academic theory and policy.

The liberal journalist George Packer argued that ‘rejecting globalisation was like rejecting the sunrise’.1 And besides, it was benevolent: a rising tide would lift all boats, while judicious exertions of military force would iron out any wrinkles in an increasingly flat earth. But there are growing signs since the global financial crash that we have reached, as one of John McDonnell’s advisors, economist James Meadway, put it, ‘peak globalisation’. World trade is still growing, but far less rapidly than before the credit crunch, and more slowly than global GDP. According to the World Trade Organization, the ratio of trade growth to GDP growth fell to 0.6:1 in 2016. Financial internationalism, wherein banks extend their reach increasingly globally, is slowing down. Protectionism is on the rise across the G20, and various governments – notably the Chinese – have imposed capital controls.2 This is a crisis of globalisation, and, with that, a crisis of all the taken-for-granted wisdom about globalisation.

Birt brought in Peter Jay, the financial journalist who famously wrote Callaghan’s speech declaring a monetarist policy, and Evan Davis. Their journalistic beat was dry economics reporting. This treated the economy as something which a narrow subset of experts deal with. Then they had more populist business programmes on the Thatcherite model, promoting the idea of a nation of shareholders. ‘By the time of the credit crunch and the austerity projects, there was a consensus around neoliberalism. Particular centres of expertise were valued – for example, Jeff Randall had been brought in from the Telegraph to be the first business editor. So that when the crisis hit, the sources they had on television were people from the City, neoliberal think tanks and, of course, politicians who had been won over to neoliberalism.


pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

airline deregulation, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, bond market vigilante , Bretton Woods, business cycle, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Glass-Steagall Act, Gordon Gekko, high-speed rail, Hyman Minsky, income inequality, inflation targeting, invisible hand, it is difficult to get a man to understand something, when his salary depends on his not understanding it, It's morning again in America, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Joseph Schumpeter, junk bonds, Kenneth Rogoff, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, low skilled workers, Mark Zuckerberg, Minsky moment, Money creation, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Savings and loan crisis, Upton Sinclair, We are all Keynesians now, We are the 99%, working poor, Works Progress Administration

To answer that question, we have to look at some economic and, even more important, political history. First, however, let’s talk some more about the crisis of 2008, which plunged us into this depression. CHAPTER THREE THE MINSKY MOMENT Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy.

To be fair to Obama, his failure was more or less paralleled throughout the advanced world, as policy makers everywhere fell short. Governments and central banks stepped in with cheap-money policies and enough aid to the banks to prevent a repeat of the wholesale breakdown of finance that took place in the early 1930s, creating a three-year credit crunch that played a major role in causing the Great Depression. (There was a similar credit crunch in 2008–09, but it was much shorter-lived, lasting only from September 2008 to the late spring of 2009.) But policies were never remotely strong enough to avoid a huge and persistent rise in unemployment. And when the initial round of policy responses fell short, governments across the advanced world, far from acknowledging the shortfall, treated it as a demonstration that nothing more could or should be done to create jobs.

The seriousness of the situation began to sink in on August 9, 2007, when the French investment bank BNP Paribas told investors in two of its funds that they could no longer withdraw their money, because the markets in those assets had effectively shut down. A credit crunch began developing, as banks, worried about possible losses, became unwilling to lend to one another. The combined effects of the decline in home construction, weakening consumer spending as the fall in home prices took its toll, and this credit crunch pushed the U.S. economy into recession by the end of 2007. At first, however, it wasn’t that steep a downturn, and as late as September 2008 it was possible to hope that the economic downturn wouldn’t be all that severe.


pages: 354 words: 99,690

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life by David Mitchell

bank run, Boris Johnson, British Empire, cakes and ale, cognitive dissonance, collapse of Lehman Brothers, credit crunch, don't be evil, double helix, Downton Abbey, Dr. Strangelove, Etonian, eurozone crisis, Golden age of television, haute cuisine, high-speed rail, Julian Assange, lateral thinking, Northern Rock, Ocado, offshore financial centre, payday loans, plutocrats, profit motive, Russell Brand, sensible shoes, Skype, The Wisdom of Crowds, WikiLeaks

No new toothy smiling suit had been swept to office, no nationally beloved beauty had been chased to death by photographers, no building had been blown up or completed, no new technology suddenly launched or discredited, no disease gone pandemic or been cured. But, as when a premiership football team runs on in front of an away crowd, and opposition fans reach vindictively for their 2ps, change was palpably in the air. In fact, this change was all about money. Money may not bring you happiness but, if there’s one thing the credit crunch of 2008 showed, no money brings a hell of a lot of grief. And that’s what we were at risk of experiencing that autumn: no money. Anywhere. At all. The sudden absence of money – its collapse as a human construct. Money isn’t really anything, after all. Humans don’t need money – we need food and shelter.

We despised one another, and of course the government, for the mistakes that had been made, but were also nostalgic for the prosperous feeling we’d had while it was happening. I realise the shine had been taken off New Labour long before 2008. That war in Iraq went down like a cup of cold piss, for a start. But I’m not sure that really upset Britain as much as we’re apt to think. The war made Britons shake their heads, but the credit crunch had us banging them against walls. You only have to look at Blair and Brown’s relative electoral fortunes: Blair won a general election after getting the country involved in an unpopular and unsuccessful war, a war of which he remained unashamedly in favour; yet Brown lost one after a global economic downturn which he admittedly failed to avert, but for which he certainly wasn’t primarily responsible.

Its existence has been threatened by a confluence of general economic gloom, consequent creative cowardice and, most of all, the bloody internet, which seems to change everything, but particularly seeks to change the way we have fun – and I’m not even talking about porn. The poor old entertainment media could really have done without the credit crunch and the internet happening at once. * It’s been a ridiculously long time coming but it’s here at last. What’s the guy been doing? He makes Kubrick look like Barbara Cartland. Doesn’t he understand the country’s in recession, the media in crisis? We need product – reliable product from an established name.


The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series) by Robert P. Baker

asset-backed security, bank run, banking crisis, Basel III, Black-Scholes formula, book value, Brownian motion, business continuity plan, business logic, business process, collapse of Lehman Brothers, corporate governance, credit crunch, Credit Default Swap, diversification, financial engineering, fixed income, functional programming, global macro, hiring and firing, implied volatility, interest rate derivative, interest rate swap, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market clearing, millennium bug, place-making, prediction markets, proprietary trading, short selling, statistical model, stochastic process, the market place, the payments system, time value of money, too big to fail, transaction costs, value at risk, Wiener process, yield curve, zero-coupon bond

They could include clients, academics, pension holders and people making investments of all sizes people selling products and services to the financial sector such as software vendors. The importance of the financial sector to the world economy has been brought into focus by many recent events: the credit crunch, the collapse of companies such as Lehman Brothers and a recession affecting most countries across the world. The result has been a demand for better inspection and regulation of trading activities. No longer is it sufficient for firms to return profits, they have to convince investors, shareholders and regulators that they are employing due diligence and managing risks.

As long as the potential risks are understood and estimated, it can be said that risk is being managed. 16 THE TRADE LIFECYCLE 2.6 PROBLEMS OF UNFORESEEN RISK No stakeholders in a business – investors, managers, employees and customers – want unforeseen risk. Due to its sudden effect, the organisation is ill-equipped to deal with it and its consequences are unknown. One of the major causes of the recent credit crunch was the failure of many organisations to take into account a particular risk: that so many American sub prime mortgage borrowers would be unable to repay their debt. Unforeseen risk points to poor management and supervision and reduces confidence in the financial entity. If risk is present, it should be identified and then sensible decisions can be taken about how to manage it. 2.7 SUMMARY A financial entity must accept that risks are an unavoidable part of the trading process.

Here the borrower sells a highly secure bond such a US Treasury bond at an agreed price for repurchase at an agreed future price. The purpose of such a transaction is to borrow money more cheaply by using the bond as collateral. Deposits oil the wheels of financial markets by ensuring participants can acquire cash and proceed with other trading. When short-term lending becomes expensive, as we saw in the credit crunch of 2008, raising money for all other trading is negatively impacted. Future As explained in the previous chapter, a future is an agreement to transact at some future time with the price decided now. If we speak about a future on aluminium, it is quite easy to see how that future is applied. Not so with a future on interest rates.


pages: 859 words: 204,092

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

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

As the United States exports relatively little to China, the latter has enjoyed a large and rising trade surplus which has grown very rapidly since 1999.147 China has invested this surplus in various forms of US debt, including Treasury bonds, agency bonds and corporate bonds - in effect, a Chinese loan to the US - thereby enabling American interest rates to be kept artificially low to the benefit of American consumers and especially, until the credit crunch, holders of mortgages. Although the US was deeply in debt, China’s continuing large-scale purchase of Treasury bonds (which I will use as shorthand for various forms of US assets held by China) allowed Americans to continue with their spending spree, and then partially helped to cushion the impact of the credit crunch. In September 2008 China’s foreign currency reserves totalled $1.81 trillion - a sum greater than the annual economic output of all but nine countries.148 The rapid growth of its foreign exchange reserves has made China a colossus in the financial world.

In early 2007 the government announced the formation of the China Investment Corporation, a new state agency to oversee investment of $200 billion of China’s foreign currency reserves - similar to Temasek Holdings, the Singapore government’s successful investment agency, which manages a $108 billion global portfolio of investments.153 To test the water, the new agency placed $3 billion of its holdings with Blackstone, the US-based private equity group, thereby signalling Beijing’s intention to switch some of its investments from US Treasury bonds into more risky equity holdings.154 In fact it has since emerged that the State Administration of Foreign Exchange, which oversees China’s reserves, has itself been investing rather more widely than was previously believed.155 These moves herald China’s rise as a major global financial player.156 In the second half of 2007, as the credit crunch began to bite, China Development Bank took a significant stake in the UK-based Barclays Bank157 and Citic Securities formed a strategic alliance with the US investment bank Bear Stearns before the latter went bust.158 Three Chinese banks were also in talks about acquiring a stake in Standard Chartered, the UK-based emerging markets lender.159 But most of this came to nought as the Chinese increasingly realized the likely severity of the credit crunch and the potential threat it represented to any stakes in Western financial institutions that it might purchase.

The winners, above all the US corporate giants that have moved their manufacturing operations to China and the consumers who have benefited from China prices at home, still considerably outnumber the losers and in any case enjoy much greater power.143 But this could change. The political consequences of spiralling commodity prices, especially oil prices, which were brought to a premature end by the credit crunch, could, if they had continued, have turned American attitudes towards China in a more negative direction. More pertinently, the threat of a serious and prolonged depression is already leading to growing demands for protection.144 It is striking that, even before the credit crunch, the number of Americans who thought that trade with other countries was having a positive impact on the US fell sharply from 78 per cent in 2002 to only 59 per cent in 2007.145 In the longer term, as Chinese companies relentlessly climb the technology ladder, the US economy will face ever-widening competition from Chinese goods, no longer just at the low-value end, but also increasingly for high value-added products as well, just as happened earlier with Japanese and Korean firms.146 In that process, the proportion of losers is likely to increase rapidly, as will be the case in Europe too.


pages: 444 words: 86,565

Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum, Joshua Pearl, Joseph R. Perella

accelerated depreciation, asset allocation, asset-backed security, bank run, barriers to entry, Benchmark Capital, book value, business cycle, capital asset pricing model, collateralized debt obligation, corporate governance, credit crunch, discounted cash flows, diversification, equity risk premium, financial engineering, fixed income, impact investing, intangible asset, junk bonds, London Interbank Offered Rate, performance metric, risk free rate, shareholder value, sovereign wealth fund, stocks for the long run, subprime mortgage crisis, technology bubble, time value of money, transaction costs, yield curve

Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions is a highly accessible and authoritative book written by investment bankers that explains how to perform the valuation work at the core of the financial world. This book fills a noticeable gap in contemporary finance literature, which tends to focus on theory rather than practical application. In the aftermath of the subprime mortgage crisis and ensuing credit crunch, the world of finance is returning to the fundamentals of valuation and critical due diligence for mergers & acquisitions (M&A), capital markets, and investment opportunities. This involves the use of more realistic assumptions governing approach to risk as well as a wide range of valuation drivers, such as expected financial performance, discount rates, multiples, leverage levels, and financing terms.

The valuation implied for a target by a DCF is also known as its intrinsic value, as opposed to its market value, which is the value ascribed by the market at a given point in time. Therefore, a DCF serves as an important alternative to market-based valuation techniques such as comparable companies and precedent transactions, which can be distorted by a number of factors, including market aberrations (e.g., the post-subprime credit crunch). As such, a DCF plays a valuable role as a check on the prevailing market valuation for a publicly traded company. A DCF is also critical when there are limited (or no) “pure play” peer companies or comparable acquisitions. Part Two: Leveraged Buyouts (Chapters 4 & 5) Part Two focuses on leveraged buyouts, which comprised a large part of the capital markets and M&A landscape in the mid-2000s.

Similarly, during the record low-rate debt financing environment of the mid- 2000s, acquirers (financial sponsors, in particular) were able to support higher than historical purchase prices due to the market’s willingness to supply abundant and inexpensive debt with favorable terms. In the ensuing credit crunch that began during the second half of 2007, however, debt financing became scarce and expensive, thereby dramatically changing value perceptions. As a result, the entire M&A landscape changed, including the volume of deals and buyers’ perspectives on valuation. Deal Dynamics Deal dynamics refer to the specific circumstances surrounding a given transaction.


The Handbook of Personal Wealth Management by Reuvid, Jonathan.

asset allocation, banking crisis, BRICs, business cycle, buy and hold, carbon credits, collapse of Lehman Brothers, correlation coefficient, credit crunch, cross-subsidies, currency risk, diversification, diversified portfolio, estate planning, financial deregulation, fixed income, global macro, high net worth, income per capita, index fund, interest rate swap, laissez-faire capitalism, land tenure, low interest rates, managed futures, market bubble, merger arbitrage, negative equity, new economy, Northern Rock, pattern recognition, Ponzi scheme, prediction markets, proprietary trading, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, short selling, side project, sovereign wealth fund, statistical arbitrage, systematic trading, transaction costs, yield curve

203; Regulation 204; Protected rights 205; The future for SIPPs 205; Postscript 206 177 Appendix: Contributors’ contact details Index Index of advertisers 183 191 199 207 212 214 private client services XII Trusts, probate and tax planning Residential property purchases and sales Relationships: formation and breakdown and the consequences Contact Ian Lane, Partner 020 7293 4801 ilane@dac.co.uk www.dac.co.uk/privateclient XIII ឣ Nil Rate Band Will Trusts: Are they still of value? Way back in October 2007 in the time before the banking crisis, ‘the credit crunch’, falling markets, massive job losses and recession (or is it depression!) the UK Government made a surprise announcement of a change to the inheritance tax legislation that was to have a profound effect on tax planning using Wills. This was the announcement of the introduction of the transferable Nil Rate Band.

His previous assignments have included working for the Corporate and Investment Bank in equity derivatives, where he performed diverse roles including senior profit and loss analysis, risk management and warrants trading. 1 Introduction In 2008 conventional private investor thinking was turned upside down following the ‘credit crunch’ and the ensuing stream of dismal revelations of imprudent bank lending, financial products based on the packaging of toxic debt and inadequate financial sector regulation. Previous conceptions of what were safe forms of investment and how diversified portfolios could be structured at acceptable levels of risk were tossed aside.

The final chapter in this section of the book is an explanation of the new ‘user-friendly’ private foundation vehicle now available in Jersey. Part Two addresses the disparate worlds of real estate and forestry. Tim Bowring of Citi Private Bank team offers definitions of the various property-backed funding alternatives and a frank analysis of the causes of the present market downturn that generated the credit crunch. James Price of Knight Frank describes the current condition of the overseas property market. In the two chapters that follow Alan Guy and Alastair Sandels of Fountains identify current opportunities in forestry investment and the risks of direct investment in forestry. In contrast, Guy Conroy of Oxigen Investments advocates timber in South-East Asia as both a profitable and ethical investment destination.


pages: 353 words: 88,376

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett by Jack (edited By) Guinan

Albert Einstein, asset allocation, asset-backed security, book value, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, clean water, collateralized debt obligation, computerized markets, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, fear index, financial engineering, fixed income, Glass-Steagall Act, implied volatility, index fund, intangible asset, interest rate swap, inventory management, inverted yield curve, junk bonds, London Interbank Offered Rate, low interest rates, margin call, money market fund, mortgage debt, Myron Scholes, passive investing, performance metric, risk free rate, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, short squeeze, statistical model, time value of money, transaction costs, yield curve, zero-coupon bond

The Investopedia Guide to Wall Speak 57 Related Terms: • Call Option • Long (or Long Position) • Strike Price • Common Stock • Stock Option Credit Crunch What Does Credit Crunch Mean? An economic condition characterized by extreme difficulty in obtaining capital. Banks and investors become wary of lending funds to corporations, and that drives up the price of debt products for borrowers. Investopedia explains Credit Crunch Credit crunches usually occur during recessions. A credit crunch makes it nearly impossible for companies to borrow money because lenders are scared of bankruptcies or defaults and charge higher interest rates because of that fear.

Bankruptcy filings in the United States can fall under one of several chapters of the Bankruptcy Code: Chapter 7 (which involves liquidation of assets), Chapter 11 (company or individual “reorganizations”), and Chapter 13 (debt repayment with lowered debt covenants or payment plans). Bankruptcy filings vary widely from country to country, leading to higher or lower filing rates, depending on how easily a person or company can complete the process. Related Terms: • Bear Market • Credit Crunch • Subprime Loan • Chapter 11 • Debt Basis Point (BPS) What Does Basis Point (BPS) Mean? A unit equal to 1/100 of 1%; it is used to denote a change in a financial instrument (usually a fixed-income security). The basis point is used commonly for calculating changes in interest rates, equity indexes, and the yield of a fixed-income security. 20 The Investopedia Guide to Wall Speak Investopedia explains Basis Point (BPS) Converting percentage changes in basis points is done as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.

Investopedia explains Mortgage Forbearance Agreement Borrowers who are faced with mortgage financial problems such as having chosen an adjustable-rate mortgage on which the interest rate has reset to a level that makes the monthly payments unaffordable usually must seek remedies other than a forbearance agreement. Related Terms: • Bankruptcy • Liability • Subprime Meltdown • Credit Crunch • Mortgage Mortgage-Backed Securities (MBSs) What Does Mortgage-Backed Securities (MBSs) Mean? Refers to a type of asset-backed security secured by a mortgage or a collection of mortgages and grouped in one of the top two ratings as determined by a credit rating agency such as Moody’s; usually make periodic payments that are similar to coupon payments.


pages: 471 words: 124,585

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

Admiral Zheng, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, classic study, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, equity risk premium, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, Future Shock, German hyperinflation, Greenspan put, Herman Kahn, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Bostrom, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, rolling blackouts, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, subprime mortgage crisis, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, W. E. B. Du Bois, Washington Consensus, Yom Kippur War

After all, a ‘great contraction’ in the US banking system has convincingly been blamed for the outbreak and course of the Great Depression between 1929 and 1933, the worst economic disaster of modern history.7 If US banks have lost significantly more than the $255 billion to which they have so far admitted as a result of the subprime mortgage crisis and credit crunch, there is a real danger that a much larger - perhaps tenfold larger - contraction in credit may be necessary to shrink the banks’ balance sheets in proportion to the decline in their capital. If the shadow banking system of securitized debt and off-balance-sheet institutions is to be swept away completely by this crisis, the contraction could be still more severe.

Europe already seems destined to experience a slowdown comparable with that of the United States, particularly in those countries (such as Britain and Spain) that have gone through similar housing bubbles. The extent to which Asia can ride out an American recession, in the way that America rode out the Asian crisis of 1997-8, remains uncertain. What is certain is that the efforts of the Federal Reserve to mitigate the credit crunch by cutting interest rates and targeting liquidity at the US banking system have put severe downward pressure on the external value of the dollar. The coincidence of a dollar slide and continuing Asian industrial growth has caused a spike in commodity prices comparable not merely with the 1970s but with the 1940s.

He lives and breathes uncertainty. Since he began trading convertible bonds from his Harvard undergraduate dormitory, he has feasted on ‘fat tails’. Citadel’s main offshore fund has generated annual returns of 21 per cent since 1998.87 In 2007, when other financial institutions were losing billions in the credit crunch, he personally made more than a billion dollars. Among the artworks that decorate his penthouse apartment on North Michigan Avenue is Jasper Johns’s False Start, for which he paid $80 million, and a Cézanne which cost him $60 million. When Griffin got married, the wedding was at Versailles (the French château, not the small Illinois town of the same name).88 Hedging is clearly a good business in a risky world.


pages: 823 words: 220,581

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

accounting loophole / creative accounting, Alan Greenspan, banking crisis, banks create money, barriers to entry, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, book value, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Greenspan put, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, Money creation, money market fund, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, place-making, Ponzi scheme, Post-Keynesian economics, power law, profit maximization, quantitative easing, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Solow, Ronald Coase, Savings and loan crisis, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

This is an incredibly simple system, but even at this point it can give us some insights into why Bernanke’s QE1 was far less effective than he had hoped – and why it would have been far more effective if the money had been given to the debtors rather than to the banks. A credit crunch The crisis of 2007 was not merely a credit crunch (where the problem is liquidity) but the end point in the process of Ponzi lending that made much of the US economy insolvent. However, the credit-crunch aspect of this crisis can be simulated in this model by halving the rate at which the bank lends from the vault, and doubling the speed at which firms try to repay their debts. The time constant for bank lending therefore drops from ½ to ¼ – so that the amount in the vault turns over every four years rather than every two – while that for repaying debts goes from 1/10 to 1/5 – so that loans are repaid every five years rather than every ten.

In the absence of instantaneous replacement cost pricing, firms must finance their increased working capital needs by increasing their borrowings from their banks or by running down their liquid assets. (Ibid.: 545) Banks therefore accommodate the need that businesses have for credit via additional lending – and if they did not, ordinary commerce would be subject to Lehman Brothers-style credit crunches on a daily basis. The Federal Reserve then accommodates the need for reserves that the additional lending implies – otherwise the Fed would cause a credit crunch: ‘Once deposits have been created by an act of lending, the central bank must somehow ensure that the required reserves are available at the settlement date. Otherwise the banks, no matter how hard they scramble for funds, could not in the aggregate meet their reserve requirements’ (ibid.: 544).

Minsky’s judgment was based largely on his financial interpretation of the US business cycle from that point on: The first serious break in the apparently tranquil progress was the credit crunch of 1966. Then, for the first time in the postwar era, the Federal Reserve intervened as a lender of last resort to refinance institutions – in this case banks – which were experiencing losses in an effort to meet liquidity requirements. The credit crunch was followed by a ‘growth’ recession, but the expansion of the Vietnam War promptly led to a large federal deficit which facilitated a recovery from the growth recession.


pages: 121 words: 31,813

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions by Lee Freeman-Shor

Alan Greenspan, behavioural economics, Black Swan, buy and hold, Carl Icahn, cognitive bias, collapse of Lehman Brothers, credit crunch, Daniel Kahneman / Amos Tversky, diversified portfolio, family office, I think there is a world market for maybe five computers, index fund, Isaac Newton, Jeff Bezos, Long Term Capital Management, loss aversion, Market Wizards by Jack D. Schwager, Pershing Square Capital Management, Richard Thaler, Robert Shiller, rolodex, Skype, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, technology bubble, The Wisdom of Crowds, too big to fail, tulip mania, world market for maybe five computers, zero-sum game

Sadly, nowadays the Royal Bank of Scotland has become synonymous with the credit crunch because it needed to be bailed out by the government, a source of anger for many in the UK. It was deemed too big to fail. At the time of writing the government owns 82% of the shares outstanding, having been forced to recapitalise the bank in order to prevent a run on the banking system. An Assassin bought shares in the Royal Bank of Scotland on 30 May 2008, before the collapse of Lehman Brothers and the onset of the credit crunch, at £22.29. As the credit crisis broke, he actually moved quicker than his stop-loss, killing the investment on 3 October 2008 at £18.62, a loss of 16%.

Not to mention middle-aged men who try to recapture their youth driving the executive 6 or 7 Series or the Z4 Roadster … One of my investors chose to invest in BMW on 11 April 2008 – just before the credit crunch hit – at a price of €34.95. He sold two months later on 23 June 2008 at a price of €32.35 for a loss of a mere 7%. Before you jump to conclusions, let me assure you that he did not sell because he foresaw the imminent credit crunch. He sold because a better idea had apparently presented itself. The stock went on to return 95% after he sold it. CASE STUDY: Pirelli Sticking to the motoring theme, we go from German automotive powerhouse to Italian tyre manufacturing behemoth Pirelli.

This paints a picture of a rather bulletproof business model because so many companies rely on Experian’s reports in the day-to-day running of their businesses. What could possibly go wrong? A Hunter bought the stock on 13 June 2006, at an initial price of £9.02 per share. Despite holding out through the credit crunch, this Hunter subsequently sold his entire stake five years later on 1 September 2011 with the shares trading at £7.06 per share. Had he done nothing, his patience as a buy-and-hold investor would not have been rewarded and he would have realised a loss of 22%. So much for the saying, ‘Time is your friend when losing’.


pages: 401 words: 112,784

Hard Times: The Divisive Toll of the Economic Slump by Tom Clark, Anthony Heath

Affordable Care Act / Obamacare, Alan Greenspan, British Empire, business cycle, Carmen Reinhart, classic study, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, deindustrialization, Etonian, eurozone crisis, falling living standards, full employment, Gini coefficient, Greenspan put, growth hacking, hedonic treadmill, hiring and firing, income inequality, interest rate swap, invisible hand, It's morning again in America, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, low interest rates, low skilled workers, MITM: man-in-the-middle, mortgage debt, new economy, Northern Rock, obamacare, oil shock, plutocrats, price stability, quantitative easing, Right to Buy, Ronald Reagan, science of happiness, statistical model, The Wealth of Nations by Adam Smith, unconventional monetary instruments, War on Poverty, We are the 99%, women in the workforce, working poor

(i) Cable, Vince (i) Cameron, David (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) Campaniello, Giuseppe (i) Canada (i) ‘capability approach’ (i) capitalism (i), (ii), (iii) career ladder (i), (ii) Carney, Mark (i) casualisation (i), (ii), (iii) Census Bureau (i), (ii), (iii) Chamberlain, Neville (i) charities (i), (ii) child poverty (i), (ii) children (i), (ii), (iii), (iv), (v), (vi) Children's Society (i) Christoulas, Dimitris (i) church attendance (i), (ii), (iii) Churchill, Winston (i) cigarette sales (i) citizenship career (i) Citizenship Survey of England and Wales (i), (ii), (iii), (iv) The Civic Culture (Almond and Verba) (i) civic infrastructure (i), (ii), (iii), (iv), (v), (vi), (vii) class divide (i), (ii), (iii), (iv), (v), (vi), (vii) class rigidity (i), (ii) Clegg, Nick (i) Clinton, Bill (i), (ii) coalition government (UK) (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Coming Up for Air (Orwell) (i) community life long shadow of recession (i), (ii), (iii) Marienthal (i) post-recession agenda (i), (ii), (iii), (iv), (v) public policy (i) social networks (i), (ii), (iii), (iv), (v), (vi) community work (i) Congressional Budget Office (i) construction work (i) contract work (i), (ii), (iii), (iv), (v), (vi) council housing (i), (ii) CPS see Current Population Survey Credit-Anstalt (i) credit crunch (i), (ii), (iii), (iv) crime rates (i), (ii), (iii) Current Population Survey (CPS) (i), (ii) Dahl, Roald (i) death rates (i), (ii) debt austerity (i) credit crunch (i) Great Recession and Depression (i) human unhappiness (i), (ii) long shadow of recession (i), (ii), (iii), (iv) post-recession agenda (i) de Gaulle, Charles (i) democratic life (i) dependency culture (i), (ii), (iii) Depression (economic) see Great Depression depression (human) (i), (ii), (iii), (iv), (v) deprivation index (i) De Quincey, Thomas (i) disability (i), (ii) Disability Living Allowance (DLA) (i) disposable income (i), (ii), (iii), (iv), (v) divorce rate (i), (ii), (iii) domestic violence (i) Dorling, Danny (i) dropouts (i), (ii), (iii), (iv), (v), (vi) Duchenne smiles (i) Duncan Smith, Iain (i) Durkheim, Emile (i) economic growth economic gap (i) growth and national income (i), (ii) post-recession agenda (i), (ii) public policy (i) social security (i) UK (i), (ii), (iii) wages (i) economic insecurity see insecurity Economic Journal (i) education economic insecurity (i) job insecurity (i) marriage rates (i) social mobility (i), (ii), (iii) unemployment (i), (ii), (iii) elasticity of intergenerational income (i), (ii) Elder, Glen (i) Elder, James (i) elderly population (i), (ii), (iii) Emanuel, Rahm (i) Employee Benefits Research Institute (i) employment protection (i), (ii), (iii), (iv), (v), (vi) employment rates (i), (ii) Employment White Paper (1944) (i) Eton College (i) Eurobarometer (i) eurozone (i), (ii), (iii), (iv) expansionary fiscal contraction (i) expectations (i), (ii), (iii), (iv) faith (i) Faith Matters (i), (ii) family class divide (i) human unhappiness (i), (ii), (iii) post-recession agenda (i), (ii) public policy (i) relative financial standing (i), (ii) social networks (i), (ii) female employment (i), (ii), (iii), (iv), (v) Fingleton, Eamonn (i) Fitzgerald, F.

The slump's poison had seeped out of silent factories, and ended up somewhere under the skin. We know all of this – and much more about daily life in this one tiny Austrian town in the 1930s – because pioneering young sociologists went there to find out what happens when everyone is thrown out of work, as virtually everyone had been when Marienthal's flax mill fell victim to the credit crunch of 1929.1 Eighty years later, a true economic hurricane again engulfed the rich world, for the first time since the 1930s. In the UK at least, the statistics confirm that national income took a bigger cumulative hit than during the Great Depression itself. You might imagine that there would be vast social consequences, but – thanks to the burgeoning of data and computers to crunch it – there is no need to rely on the imagination, or indeed on anecdotes from one village in the Austrian hills.

In his 2007 Budget speech, Chancellor Gordon Brown could boast that Britain was enjoying ‘the longest period of economic stability and sustained economic growth in our country's history’, just before he moved unchallenged into No. 10 Downing Street.1 The long expansion in the US economy had been briefly interrupted by 9/11, but felt just as assured. Few outside the financial sector discerned the first whispers of a credit crunch during that notably wet English summer,2 but then September brought something unseen since 1866 – a run on a British bank. It was not yet obvious that the queues of savers that formed outside branches of the smallish, provincial Northern Rock represented a threat to the financial universe as we knew it.


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

“The Real Output Losses Associated with Modern Banking Crises.” Journal of Money, Credit, and Banking 37 (2005): 977-99. Bruner, Robert F., and Sean D. Carr. The Panic of 1907: Lessons Learned from the Market’s Perfect Storm. Hoboken, N.J.: John Wiley and Sons, 2007. Brunnermeier, Markus K. “Symposium: Early Stages of the Credit Crunch: Deciphering the Liquidity and Credit Crunch 2007-2008.” Journal of Economic Perspectives 23 (2009): 77-100. Brunnermeier, Markus K., Stefan Nagel, and Lasse H. Pedersen. “Carry Trades and Currency Crashes.” National Bureau of Economic Research Working Paper no. 14473, November 2008. Online at http://www.nber.org/papers/w14473.

In the pages that follow, we’ll move between past and present, revealing how the foregoing questions were asked and answered in the wake of previous crises. Along the way we’ll explain several intimidating and often misunderstood concepts in economics: moral hazard, leverage, bank run, regulatory arbitrage, current account deficit, securitization, deflation, credit derivative, credit crunch, and liquidity trap, to name a few. We hope our explanations will prove useful not only to financial professionals on Wall Street and Main Street but also to corporate executives at home and abroad; to undergraduate and graduate students in business, economics, and finance; to policy makers and policy wonks in many countries; and most numerous of all, to ordinary investors around the world who now know that they ignore the intricacies of the international financial order at their peril.

As homeowners defaulted on their mortgages, the value of the securities derived from those loans collapsed, and the bust began. Eventually the losses suffered by highly leveraged financial institutions forced them to hunker down and limit their exposure to risk. As happens in every bust, the banks overcompensated: they trimmed their sails, curtailed lending, and thereby triggered an economy-wide liquidity and credit crunch. Individuals and firms could no longer “roll over,” or refinance, their existing debt, much less spend money on goods and services, and the economy began to contract. What started as a financial crisis spilled over into the real economy, causing plenty of collateral damage. That’s the recent crisis in a nutshell, but it could be the story of almost any financial crisis.


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

Allowing weak or insolvent banks to continue operating—and especially supporting them with loans or loan guarantees—is costly and inefficient.13 When large banks and even an entire banking system are in trouble, politicians and supervisors fear that strict enforcement could cause a credit crunch and a recession.14 They believe that the time is not ripe to resolve the problems. Instead they allow insolvent or highly distressed banks to continue operating, and, if necessary, they provide bailouts.15 Research on banking crises, however, has shown that failing to deal with banking problems early and forcefully often results in more serious crises and in more severe credit crunches and recessions later.16 Kicking the can down the road can be very expensive. Sometimes the concern is not just about the distress or hidden insolvency of individual banks.

Regarding the contraction in repo lending, Krishnamurthy et al. (2012) show that lenders’ concerns about the value of the collateral could be traced to the private-sector issuers, in particular some key dealers such as Bear Stearns and Lehman Brothers. Krishnamurthy et al. (2012, 6) conclude that, in contrast to Gorton’s (2010) interpretation, the run on the repo markets “looks less like the analogue of a traditional bank run of depositors and more like a credit crunch in which dealers acted defensively given their own capital and liquidity problems, raising credit terms to their borrowers.” Credit crunches are actually due to the effect of debt overhang discussed in Chapter 3, which leads distressed lenders to avoid making loans that they would have made had they been less distressed. 55. As discussed by Skeel and Jackson (2012), rules from 1994 and their expansion in 2005 exempt repos and derivatives from automatic stays in bankruptcy and give them special preference.

The unprecedented decline in output in 2009 and the resulting loss of output have been valued in the trillions of dollars.19 The crisis has caused significant suffering for many.20 In light of these effects, warnings that greater financial stability would come at the expense of growth sound hollow. Warnings that bank lending would suffer also sound hollow. In 2008 and 2009, banks that were vulnerable because they had too much debt cut back sharply on their lending. The severe credit crunch was caused by banks’ having too much debt hanging over them. Why would restrictions on bank borrowing have any effect on bank lending at all? One argument was given in 2010 by the British Bankers’ Association, which claimed that new regulations would require U.K. banks to “hold an extra £600 billion of capital that might otherwise have been deployed as loans to businesses or households.”21 To anyone who does not know what the regulation is about, this argument may look plausible.


pages: 782 words: 187,875

Big Debt Crises by Ray Dalio

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, break the buck, Bretton Woods, British Empire, business cycle, buy the rumour, sell the news, capital controls, central bank independence, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, declining real wages, equity risk premium, European colonialism, fiat currency, financial engineering, financial innovation, foreign exchange controls, German hyperinflation, global macro, housing crisis, implied volatility, intangible asset, it's over 9,000, junk bonds, Kickstarter, land bank, large denomination, low interest rates, manufacturing employment, margin call, market bubble, market fundamentalism, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Northern Rock, Ponzi scheme, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, refrigerator car, reserve currency, risk free rate, Savings and loan crisis, short selling, short squeeze, sovereign wealth fund, subprime mortgage crisis, too big to fail, transaction costs, universal basic income, uptick rule, value at risk, yield curve

To help alleviate the situation and build confidence, a number of major banks proposed joining forces and creating a fund that would aim to raise $75-100 billion for buying distressed subprime mortgage securities. Like other observers, we viewed it as a natural response to the credit crunch that would help to alleviate the risk of contagion. However, by the end of the year, efforts to establish this fund had been abandoned, as the collaborating banks decided that it was “not needed at this time.”15 Meanwhile, despite optimism at home, the credit crunch spread from the US to Europe through two main mechanisms. The first was that some European banks (most notably the British bank Northern Rock) had come to rely on money markets for short-term wholesale funding.

“The Outlook, Policy Choices and Our Mandate” Remarks at the Society of American Business Editors and Writers Fall Conference, City University of New York, Graduate School of Journalism. New York City, October 1, 2010. https://www.newyorkfed.org/newsevents/speeches/2010/dud101001. Elliott, Larry and Jill Treanor. “The Day the Credit Crunch Began, Ten Years On: ‘The World Changed,’” The Guardian, August 3, 2017. https://www.theguardian.com/business/2017/aug/02/day-credit-crunch-began- 10-years-on-world-changed. Ellis, David and Ben Rooney. “Banks to Abandon ‘Super-SIV’ Fund,” CNNMoney.com, December 21, 2007. https://money.cnn.com/2007/12/21/news/companies/super_siv/index.htm?postversion=2007122116.

., it is appropriated through the budget process) and some from the central banks (by “printing”). Governments inevitably do both, though in varying degrees. In addition to providing money to some essential banks, governments also typically provide money to some nonbank entities they consider essential. Next, they must ease the credit crunch and stimulate the overall economy. Since the government is likely having trouble raising funds through taxation and borrowing, central banks are forced to choose between “printing” still more money to buy their governments’ debts or allowing their governments and their private sector to compete for the limited supply of money, which will only tighten money further.


pages: 305 words: 69,216

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

Alan Greenspan, Andrei Shleifer, banking crisis, Bear Stearns, Bernie Madoff, business cycle, collateralized debt obligation, collective bargaining, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Glass-Steagall Act, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, low interest rates, market bubble, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, oil shock, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, savings glut, shareholder value, short selling, statistical model, subprime mortgage crisis, too big to fail, transaction costs, very high income

The banks' uncertainty about the value of their mortgage-related assets and swap insurance and the magnitude of their swap liabilities curtailed — indeed, until the government stepped in, froze— lending. That was the "credit crunch." It caused both an immediate drop in economic activity and, in reaction to that drop and in anticipation of a further drop in the near future, a precipitous decline in the stock market. It started the dangerous spiral that we're in. Ordinarily one would expect a credit crunch to be self-correcting. A shortage of capital for lending, due to the shrinkage of the banks' equity cushion, would attract new capital to banking, to rebuild the cushion.

At least until the U.S. dollar ceases to be the world's principal reserve currency (a currency held by foreign banks as well as by the issuing country's own banks, and used as a major medium for international transactions), the federal government has almost unlimited capital because of its taxing, borrowing, and money-creating powers, and it is not constrained by having to make a profit or even cover its costs to survive. Government officials thought at first that the credit crunch was the result of a kind of panic —that the banks were scared to lend because they didn't know how thick their equity cushion was. If so, then by buying the mortgage-backed securities from the banks the government would dispel the panic and unfreeze lending. It would need to hold the securities that it had bought only until their value became clear; it would then sell them and recover the purchase price.

Other fortuities were a lame-duck Congress and a lame-duck President who seemed to lack interest or competence in handling economic issues and to prefer reminiscence, retirement planning, legacypolishing, and foreign travel to directing, and explaining to the public, the government's response to the biggest economic crisis in three quarters of a century. Still other fortuities were the indecisive, improvised, and inarticulate (though, eventually, aggressive) response to the crisis by government officials; a sudden collapse of much of the automobile industry as a delayed consequence of a surge in gasoline prices exacerbated by the credit crunch (two thirds of all cars are bought on credit); and the deepening of the economic crisis during a Christmas shopping season already foreshortened by a late Thanksgiving (November 27). Desperate to attract Christmas shoppers and avoid an inventory pileup, retailers offered unprecedented discounts.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

The developed world built an economic model on debt; consumers borrowed to finance their lifestyles, companies borrowed to enhance their returns, financial institutions borrowed more money to play the asset markets, countries borrowed money to tide economies over recessions. It may well be that the credit crunch of 2007 – 08 showed that this model had been tested to destruction. But what will replace it? RUNNING ROUND IN CIRCLES The Buddhists use a wheel of life to symbolize the cycle of life, death and rebirth. Religious scholars say that humans see everything from their own frame of reference, from their own point in the circle.

Some countries were forced to turn to the IMF for assistance – a humiliation summed up in a picture of President Suharto of Indonesia signing a loan agreement in 1998, under the headmasterly eye of IMF officials. It was a determination to avoid a repeat of those events that led Asian nations to pursue their export-led policies in the 2000s; one of the factors that led to the credit crunch. Iceland’s was an even more incredible story. A country of just 300,000 people on a remote island in the North Atlantic, best known for its fishing grounds and volcanoes, suddenly became a global financial power house. The carry trade led to an influx of capital in the 2000s; a strong currency allowed its entrepreneurs to go on a shopping spree for European businesses (including the West Ham football team and Hamleys toyshop, London’s equivalent of FAO Schwarz in New York).

The Europeans sought to escape this problem by clubbing together in a single currency, but eventually the strains had to show. 7 Blowing Bubbles ‘Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.’ George Soros, hedge fund manager Where did all the money go? My father-in-law asked that question in the aftermath of the credit crunch of 2007 and 2008, when house prices, share prices and corporate bond prices all tumbled. It seemed a reasonable point. If all the assets in the world were worth, say, $3 trillion one year and $2 trillion the next, what happened to that missing trillion? To explain the answer, we have to turn to the career of Bernie Madoff, a convicted fraudster.


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

The LSE backed down and took the money. 84 When Genius Failed: The Rise and Fall of Long-Term Capital Management, Random House Trade Paperbacks, 2000. 85 Dogs and Demons: The Fall of Modern Japan, Farrar, Straus & Giroux and Penguin Books, 2001. 86 ‘Letter from Chicago: After the Blow-up’, 11 January 2010. 87 In Going Off the Rails: Global Capital and the Crisis of Legitimacy, John Wiley, 2003, I argued that Federal Reserve chairman Alan Greenspan’s asymmetric and morally hazardous approach to monetary policymaking, which involved the repeated extension of a safety net to markets, was undermining capitalism’s immune system; the use of highly complex financial instruments meant that central banks and bank supervisors were over-dependent on experts in private banks to monitor the plumbing of the system and that supervision had been semi-privatised by default; financial institutions’ risk management was fundamentally flawed; financial innovation had failed to come up with any way of hedging against liquidity risk in banking; and the system’s pro-cyclicality was being exacerbated by the Basel capital adequacy regime. The book explained that the cycle would end with a credit crunch and system-wide deleveraging, creating severe deflationary pressure. In my columns at the FT before the credit crunch of 2007, I elaborated these arguments while highlighting excessive leverage in the system, the decline in bank lending standards and the risks inherent in the fast-growing shadow banking system. I did not, of course, accurately predict the timing of the bursting of the bubble. 88 ‘Expectations of Returns and Expected Returns’, 2012, http://www.hbs.edu/faculty/ Publication%20Files/expectedreturns20121020_00760bc1-693c-4b4f-b635-ded0e540e78c.pdf 89 Ibid. 90 http://www.economist.com/node/14165405 91 http://www.johnkay.com/2011/10/04/the-map-is-not-the-territory-an-essay-on-thestate-of-economics 92 Speech to the annual conference of the Institute for New Economic Thinking, quoted by Anatole Kaletsky in the International New York Times, April 2014. 93 Stabilizing an Unstable Economy, Yale University Press, 1986. 94 The Time of My Life, Penguin Books, 1990. 95 The trade-to-GDP ratio is the economy’s total trade of goods and services (exports plus imports) divided by GDP. 96 Politics, Book 7, Part 9, http://classics.mit.edu/Aristotle/politics.7.seven.html 97 http://classics.mit.edu/Plato/laws.html 98 Quote from Jerry Z.

This contributes to inequality both inside companies and in society at large, leading to the kinds of discontent and alienation expressed by the Occupy movement across America in 2011 and 2012, along with similar protests around the world. It is possible to put a case that manufacturing can shrink too far if international specialisation causes economies to suffer from a lack of diversity. That was the case with Britain, which was seriously under-diversified when the credit crunch struck in 2007. Back then, it derived more than 9 per cent of GDP from financial services. Yet it is also possible to suffer from a lack of diversification by dint of excessive exposure to manufacturing, as was the case with Germany at the same time. The Germans’ over-reliance on exports to drive economic growth meant that the collapse in world trade after the bankruptcy of Lehman Brothers in 2008 resulted in a greater percentage loss of output than in the US, which was the epicentre of the financial crisis.

What is striking about this progression is that there have been two conspicuous spikes in the level of financial activity and profitability. One was in the Roaring Twenties, which led to a peak contribution by finance to the wider economy of nearly 6 per cent of GDP after the 1929 crash. The other was in the years before the recent credit crunch and subsequent collapse of Lehman Brothers. Even more impressive growth can be seen in the UK, where, over 160 years, financial services outstripped growth in the economy as a whole by 2 percentage points a year, accounting for no less than 9.4 per cent of GDP in 2006. In a less heavily regulated environment, UK bank balance sheets grew much faster than those in the US.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

active measures, Alan Greenspan, AOL-Time Warner, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, Easter island, endogenous growth, eurozone crisis, financial engineering, financial innovation, first-past-the-post, full employment, Glass-Steagall Act, Great Leap Forward, guns versus butter model, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market fundamentalism, Mexican peso crisis / tequila crisis, military-industrial complex, Money creation, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, Suez crisis 1956, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, WikiLeaks, Yom Kippur War

The global economy became hooked on that toxic money, which, by its nature, divided and multiplied unsustainably. So when it turned to ashes, world capitalism crashed. If it were not for the lessons that the central banks had learned from the Crash of 1929, the repercussions would have been unimaginable – as opposed to just frightful. Chronicle of a Crash foretold: Credit Crunch, bailouts and the socialization of nearly everything 2007 – The canaries in the mine April – New Century Financial, a mortgage company that had issued a great number of sub-prime mortgages, goes under, with reverberations throughout the sector. July – Bear Stearns, the respected merchant bank, announces that two of its hedge funds will not be able to pay their investors their dues.

On 6 December, President Bush unveils a plan to help a million American homeowners avoid having their houses confiscated by the banks (i.e. avoid foreclosure, in American parlance). A few days later, the Fed gets together with another five central banks (including the ECB) to extend almost infinite credit to the banks. The aim? To address the Credit Crunch – i.e. the complete halt in inter-bank lending. 2008 – The main event January – The World Bank predicts a global recession, stock markets crash, the Fed drops interest rates to 3.5 per cent, and stock markets rebound in response. Before long, however, MBIA, an insurance company, announces that it has lost $2.3 billion from policies based on bonds containing sub-prime mortgages.

Wall Street’s fifth-largest bank, Bear Stearns (which in 2007 was valued at $20 billion) is wiped out, absorbed by JPMorgan Chase, which pays the paltry sum of $240 million for it, with the taxpayer throwing in a subsidy in the order of $30 billion. April – It is reported that more than 20 per cent of mortgage ‘products’ in Britain are being withdrawn from the market, along with the option of taking out a 100 per cent mortgage. Meanwhile, the IMF estimates the cost of the Credit Crunch to be in excess of $1 trillion. The Bank of England replies with a further interest rate cut to 5 per cent and decides to offer £50 billion to banks burdened with problematic mortgages. A little later, the RBS attempts to stave off bankruptcy by trying to raise £12 billion from its shareholders, while at the same time admitting to having lost almost £6 billion in CDOs and the like.


pages: 348 words: 82,499

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future by Andy Bell

asset allocation, bank run, Bear Stearns, Black Monday: stock market crash in 1987, buy and hold, collapse of Lehman Brothers, credit crunch, currency risk, diversification, diversified portfolio, estate planning, eurozone crisis, fixed income, high net worth, hiring and firing, Isaac Newton, junk bonds, Kickstarter, lateral thinking, low interest rates, money market fund, Northern Rock, passive investing, place-making, quantitative easing, selection bias, short selling, South Sea Bubble, technology bubble, transaction costs, Vanguard fund

One advantage of having at least some exposure to commercial property is the fact that the sector theoretically performs in different cycles to other parts of the economy, thereby dampening risk in your overall portfolio. Commercial property funds are generally considered less risky than equity funds. That said, commercial property funds performed terribly, along with virtually every other class, through the credit crunch, proving the theorists wrong when they fell around 40 per cent in around 15 months between 2007 and 2008. Asset values are yet to return to pre-2007 levels. Analysts’ views are split as to whether these lower valuations reflect a buying opportunity or a long-term negative trend as banks slowly unwind their debt mountains by drip-feeding commercial property back into the market.

The UK fared worse than most in that crash, with the FT30, then the leading index in this country, falling 73 per cent top to bottom. Since then we have lived through 1987’s Black Monday, 1992’s Black Wednesday, 1997’s Asian Crisis, 1998’s Russian Crisis, 2000’s dot.com bubble, the 9/11 market falls and the 2002 downturn, among others. Then, of course, there was the credit crunch of 2008, kicked off by the collapse of Lehman Brothers, which triggered the global financial crisis that developed economies are still struggling to extricate themselves from to this day. And it is fairly certain there will be more along in the future. But don’t let that put you off. Easy to say, you might think, but with all that bad news, why would anyone want to invest in equities?

These companies are the giants of the UK economy, dominating the stockmarket – their combined share value representing more than four-fifths of the entire value of all the quoted shares in the UK. The FTSE 100 was established in 1984, with a base price of 1,000. It peaked at 6,950 on the penultimate trading day of the last millennium, 30 December 1999. The post-credit crunch gloom took it to below 3,500 in March 2009. It is worth remembering that all the FTSE indices reflect only the value of the companies’ shares and not the income generated through the payment of dividends. So if, for example, the FTSE 100 stayed at 5,000 for a year, that does not mean investors would have made nothing at all over that period, as they would have received the dividends paid.


pages: 207 words: 86,639

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

Abraham Maslow, Alan Greenspan, Alvin Toffler, Apollo 11, Asian financial crisis, back-to-the-land, banking crisis, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, carbon tax, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Crossrail, delayed gratification, deskilling, digital divide, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, Glass-Steagall Act, green new deal, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Elkington, junk bonds, Kickstarter, land bank, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, Money creation, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pension time bomb, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, systems thinking, the long tail, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

What they published in July 2008 was known as the ‘Green New Deal’, launched 75 years after President Roosevelt launched a New Deal to rescue the USA from financial crisis.5 The Green New Deal urged governments to embrace a comprehensive, selfreinforcing programme including to: • • • • • • • invest in a major programme of renewable energy and wider environmental transformation that would create thousands of new green collar jobs; build a new alliance between environmentalists, industry, agriculture and unions to put the interests of the real economy ahead of those of footloose finance; set up an Oil Legacy Fund, paid for by a windfall tax on the profits of oil and gas companies, as part of a wide-ranging package of financial innovations and incentives to assemble the tens of billions of pounds that need to be spent, including local authority green bonds, green gilts and green family savings bonds; make sure fossil fuel prices include the cost to the environment, and are high enough to tackle climate change by creating economic incentives to drive efficiency and bring alternative fuels to market; cut corporate tax evasion by clamping down on tax havens and corporate financial reporting; re-regulate the domestic financial system, inspired by reforms implemented in the 1930s, including cutting interest and much tighter regulation of the wider financial environment; break up the discredited financial institutions that have needed so much public money to prop them up in the latest credit crunch. Taken together, the Green New Deal urged a programme of re-regulating finance and taxation plus a huge transformational programme aimed at substantially reducing the use of fossil fuels and, in the process, tackling the unemployment and decline in demand caused by the credit crunch. It involved policies and new funding mechanisms that will reduce emissions and allow us to cope better with the coming energy shortages caused by peak oil.

Limit the amount people can borrow It is increasingly clear that using mortgages as the main way we inject money into the financial system has, at the very least, put an incredible strain on house prices. These have certainly risen because of a shortage of homes in places where people want to live and the influx of wealthy people into the UK – especially London – but mainly because of an inflationary increase in the amount of money that people can borrow for a mortgage. Before the credit crunch, this was anything up to six times their salary. It is no coincidence that the country that introduced ‘grandparent mortgages’, paid off by the generation after next (Japan), also suffers from the highest property prices in the world, and some people in Tokyo are reduced to living in what is little more than a tube.

Evidence obtained from the insider trader Ivan Boesky led to Wall Street’s biggest criminal prosecution ever (at least until the Bernard Madoff affair in 2008), after which 98 indictments of fraud and racketeering were brought against Milkin. He was sentenced to ten years in jail and agreed to pay $600 million in fines. Without his leadership, the junk bonds faltered. It is widely believed that the temporary decline of the junk bond market led to a credit crunch that contributed to the 1990 recession. Milken was released from prison early because he had been given only 18 months to live, and now runs his own economic think tank. But one of the legacies of those years has been the defensive loading of companies WHY ARE MALAWI VILLAGERS PAYING THE MORTGAGES OF STOCKBROKERS?


pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

I have tried to combine a history of ideas, a narrative of the financial crisis, and a call to arms. It is my contention that you cannot comprehend recent events without taking into account the intellectual and historical context in which they unfolded. For those who want one, the first chapter and last third of the book contain a reasonably comprehensive account of the credit crunch of 2007–2009. But unlike other books on the subject, this one doesn’t focus on the firms and characters involved: my aim is to explore the underlying economics of the crisis and to explain how the rational pursuit of self-interest, which is the basis of free market economics, created and prolonged it.

The third-generation rational expectations models can be useful for exploring the old question of how central banks should set interest rates to achieve a low and stable rate of inflation, but they have virtually nothing to say about what policymakers should do to maintain financial stability. As in the original Lucas models, there is no role in them for stock market bubbles, credit crunches, or a drying up of liquidity. Indeed, recognizable financial markets don’t really exist. The illusions of harmony, stability, and predictability are maintained, and Hayek’s information processing machine does its job perfectly: at all times, prices reflect economic fundamentals and send the right signals to economic decision-makers.

But if they do this, businesses will be deprived of credit; the economic downturn and the problem of adverse selection will only get more acute. In extreme circumstances, the entire lending market might freeze up. In solving one set of information problems, banks create others, of which the possibility of a credit crunch is but one example. Since banks don’t publish a list of all the loans they have made, the typical bank customer doesn’t really know if his bank is sound. If his deposits aren’t guaranteed, he has every incentive to withdraw his savings at the first sign of trouble. Since each depositor is in the same position, the possibility of a “run” on the bank is very real.


Norman Foster: A Life in Architecture by Deyan Sudjic

air gap, Alan Greenspan, Boeing 747, Buckminster Fuller, carbon footprint, credit crunch, cuban missile crisis, Frank Gehry, gentrification, Great Leap Forward, interchangeable parts, James Dyson, Jane Jacobs, low cost airline, Masdar, megacity, megastructure, Murano, Venice glass, Norman Mailer, Pearl River Delta, Peter Eisenman, sustainable-tourism, The Death and Life of Great American Cities, three-masted sailing ship, University of East Anglia, urban decay, urban renewal, white flight, young professional

When the new banking hall opened for business, a specially produced gold-wrapped chocolate coin bearing the bank’s image was distributed to every member of staff as a good luck talisman. HSBC, however, is not simply a local institution; it has become one of the largest banks in the world, strong enough to withstand even the credit crunch of 2008 that saw its British competitors forced to seek government protection. This ambiguity partly accounts for the difficulty that Foster experienced in deciding what the most appropriate colour for the exterior was. Should the expressed steel structure, which ripples across the façade of the building like a prizefighter’s pectorals, be finished in red – in China, a colour traditionally associated with the emperor, and with good fortune – or in a more neutral, ‘international’ colour?

At the time it seemed like a fantastic, impossible speculation: the Petronas building in Kuala Lumpur was the world’s tallest tower under construction at the time, and the Japanese tower would have been a full 300 metres taller. Since then, things have changed enormously. When the overheated boom in Dubai was cut short by the credit crunch, the Burj al Arab tower actually finished thirty metres taller than Foster had proposed for the project. What we do not know yet is whether the Burj tower will come to be seen as a freakish one-off, left beached by the tide, as anomalous as the indoor ski slopes that Dubai built in its shopping malls, or whether it will serve as a pointer to the scale of a new generation of towers.

Interviewed during the course of the exhibition, Chigirinsky told the Moscow News he had chosen to work with Foster because ‘a new kind of consumer is emerging in Russia. People here want to know the world’s state of the art, and go one better. In the past, tastes were kitschy, in the “I want more gilt on that ceiling” style. But over the years, people not only got richer, their taste also evolved.’ By the end of 2008, however, the credit crunch put a stop to any speculative project that depended on bank finance. Chigirinsky’s plans to build with Foster were no exception, and came crashing to a sickening stop when the Georgian pulled out of the $3 billion Crystal City project, unable to raise the capital. The New Holland project had also come to a standstill.


pages: 379 words: 114,807

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

activist lawyer, Asian financial crisis, banking crisis, big-box store, Black Monday: stock market crash in 1987, blood diamond, British Empire, Buy land – they’re not making it any more, Cape to Cairo, carbon credits, carbon footprint, clean water, company town, corporate raider, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, Garrett Hardin, Global Witness, index fund, Jeff Bezos, Kickstarter, Kondratiev cycle, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, megaproject, Mohammed Bouazizi, Nelson Mandela, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, Tragedy of the Commons, undersea cable, urban planning, urban sprawl, vertical integration, WikiLeaks

Perhaps I had misunderstood the hidden hand of the market, and my own hidden altruism? I hoped to find out more in the displays about the illustrious history of CBOT. But, strange to say, the timeline stopped just before some of the biggest events in this place’s history—the 2008 food price spike, the subsequent crash following the credit crunch, and the new surge in prices that was roaring as I toured the exchange in late 2010. I left confused and decided to go for a McDonald’s. I figured that, even more than the bowl of corn flakes, a Big Mac was now the ultimate modern consumer expression of the trading I had just watched. But, outside the exchange, my eye was caught by Harper’s magazine on a newsstand.

The distinguished Indian economist Jayati Ghosh said later: “From about late 2006, a lot of financial firms realized that there was really no more profit to be made in the US housing market.” They switched to commodities and began pushing up prices “so that what was a trickle in late 2006 becomes a flood from early 2007.” As the prices of shares, real estate, and other former wealth generators fell during the credit crunch of 2008, the prices of commodities index funds continued to rise, as investors poured in. This accelerated as governments in the United States and Europe tried to save the world banking system by pumping in new money—quantitative easing. Much of this new money, we now know, went straight into commodities.

Abdul Taib Mahmud, who is old enough to remember the Japanese landing in Borneo during the Second World War, was undaunted by fears of a new land invasion. He returned with a promise of a billion dollars from Perigon Advisory, an investment fund based in Bahrain. For a while in 2009, Gulf investors showed signs of getting cold feet, as the credit crunch created the debt crisis that almost engulfed the region’s most visible totem of wealth, the desert megacity of Dubai. Some deals were quietly put on hold or dropped. Abu Dhabi’s Al Qudra Holding had promised in 2008 to acquire 1 million acres in a host of countries from Australia to Eritrea, Croatia to Thailand, and Ukraine to Pakistan.


pages: 333 words: 76,990

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

Alan Greenspan, asset allocation, banking crisis, banks create money, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, book value, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, data science, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, equity risk premium, Fall of the Berlin Wall, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, forward guidance, Francis Fukuyama: the end of history, general purpose technology, gentrification, geopolitical risk, George Akerlof, Glass-Steagall Act, household responsibility system, housing crisis, index fund, invention of the printing press, inverted yield curve, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kickstarter, Kondratiev cycle, liberal capitalism, light touch regulation, liquidity trap, Live Aid, low interest rates, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shock, open economy, Phillips curve, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Shenzhen special economic zone , Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, tail risk, Tax Reform Act of 1986, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

The annualised real total return to US equities (as a proxy) between 1956 and 2000 was 7%. Conditions, and forward expectations, began to change from the start of this century in the aftermath of the collapse in equity markets following the end of the technology bubble. In this post-bubble world, equity valuations fell from unrealistically high levels. The onset of the credit crunch, and the deleveraging of balance sheets in many developed economies that followed this, have punctured the confidence that once surrounded equities, and the pre-1960s scepticism about equity returns came back. Dividend yields once again rose above bond yields, and both historical and expected future returns have collapsed.

This resulted in two errors: first, investors capitalised future earnings at the then (very high) nominal rate rather than the real rate and, second, they failed to take account of the gains that were generated by depreciating the real value of nominal liabilities.4 Certainly, sharp rises in inflation in the 1970s had contributed to the collapse of valuations in both bond and equity markets. This inflationary era, which had been so damaging to financial markets, came to a close partly as a result of the so-called Volker credit crunch (a period known for the recession caused by the Fed tightening cycle that started in 1977), which took US Fed funds rates (policy rates) from about 10% to close to 20%. From that point, inflation started to fall around the world and, coupled with a vigorous recovery in economic activity from a deep recession, confidence – and asset valuations – started to rise.

Commodity prices also collapsed, with Brent prices more than halving in value from nearly $100 per barrel in summer 2014 to $46 in January 2016. Three Waves of the Financial Crisis These waves can be described with reference to the causes of stress as they erupted in the different regions. Wave one in the US started with the housing market collapse and spread into a broader credit crunch, ending with Lehman Brothers filing for bankruptcy and the start of the Troubled Asset Relief Program (TARP) and quantitative easing (QE).4 Wave two in Europe began with the exposure of banks to leveraged losses in the US and spread to a sovereign crisis given the lack of a debt-sharing mechanism across the euro area.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Glass-Steagall Act, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

But Dugan needed the cooperation of the Fed, as well as the Federal Deposit Insurance Corporation and the Office of Thrift Supervision (OTS), which proved slow going. His fellow regulators—in particular the OTS, which supervised highfliers such as Countrywide and WaMu—worried that if they shut down or even narrowed the loan channel, they could precipitate a credit crunch. And Greenspan was philosophically, perhaps reflexively, opposed to restricting credit. By the end of 2005, Dugan had coaxed the group into issuing tentative rules, but these were subject to a comment period, and the mortgage industry was hotly opposed. For one, they said, if federally chartered banks were subject to tighter guidelines, applicants would seek out state banks and nonbanks.

In 1998, when the hedge fund Long-Term Capital Management imploded, seeming to imperil Wall Street, Fuld valiantly went on the road to keep Lehman’s creditors from withdrawing their lines of credit; his efforts saved the firm. He had the daring of a gambler who believes, deep down, that he will always be able to play the last card—that if down markets or a credit crunch ever swamped his firm, he would find a way to steer it home. Fuld had attended the University of Colorado, and his middling education left him deeply insecure among polished Ivy League investment bankers. In other respects, he was a typical Wall Street CEO. His trader’s gruffness, his guttural barking, had been moneyed over.

Paulson, as if flirting with the apocalypse, said, “By tomorrow, it may be over.” They agreed to meet that evening. Then, Paulson called the White House. The money market rout was continuing—by Thursday, investors had withdrawn $200 billion, and Putnam Prime, another brand-name fund that had been overwhelmed by redemptions, was forced to close.11 This moved the credit crunch from Wall Street to Main Street. As investors fled, funds had to disgorge themselves of assets, and bread-and-butter corporations lost a prime source of credit. Rates on commercial paper soared, and many companies couldn’t borrow at any price. Blue-chip AT&T, which normally funded itself with thirty-day paper, was reduced to living on the shoestring of overnight credit.


pages: 632 words: 159,454

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

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, foreign exchange controls, Francisco Pizarro, full employment, German hyperinflation, Glass-Steagall Act, guns versus butter model, hiring and firing, income inequality, invisible hand, Isaac Newton, it's over 9,000, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, land bank, liberal capitalism, low interest rates, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, subprime mortgage crisis, Suez canal 1869, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

Despite its obvious bias, the account is interesting because it was published in April 2008, five months before the dramatic fall of Lehman Brothers in September of that year, which was the moment when the crisis took on truly global dimensions. ‘The trigger for the credit crunch’, wrote Blackburn, ‘was rising defaults among US holders of subprime mortgages in the last quarter of 2006 and early 2007.’ This led to the failure of ‘several large mortgage brokers in February–March 2007’. The analysis shows the impact which the credit crunch had on a frightened world at the end of 2007. ‘The subprime debacle and the drying up of credit, themselves the consequences of deteriorating conditions, were hastening the slide to recession in the US and the global economy.’ The ‘credit crunch’ itself came as ‘the climax of a long period of gravity-defying global imbalances and asset bubbles’.

Gold would reach an all-time high in January 1980 of US$850 an ounce, a level which would not be attained again for nearly twenty-five years.49 The Fed’s discount interest rate rose from 13.5 per cent to a new peak of 14.5 per cent in October 1979, and commercial banks like Chase Manhattan increased their rates in response. Controlling the money supply would prove challenging for the Federal Reserve. One considerable danger continued to be ‘the threat of an outright credit crunch’, in the words of Time magazine in its October 1979 piece. Such an eventuality would occur if the ‘Federal Reserve’s tightening up of money, and the resulting rise in interest rates, reach such levels that borrowers found it impossible to get money on almost any terms’.50 The situation outlined in this scenario was classical in its character.

It was widely accepted that tight money could strangle business investment, and that the most effective means of achieving this outcome was through an overly aggressive increase in interest rates. Time recalled that such a ‘squeeze [had] occurred in the summer and fall of 1974, and almost immediately forced businesses to lay off upwards of 2 million workers’. With admirable realism, the article proposed that ‘something like a credit crunch may be the only thing that can break the nation’s addiction to easy money’. Volcker, Time concluded, ‘had brought monetary policymaking fully into the fight to hold prices down’. The President had insisted at a press conference towards the end of October 1979 that ‘whatever it takes to control inflation, that’s what I’ll do’.


pages: 444 words: 151,136

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

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

The stability witnessed since World War II in the U.S. economy may ironically be a cause of economic instability, which could be deepened and extended in duration should cultural and political factors align in complete support of socialism. Whenever there has been a recession, rates have been lowered and liquidity injected such that the impact of credit default was diluted. Although this avoided long, deep recessions, it has encouraged greater and greater waves of risk taking. What did the American public know of the credit crunch? Amazingly, a survey of 1,361 homeowners released in August 2008 and conducted by Harris Interactive for Zillow, an Internet-based provider of home valuations derived from the collection of last sale public records and proprietary algorithms, revealed that 62 percent of homeowners thought their home value had increased or remained the same in the last year!

Its growth, periodic overexpansion, and contraction 46 ENDLESS MONEY became the DNA encoding cyclicality to the economic corpus, but the use of silver and gold at the base provided restraint that would reign in moral hazard and provide a safe haven for savers. However, when specie conversion was suspended, it would set the stage for even larger catastrophes, a point that might well be taken when evaluating the Fed’s actions in combating the credit crunch of 2008. The practice of using credit as currency had actually begun in England. Charles I borrowed gold on deposit from merchants at the mint to help finance a civil war. After this gold was returned, merchants sought to avoid the state’s involuntary usage of their wealth by keeping it at goldsmiths instead, who issued receipts for the inventory.

The Fed and the mortgage agencies in this context may be seen as supplementary organs of 120 ENDLESS MONEY government (such as the Supreme Court), which are moving to compliment the axis of dependency and the modern technocratic state. There was a great debate among market observers as the credit crunch became virulent in late 2008 between whether there would be deflation or inflation, assuming away the base case of muddling through for the moment. Those who rooted for the deflationist camp looked to the depression years and saw a consumer heavily laden with debt and a highly leveraged banking system wherein over half of its loans relate to real estate.6 They saw interest rates at generational lows already, with the Fed discount rate near zero by year-end 2008.


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

3D printing, 90 percent rule, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business cycle, business process, butterfly effect, carbon credits, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, different worldview, discounted cash flows, en.wikipedia.org, Fall of the Berlin Wall, fear of failure, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, Glass-Steagall Act, happiness index / gross national happiness, holacracy, job satisfaction, John Perry Barlow, liberation theology, low interest rates, Marshall McLuhan, microcredit, mobile money, Money creation, money: store of value / unit of account / medium of exchange, more computing power than Apollo, new economy, Occupy movement, price stability, reserve currency, Silicon Valley, systems thinking, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

Currently, as infrastructure crumbles in the United States and in many other nations, and the availability of high-quality education and health care plummets, with massively underfunded liabilities, the stark statistics still don’t tell the full story of America’s sons and daughters and, indeed, the entire global family as it grapples with an uncertain future. The situation is particularly dire in Europe: Greece, Spain, Ireland, the United Kingdom, and Italy are in a credit crunch not seen in generations. Even in the countries that were up until recently considered booming, nations like the BRICs—Brazil, Russia, India, and China— development was highly uneven, with entire regions experiencing scarcity and need. Now it would appear that their economic bloom is wilting.10 Practically everywhere one finds many tales of how the highly competitive nature of the conventional money system influences our lives.

THE DASH FOR CASH Beyond the daily monetary mêlée that is playing out on the personal level, some 44 states in the Union are considering bankruptcy,20 and dozens of cities across the nation are faced with inevitable budget shortfalls.21 The river port city of Stockton, California, is the largest U.S. city to lately declare bankruptcy.22 In the meantime, at various levels of officialdom globally, it’s believed that the only way out of the current credit crunch, on the present trajectory, is the forfeiture of assets in the blaze of fire sales. Some 28 states have passed private public partnerships (PPPs) enabling statutes.23 Despite the benign-sounding label, these statutes mean that governments—at whatever level—are selling off existing infrastructure that has already been built and paid for with taxpayers’ money to reduce existing debt, if they are unable to meet current governmental expenses.

It turned out to be a very successful project that led to Uruguay being one of the most advanced countries in that business.”6 Van Arkel and he together designed a currency that would address the critical issue of cash flow facing small and medium-size enterprises when their suppliers extend credit for 30 days while their larger customers may not pay for 90 days. Often there’s a credit crunch, as banks refuse to provide bridge financing or do so subject to very onerous conditions. Furthermore, if the business is a new one, a credit line can be virtually impossible to secure. These problems are endemic in businesses in both developing and developed countries. The solution that emerged is called the Commercial Credit Circle, or C3 for short.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

An Inconvenient Truth, Andrew Wiles, banking crisis, Basel III, behavioural economics, Berlin Wall, Bernie Madoff, Black Swan, Boeing 747, business logic, car-free, carbon footprint, carbon tax, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, disruptive innovation, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, financial engineering, Firefox, food miles, Gerolamo Cardano, global supply chain, Great Leap Forward, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, mass immigration, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, SpaceShipOne, special economic zone, spectrum auction, Steve Jobs, supply-chain management, tacit knowledge, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen, Tyler Cowen: Great Stagnation, Virgin Galactic, web application, X Prize, zero-sum game

If this sounds familiar, it should. Within the first few days of the credit crunch in 2007, long before most people were aware of the scale of the trouble, the economist John Kay was pointing out the similarities between the crunch and the LMX spiral. As in the credit crunch, financial institutions and regulators told themselves that sophisticated new financial tools were diluting risk by spreading it to those best able to cope. As in the credit crunch, historical data suggested that the packaged reinsurance contracts were very safe. And as in the credit crunch, the participants found the true shape of the risk they were taking almost impossible to discern until after things had gone horribly wrong.

Banks will not voluntarily carry thick cushions of capital, so regulators have to force them, and there is a cost to this. Capital is expensive, so higher capital requirements are likely to make loans and insurance more costly. It is possible to have too much of a good thing, even capital. But the credit crunch made it clear that the banks were carrying too little. The second possible safety gate involves the curiously named ‘CoCo’ bonds – short for contingent convertible bonds. CoCos are debt, so under normal circumstances CoCo holders are paid interest and take priority over shareholders just as ordinary bank creditors do.

item_id=00000138 192 ‘When you look at the way the accident happened’: author interview with Philippe Jamet, 24 March 2010. 194 Turned back to concentrate on the Lehman Brothers problem: Andrew Ross Sorkin,Too Big to Fail (London: Allen Lane, 2009), pp. 235–7. 194 ‘Hold on, hold on’: Sorkin, Too Big to Fail, p. 372. 195 ‘We’re a million miles away from that at the moment’: Squam Lake Working Group on Financial Regulation, ‘A new information infrastructure for financial markets’, February 2009, http://www.cfr.org/publication/18568/new_information_infrastructure_for_financial_markets.html; and Andrew Haldane, ‘Rethinking the financial network’, speech given on 28 April 2009 to the Financial Student Association in Amsterdam, http://www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf, and author interview with Andrew Haldane, August 2010. 196 And that man was Tony Lomas: for the account of Lehman’s bankruptcy in Europe, I have relied on the superb account by Jennifer Hughes, ‘Winding up Lehman Brothers’, FT Magazine,8 November 2008, http://www.ft.com/cms/s/2/e4223c20-aad1-11dd-897c-000077b07658.html 198 It had one million derivatives contracts open: Andrew Haldane, ‘The $100 billion question’, speech given at Institute of Regulation & Risk, Hong Kong, 30 March 2010, http://www.bankofengland.co.uk/publications/speeches/2010/speech433.pdf 199 The courts refused: Jane Croft, ‘Definition on Lehman client money sought’, Financial Times, 10 November 2009; and Anousha Sakoui & Jennifer Hughes, ‘Lehman creditors face long delays’, Financial Times, 14 September 2009. 199 It is quite possible that Lehman’s financial indicators: Henny Sender & Jeremy Lemer, ‘“epo 105” accounting in focus’, Financial Times, 12 March 2010, http://www.ft.com/cms/s/0/1be0aca2-2d79-11df-a262-00144feabdc0.html 199 About three years after the bankruptcy process began: Sakoui & Hughes, ‘Lehman creditors’. 200 Dominoes, unlike banks, are supposed to fall over: Andrew Haldane, ‘The $100 billion question’. 201 The job the poor bird had started: BBC News, ‘Sparrow death mars record attempt’, 19 November 2005, http://news.bbc.co.uk/1/hi/world/europe/4450958.stm; and embedded video at http://news.bbc.co.uk/player/nol/newsid_4450000/newsid_4452600/4452646.stm?bw=bb&mp=wm&news=1&bbcws=1 203 The credit crunch made it clear that the banks were carrying too little: ‘Reforming capital requirements for financial institutions’, Squam Lake Working Group Paper, April 2009, http://www.cfr.org/content/publications/attachments/Squam_Lake_Working_ Paper2.pdf 204 Those bonds should be held by private individuals: Lex, ‘CoCo bonds’, Financial Times, 11 November 2009, http://www.ft.com/cms/s/3/d7ae2d12-ced1-11de-8812-00144feabdc0.html; Gillian Tett, ‘A staple diet of CoCos is not the answer to bank failures’, Financial Times, 13 November 2009, http://www.ft.com/cms/s/0/d791f38a-cff4-11de-a36d-00144feabdc0.html; and interview with Raghuram Rajan, July 2010. 205 Worst possible decision is indecision: ‘Improving resolution options for systemically relevant financial institutions’, Squam Lake Working Group Paper, October 2009, http://www.cfr.org/content/publications/attachments/Squam_Lake_Working_Paper7.pdf 206 Bridge bank continues to support the smooth running: Willem Buiter, ‘Zombie solutions: good bank vs. bad bank approaches’, VoxEU, 14 March 2009, http://www.voxeu.org/index.php?


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

Alan Greenspan, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, centralized clearinghouse, Charles Lindbergh, credit crunch, Credit Default Swap, crony capitalism, disintermediation, Dutch auction, fear of failure, fiat currency, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, foreign exchange controls, Fractional reserve banking, German hyperinflation, Glass-Steagall Act, Hyman Minsky, incomplete markets, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, large denomination, liquidity trap, Long Term Capital Management, low interest rates, market microstructure, Money creation, money market fund, moral hazard, Network effects, Northern Rock, oil shock, Paul Samuelson, Phillips curve, plutocrats, price stability, profit maximization, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, Robert Gordon, Robert Solow, Savings and loan crisis, savings glut, seigniorage, special drawing rights, The Great Moderation, the payments system, too big to fail, transaction costs, Tyler Cowen, unorthodox policies, vertical integration, Y2K

If given aggregate (goods) supply schedules are assumed, prices will be bid up, eventually triggering an external drain of specie from the central bank. The central bank, finding itself in danger of imminent default, proceeds to save itself by aggressively contracting credit. The contraction reduces commercial banks’ reserves, forcing them to contract as well, triggering a general credit crunch. FROM VILLAINS TO HEROES: THE ORIGINS OF THE CLASSICAL LENDER OF LAST RESORT If central banks are in fact sources of financial instability, how have they come to be regarded as just the opposite? The explanation resides partly in modern economists’ limited understanding of the workings of competitive currency arrangements, which causes them to assume that such arrangements must necessarily be less stable (because less subject to central control) than monopolistic ones, and partly in their failure to appreciate the origins of the idea that monetary systems require a lender of last resort.

This policy left the thrifts stranded, however—their own rates being fixed at 4 percent (Wojnilower 1980: 286–87). At last, to protect the thrifts, the Fed in 1966 refused to lift bank deposit-rate ceilings again, while simultaneously putting the brakes on monetary expansion. The result was an even more severe bank “credit crunch.” Finally, in August 1966, the Fed reversed its monetary policy again, this time to “rescue” the banks from its own misguided policies. The banking crisis of 1966—the first “financial crisis” (to adopt the conventional, hyperbolic vernacular) in the United States since the Great Depression—was a direct consequence of Regulation Q restrictions combined with erratic Fed monetary policy.

Although it involved practically no government regulation save certain minimum capital requirements, Canada’s system managed to accommodate fluctuating currency needs without difficulty and without any losses to the public. “As surely and regularly as the autumn months come around and the inevitable accompanying demand for additional currency begins to manifest itself,” wrote L. Carroll Root (1894: 322), so “does the currency of the banks automatically respond.” Credit crunches and panics were unknown. As one prominent Canadian banker put it, “The Canadians never know what it is to go through an American money squeeze in the autumn” (Root 1894: 322).6 The stark contrast between the behavior of the currency stock in the United States and its behavior in Canada is shown in Figure 6.1.


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

‘How much are we talking about?’ he asked. ‘It could be 100 million.’ ‘Why didn’t you tell me?’ ‘I really don’t know,’ I replied. ‘But now I feel ashamed. I want to apologise.’ Having opened the floodgates, the questioning began. I was interrogated about risk, volatility, hedging, 2008, liquidity, the credit crunch, Lehman Brothers, Merrill Lynch, other people’s losses, price movements, my previous boss, Bank of America, bonuses, profits, honesty, 2009, management, pressure, smoothing of profit and loss, exhaustion. Towards the end of our 45-minute conversation he asked: ‘Could this be a momentary lapse of reason?’

‘Central banks are put at a constant disadvantage versus the market when it comes to implementing monetary policy,’ I scribbled down on a piece of paper in early 2009. ‘The LIBOR problem has implications as it delays information to policy makers who are supposed to steer LIBOR. This probably led to a very long delay in the rate-setting process after the credit crunch started in 2007,’ I then went on to write as I tried to formulate a research question for my PhD application. There was nothing wrong with the way central bankers saw the market, in theory. LIBOR should reflect the rate at which banks lent to each other, so the idea that the LIBOR–OIS spread was a kind of barometer of fear of bank insolvency was logical.

Moreover, how could they spread without other people knowing about it? To begin to understand why, I believe it is necessary to go back quite far in history – way before ‘Trader A’, ‘Trader B’ or ‘Broker D’ performed their first ever LIBOR trades. CHAPTER 4 THE LIBOR ILLUSION Since the credit crunch began, it has become clearer to all of us that LIBOR, not the Bank of England base rate, is what really governs saving and borrowing rates in the high street. It has always been relied on by the market as a reliable benchmark which is also the most transparent. It is appropriate in this global downturn to ensure the continued robustness of this pillar of our financial architecture.1 These were the words of the British Bankers’ Association (BBA) Chief Executive Angela Knight in a speech given on 18 December 2008.


pages: 840 words: 202,245

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

Abraham Maslow, accounting loophole / creative accounting, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, Bear Stearns, book value, Bretton Woods, business cycle, capital controls, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Bogle, John Meriwether, junk bonds, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, low interest rates, market bubble, Mary Meeker, Michael Milken, minimum wage unemployment, MITM: man-in-the-middle, Money creation, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, shareholder value, short selling, Silicon Valley, Simon Kuznets, tail risk, Tax Reform Act of 1986, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

Miller (Berlin: Springer, 2008), pp. 41–56. 26 THE CRISIS PASSED: Cook and Laroche, Instruments of the Money Market, p. 38. 27 “IT WAS THE BEGINNING OF THE END”: William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Touchstone, 1987), p. 319. 28 EVENTUALLY WRISTON PUBLISHED: Walter B. Wriston, Risk and Other Four-Letter Words (New York: Harper & Row, 1986). 29 “THESE NEW MONEY MARKET INSTRUMENTS”: Kaufman, Of Money and Markets, p. 253. 30 ONLY A CREDIT CRUNCH TRULY SLOWED: Albert Wojnilower, “The Central Role of Credit Crunches in Recent Financial History,” Brookings Papers on Economic Activity, vol. 2, 1980. 31 “I THOUGHT THE OLD REGULATIONS”: Author interview with Albert Wojnilower, July 2004. CHAPTER 2: MILTON FRIEDMAN 1 AFTER HE HAD GAINED WORLDWIDE FAME: Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), Preface, 1982 edition, p. xiv. 2 HIGH UNEMPLOYMENT OF 9 PERCENT: In fact, as we shall see, there was a major error in computing mortgage costs back then.

In 1961, the Federal Reserve was concerned that banks have enough funds to prevent an economic slowdown then under way from getting worse. When interest rates rose in an overheating economy—or were raised by the Fed to forestall inflation—depositors put their money elsewhere because banks could not raise their own rates under Regulation Q. This diversion of funds was known as disintermediation, and the result was a credit crunch as bank lending to businesses would dry up. Wriston realized that the Fed now feared disintermediation and the economy needed him as much as he needed the economy. But not all his competitors were in favor of the negotiable CD. Unlike Wriston, they feared challenging the Federal Reserve and were also concerned with a possible rate war, in which banks would keep raising rates competitively to attract depositors.

There were still restrictions on the rates paid, and the minimum size of a CD was $100,000, but bank credit increased far faster than the economy in these years, lending rising from $30 billion to $200 billion between 1962 and 1965. By the mid-1960s, new negotiable CDs were not adequate to ward off likely disintermediation and resulting credit crunches. Spending on the Vietnam War was pushing the federal budget into deficit at a time when the economy was growing strongly, new social programs were under way, and U.S. business was booming. The negotiable CDs actually contributed to higher inflation and interest rates, a fact that was not well recognized by either policymakers or economists.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, Bear Stearns, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, Glass-Steagall Act, index fund, invisible hand, junk bonds, light touch regulation, margin call, Michael Milken, moral hazard, Nick Leeson, Northern Rock, proprietary trading, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, two and twenty, zero-sum game

For example, Senator Levin, at the Senate Permanent Subcommittee on Investigations hearings into ABACUS-AC1, raised a series of ethical questions, including the duty of care of investment banks to clients, and whether investment banks should sell products in which they do not believe. Much of the financial crisis was not novel It is also worth looking back at previous banking crises to assess how much of the recent crisis is novel, and whether there are ethical implications for investment banks. A number of the areas of concern in the credit crunch were clearly understood to be existing problems from previous crises: • The unreliability of credit ratings, including multi-notch downgrades and allegations of conflicts on interest was a major area of concern in the wake of the Enron and WorldCom credit downgrades and bankruptcies in 2001–2.

., tax raising) its citizens, the ethical position of trading in sovereign debt may have different characteristics than trading in corporate debt. • Strategies involving short-selling are not novel. George Soros was shorting the pound when he famously profited from the UK’s attempt to remain in the European Exchange Rate Mechanism (ERM) in 1992. • The proximate cause of the credit crunch – mis-selling of high-risk mortgages in the US – is reminiscent of other mis-selling problems in the past, such as the IPO of some dotcom stocks and the sale to retail customers of endowment plans in the UK, although the economic damage from the sub-prime crisis was significantly greater than in previous cases. 18 Ethics in Investment Banking The positive impact of investment banking Although investment banking has received much recent criticism, it has also made positive contributions to society both directly and indirectly.

Some investment banks’ high-risk operations, which contributed to causing a recession, also raised questions about the banks’ duties to society at large and their apparent lack of awareness of wider responsibilities. In a letter sent from the learned society, the British Academy, to Queen Elizabeth II in response to her question, “why had nobody noticed that the credit crunch was on its way?” its authors, Professors Tim Besley and Peter Hennessy, describe “a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the [economic] system as a whole”.2 The financial crisis also raised fundamental questions about the creation of complex financial instruments that contributed to market instability.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

"World Economic Forum" Davos, 23andMe, Abraham Maslow, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, Cornelius Vanderbilt, cotton gin, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Easter island, Edward Glaeser, Edward Jenner, electricity market, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, flying shuttle, Flynn Effect, food miles, Ford Model T, Garrett Hardin, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, hedonic treadmill, Herbert Marcuse, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jevons paradox, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, Kickstarter, knowledge worker, Kula ring, Large Hadron Collider, Mark Zuckerberg, Medieval Warm Period, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, ocean acidification, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, plutocrats, Ponzi scheme, precautionary principle, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Robert Solow, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, Thales and the olive presses, Thales of Miletus, the long tail, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, world market for maybe five computers, Y2K, Yogi Berra, zero-sum game

They do not progress from one mode of living to another – nor do they deplore doing so. They do not experience agricultural, urban, commercial, industrial and information revolutions, let alone Renaissances, Reformations, Depressions, Demographic Transitions, civil wars, cold wars, culture wars and credit crunches. As I sit here at my desk, I am surrounded by things – telephones, books, computers, photographs, paper clips, coffee mugs – that no monkey has ever come close to making. I am spilling digital information on to a screen in a way that no dolphin has ever managed. I am aware of abstract concepts – the date, the weather forecast, the second law of thermodynamics – that no parrot could begin to grasp.

Japan spent the first half of the twentieth century jealously seeking to grab resources and ended up in ruins; it spent the second half of the century trading and selling without resources and ended up topping the lifespan league. In the 2000s the West misspent much of the cheap windfall of Chinese savings that the United States Federal Reserve sluiced our way. So long as somebody allocates sufficient capital to innovation, then the credit crunch will not in the long run prevent the relentless upward march of human living standards. If you look at a graph of world per capita GDP, the Great Depression of the 1930s is just a dip in the slope. By 1939 even the worst-affected countries, America and Germany, were richer than they were in 1930.

The notion of synergy, of both sides benefiting, just does not seem to come naturally to people. If sympathy is instinctive, synergy is not. For most people, therefore, the market does not feel like a virtuous place. It feels like an arena in which the consumer does battle with the producer to see who can win. Long before the credit crunch of 2008 most people saw capitalism (and therefore the market) as necessary evils, rather than inherent goods. It is almost an axiom of modern debate that free exchange encourages and demands selfishness, whereas people were kinder and gentler before their lives were commercialised, that putting a price on everything has fragmented society and cheapened souls.


pages: 317 words: 101,475

Chavs: The Demonization of the Working Class by Owen Jones

Asperger Syndrome, banking crisis, Berlin Wall, Boris Johnson, British Empire, Bullingdon Club, call centre, collapse of Lehman Brothers, credit crunch, deindustrialization, Etonian, facts on the ground, falling living standards, first-past-the-post, ghettoisation, Gini coefficient, green new deal, hiring and firing, housing crisis, illegal immigration, income inequality, informal economy, low skilled workers, low-wage service sector, mass immigration, meritocracy, Neil Kinnock, Occupy movement, pension reform, place-making, plutocrats, post-war consensus, race to the bottom, Right to Buy, rising living standards, social distancing, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, too big to fail, unpaid internship, upwardly mobile, We are the 99%, wealth creators, Winter of Discontent, women in the workforce, working-age population

You look around in vain, hoping for even a flicker of concern or the hint of a cringe. I had one of those moments at a friend's dinner in a gentrified part of East London one winter evening. The blackcurrant cheesecake was being carefully sliced and the conversation had drifted to the topic of the moment, the credit crunch. Suddenly, one of the hosts tried to raise the mood by throwing in a light-hearted joke. 'It's sad that Woolworth's is closing. Where will all the chavs buy their Christmas presents?' Now, he was not someone who would ever consider himself to be a bigot. Neither would anyone else present: for, after all, they were all educated and open-minded professionals.

It lost well over twice the proportion of jobs as finance and business services in the first year of the crisis. The City's share of the economy has actually grown since 2005, leaving us more dependent on the part of the economy that caused the crash in the first place. As former City economist Graham Turner puts it, it is 'a staggering outcome of this credit crunch'. With industrial jobs steadily drying up, it might seem bizarre that the British public stubbornly continues to self-identify as working class. Matthew Taylor recalls reactions to Blair's 'we're all middle class' speech: 'It was quickly pointed out that, interestingly, more people in Britain call themselves working class now than did in 1950.'

Indeed, over half the people living in poverty are homeowners. There are actually more homeowners in the bottom 10 per cent (or decile) than there are in each of the two deciles above it. As we know, encouraging so many people to take on unaffordable levels of debt had a detonator role in the credit crunch. In any case, as more and more people have become priced out of home ownership, ithas gone into reverse: peaking at 71 per cent in 2002-03 and falling back to 68 per cent six years later. If it is not community, income or living arrangements that defines the working class, what isit? Neil Kinnock may be the Labour leader who laid the foundations for the party's dramatic swing to the right, but he still feels most comfortable with how Karl Marx put it.


pages: 267 words: 74,296

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed by John Peet, Anton La Guardia, The Economist

"World Economic Forum" Davos, bank run, banking crisis, Berlin Wall, Bretton Woods, business cycle, capital controls, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, debt deflation, Doha Development Round, electricity market, eurozone crisis, Fall of the Berlin Wall, financial engineering, fixed income, Flash crash, illegal immigration, labour market flexibility, labour mobility, light touch regulation, low interest rates, market fundamentalism, Money creation, moral hazard, Northern Rock, oil shock, open economy, pension reform, price stability, quantitative easing, special drawing rights, supply-chain management, The Great Moderation, too big to fail, transaction costs, éminence grise

And little matter that Europe could not project the same military force as the United States; Europe saw itself as a “normative power”, able to influence the world through its ability to set rules and standards. Some Europhiles even imagined that Europe would “run the 21st century”, as the title of one optimistic book put it.1 The collapse of subprime mortgages in the United States, and the credit crunch that followed, only confirmed such convictions. The single currency, the European Union’s most ambitious project, was seen as a shield against financial turbulence caused by runaway American “ultra-liberalism”, as the French liked to describe the faith in free markets. But when the financial storm blew in from across the Atlantic, the euro turned out to be a flimsy umbrella that flopped over in the wind and dragged away many of the weaker economies.

“The whole system was looking at the economy through the keyhole of fiscal policy,” says one Commission veteran. By 2007 the fiscal situation had seemingly never been better. All members of the euro zone were out of the excessive deficit procedure (EDP) by mid-2008, and so formally deemed to have their public finances in order though the credit crunch was intensifying. The Commission boasted that reform of the pact had promoted discipline and national “ownership”. Even Greece was released from the EDP in 2007, despite persistent doubts about the reliability of its figures. But, rather as with the enforcement of the pact, governments would not hear of the Commission being given the power to audit their national figures.

Other European leaders worried that the rebelliousness might spread (Sarkozy cancelled a planned school reform, fearing “regicidal” mobs). The teetering Greek prime minister, Kostas Karamanlis, sacked his finance minister, George Alogoskoufis, a month later and then loosened the public purse-strings ahead of an election. Greek bond yields had been drifting upward from the start of the credit crunch in 2007. But with the riots the spread over German bonds blew out, rising from about 160 to 300 basis points in late January 2009, after Standard & Poor’s had downgraded Greece’s debt. The European Commission placed Greece (and five others) under surveillance for breaching the 3% deficit limit.


pages: 483 words: 141,836

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

Abraham Wald, activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, book value, business cycle, capital asset pricing model, carbon tax, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, currency risk, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, fail fast, fear index, financial engineering, financial innovation, global macro, illegal immigration, implied volatility, independent contractor, index fund, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market clearing, market fundamentalism, market microstructure, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, power law, pre–internet, proprietary trading, quantitative trading / quantitative finance, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, stock buybacks, stocks for the long run, tail risk, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

To the extent possible, the stresses should be independent rather than things likely to occur together. For a financial firm a typical set might be stock market crash, credit crunch, commodity price spike, interest rate spike, and liquidity squeeze. The risk manager works through plausible scenarios of how each stress would affect other markets, not just the stress itself but the likely follow-on effects. This considers only the immediate effects, not the future effects. For example, a credit crunch means there will be more defaults. But those won’t happen right away. The credit stress might begin with a major bankruptcy, but rather than guessing how many follow-on bankruptcies there will be, the risk manager estimates the effect of increased credit spreads on all the firm’s positions.

If she’s afraid credit is going to get worse, she buys protection on BBB-rated securities—these are the bonds just above junk bonds on the credit rating scale. Junk bonds can default in good times and bad, but a significant increase in BBB default rates tells you there’s a credit crunch. Of course, increases in default rates of higher-rated bonds—bonds with A, AA, or AAA ratings—tell you even more loudly that there’s a credit crunch. But the BBB spreads start to increase first, so it’s a good place to set your first line of hedging defense. If you start making money on your BBB hedge, you can use the profits to buy higher-rated protection. The BBB protection is an insurance policy that pays off in severe credit downturns, but doesn’t pay any extra for historic downturns.

Otherwise, it does not care if Treasury prices go up or down, or even if the U.S. government defaults. We always knew there were some risks to this kind of leverage, but they seemed much smaller than the risks you eliminated by hedging. We learned that was not necessarily true. In a severe credit crunch and liquidity crisis, even good leverage, the kind that offsets your risks, could kill. The next step is to think like a frequentist. What things did other people learn that were really just fluctuations in a random walk? U.S. Treasury bonds did great during the crisis, but that might not happen next time.


pages: 471 words: 127,852

Londongrad: From Russia With Cash; The Inside Story of the Oligarchs by Mark Hollingsworth, Stewart Lansley

"World Economic Forum" Davos, Berlin Wall, Big bang: deregulation of the City of London, Bob Geldof, Bullingdon Club, business intelligence, company town, Cornelius Vanderbilt, corporate governance, corporate raider, credit crunch, crony capitalism, Donald Trump, energy security, Etonian, F. W. de Klerk, Global Witness, income inequality, kremlinology, Larry Ellison, Londongrad, mass immigration, mega-rich, Mikhail Gorbachev, offshore financial centre, paper trading, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, power law, rent-seeking, Ronald Reagan, Skype, Sloane Ranger

By 2007, the 51-year-old was rich enough to spend £35 million on one of the most expensive new houses in Britain, a Hampstead mansion that boasts a Versailles-style stone staircase, indoor pool and spa, and a carved replica of a chimneypiece at Cliveden House in Buckinghamshire. Even by the summer of 2008, there were only minimal signs of a slowdown in the diamond trade. In June, as the credit crunch was starting to be felt and property and share prices plunged, Chopard launched London’s most expensive cocktail at the Westbury Hotel in Mayfair. At £225 per glass, the Chopardissimo - a vodka martini with Beluga caviar - was served up to 100 of the company’s best customers. There are few areas of London’s highly developed consumerist culture that have not been touched by the Russians.

Nevertheless, by the spring of 2008 Deripaska’s hopes of a London float seemed to be dead in the water, sunk in the wake of uncertainty over the future of Rusal and the High Court’s decision to allow the Cherney v Deripaska case to proceed in London. Instead, he decided to turn to Hong Kong to launch his IPO. There would be fewer ‘legal’ difficulties there than in London, he said. By the summer of 2008, a new cloud was appearing on the horizon - the unfolding economic fallout from the credit crunch. Among those swept up in the gathering global storm were the oligarchs. * * * *Mandelson wrote to The Times on 25 October 2008, ‘The Director-General for Trade in the European Commission, David O’Sullivan, confirmed…that I made no personal intervention to support the commercial interests of Mr Deripaska.

The first signs of the impact of the impending financial crisis came in the dying days of summer 2007, when the continuing surge in house prices nationwide first shuddered, came to a halt, and then went into reverse. There was one significant exception to this trend - the prime London market. Even as the credit crunch began to take its toll on the domestic demand for housing, foreign wealth continued to come into the country. At least until the autumn of 2008, house prices at the top end of the market carried on ‘defying the laws of gravity’, as one agent put it. In the months straddling the Russian presidential election in March 2008, leading property agents reported a new surge of interest from Russians uncertain about the future of the country after Putin.


Debtor Nation: The History of America in Red Ink (Politics and Society in Modern America) by Louis Hyman

Alan Greenspan, asset-backed security, bank run, barriers to entry, Bretton Woods, business cycle, business logic, card file, central bank independence, computer age, corporate governance, credit crunch, declining real wages, deindustrialization, diversified portfolio, financial independence, financial innovation, fixed income, Gini coefficient, Glass-Steagall Act, Home mortgage interest deduction, housing crisis, income inequality, invisible hand, It's morning again in America, late fees, London Interbank Offered Rate, low interest rates, market fundamentalism, means of production, mortgage debt, mortgage tax deduction, p-value, pattern recognition, post-Fordism, profit maximization, profit motive, risk/return, Ronald Reagan, Savings and loan crisis, Silicon Valley, statistical model, Tax Reform Act of 1986, technological determinism, technology bubble, the built environment, transaction costs, union organizing, white flight, women in the workforce, working poor, zero-sum game

FHA Commissioner Philip Brownstein believed that “our innovations and aggressive thrusts against blight and deterioration, our massive efforts on behalf of the needy, will be lost without an adequate continuing supply of mortgage funds.”4 In a novel move, policymakers seeking a way to fund an expansion of stabilizing home ownership in the cities turned to those same securities markets for new sources of mortgage funds.5 Using markets as sources of capital defined the Great Society approach. Rather than distributing existing mortgages through resale networks as New Deal–era institutions did, markets would guarantee that credit crunches would not interrupt urban development. With the mortgage-backed security, Great Society policymakers tried to harness changes in capitalism to fit its programs rather than trying to regulate capitalism to fit its agenda. Beyond the immediate crisis of the Credit Crunch of 1966, the old system of buying and selling individual government-insured mortgages through personal connections had already begun to break down over the 1960s.

While in theory the mortgage-backed security allow borrowers to bypass financial institutions and borrow directly from capital markets, in practice, a long chain of financial institutions still mediated the connection between borrower and lender, and it was the way in which the mortgage-backed security fit those institutional needs that made it such a success. Making the mortgage-backed security work required adjusting the financial institutions that constituted the mortgage market—mortgage companies, institutional investors, and the FNMA. The FNMA existed before the credit crunch, but the Congressional response to the credit crunch remade FNMA into a new kind of institution, even more privatized and market-oriented—with a new kind of financial instrument containing great possibilities. Created in the New Deal to buy and sell government-insured mortgages across the country, FNMA had forged a national secondary market for mortgages offered through the FHA.

Solving the urban crisis would require solving the housing crisis. But to fix the housing crisis, radical financial innovation would have to occur to maintain the capital flows into mortgages. As the urban riots became the urban crisis, however, mortgage markets had a crisis of their own. American mortgage markets had abruptly frozen—the so-called Credit Crunch of 1966—as investors rapidly withdrew their deposits from banks and put their money in the securities markets. Stocks and bonds offered greater returns than the Federal Reserve–regulated rates available at banks3 Without these deposits, banks could not lend mortgage money. FHA Commissioner Philip Brownstein believed that “our innovations and aggressive thrusts against blight and deterioration, our massive efforts on behalf of the needy, will be lost without an adequate continuing supply of mortgage funds.”4 In a novel move, policymakers seeking a way to fund an expansion of stabilizing home ownership in the cities turned to those same securities markets for new sources of mortgage funds.5 Using markets as sources of capital defined the Great Society approach.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

"there is no alternative" (TINA), accounting loophole / creative accounting, Alan Greenspan, balance sheet recession, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Greenspan put, Growth in a Time of Debt, high-speed rail, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, low interest rates, market bubble, market clearing, Martin Wolf, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, Phillips curve, Post-Keynesian economics, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Solow, savings glut, short selling, structural adjustment programs, tail risk, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, Two Sigma, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Germany got nervous again in 2009 when several Landesbanken, Germany’s public-private regional development banks, which had, it turned out, also been investing in toxic US assets, got into trouble. But their losses, too, were easily dealt with. By the end of 2009, the German banking system was stable, if not healthy. What worried the Germans was how the global credit crunch would affect their exports—their growth machine—not exposure to US subprime mortgage bonds. Those fears seemed justified when, in the fourth quarter of 2008, German exports contributed 8.1 percent of an overall 9.4 percent annualized decline in GDP.5 By mid-2009, the Bundesbank was forecasting a 6 percent GDP contraction by the end of the year.

And while everyone seemed to know that the explosion had something to do with asset bubbles and banks, at the start of the crisis few had a convincing story about how the banks had caused it. This is where the Austrians came back in. Their writings from the 1930s seemed to describe the 2008 financial crisis perfectly. Its aftermath, and what to do about it, was to prove another matter entirely. The Hayek/Mises Model of Credit Crunches and Collapses Writing in the 1920s, Hayek and Mises drew attention to the rather obvious fact that banks make money from the extension of credit. And while each bank may wish to be prudential, each has an incentive to expand credit beyond its base (at that time, gold) reserves to stay in business against more aggressive banks and/or capture market share.

Yet Another Banking Crisis The 2008 crisis hit the REBLLs as a combination of a current account crisis—exports slumped as financing for imports dried up and deficits, already large, exploded—and the bursting of real estate bubbles once the foreign banks that owned their financial sectors tried to cover their losses in the credit crunch. As we discussed back in chapter 2, when a bank makes a loss in one part of its portfolio, it looks to liquidate assets elsewhere in the portfolio to cover those losses.161 The REBLLs were the very definition of “elsewhere in the portfolio.” Worried about the solvency of their home-base operations in the aftermath of the Lehman crisis, the parent banks of these REBLL banks let it be known to the REBLL governments that they were considering pulling out of their countries to supply much-needed liquidity to their core (home) operations.162 Given the extremely open and market-friendly economic institutions of the REBLLs, these states had no way to keep capital at home.


pages: 297 words: 108,353

Boom and Bust: A Global History of Financial Bubbles by William Quinn, John D. Turner

accounting loophole / creative accounting, Alan Greenspan, algorithmic trading, AOL-Time Warner, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Big bang: deregulation of the City of London, bitcoin, blockchain, book value, Bretton Woods, business cycle, buy and hold, capital controls, Celtic Tiger, collapse of Lehman Brothers, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, debt deflation, deglobalization, Deng Xiaoping, different worldview, discounted cash flows, Donald Trump, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, fake news, financial deregulation, financial intermediation, Flash crash, Francis Fukuyama: the end of history, George Akerlof, government statistician, Greenspan put, high-speed rail, information asymmetry, initial coin offering, intangible asset, Irish property bubble, Isaac Newton, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, junk bonds, land bank, light touch regulation, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Network effects, new economy, Northern Rock, oil shock, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, railway mania, Right to Buy, Robert Shiller, Shenzhen special economic zone , short selling, short squeeze, Silicon Valley, smart contracts, South Sea Bubble, special economic zone, subprime mortgage crisis, technology bubble, the built environment, total factor productivity, transaction costs, tulip mania, urban planning

Indeed, it would be the late 1890s before real GDP returned to the levels prevailing on the eve of the land boom, and it would be the early 1900s before GDP per capita returned to the levels witnessed in 1888.93 Given that the land boom was concentrated on Melbourne, it is unsurprising that Victoria experienced a longer and deeper depression than NSW.94 It was also substantially longer and deeper than that experienced by Australia during the Great Depression of the 1930s. The main reason for the severity of the 1890s depression was the 1893 financial crisis. Because deposits were locked up in suspended banks, the money supply fell dramatically and there was a credit crunch, with surviving banks becoming much more cautious.95 Furthermore, as can be seen from Table 5.1, the funds flowing from the UK dried up; as one history of the crisis put it, ‘the British investor would have rather buried his money under the floor boards than entrusted it to an Australian bank’.96 This obliged Australian banks to contract their balance sheets.

Banks held very few technology shares: in one sample of investors, the portfolio of banks never consisted of more than 4 per cent of technology stocks, a lower weighting than any other category of institutional investor.64 Furthermore, the pre-crash profit margins in the banking sector were particularly high, while default rates were low, providing a buffer against the economic downturn.65 Banks were thus able to continue to supply credit after the crash, and the economy avoided the bank failures, credit crunch and deflation that characterised the 1930s. The economic effects were also fairly limited elsewhere. The UK experienced continued growth until the global financial crisis of 2007–8. The French economy stagnated in 2002–3, but did not experience a recession, while the Japanese economy experienced a contraction that was mild in the context of its ongoing economic problems.

Coffee, ‘A theory of corporate scandals’, 204–5. 62. National Bureau of Economic Research, ‘US Business Cycle Expansions’. 63. Kliesen, ‘The 2001 recession’, 28–30. 64. Griffin et al., ‘Who drove?’, 1,260. 65. Schuermann, ‘Why were banks better off?’, 6. 66. GDP data obtained from the World Bank. 67. Nehls and Schmidt, ‘Credit crunch’. 68. Eatwell, ‘Useful bubbles’, 43. 69. Andreesen, ‘Why software?’, Wall Street Journal, 20 August 2011. 70. Rao, ‘A new soft technology’, Breaking Smart. 71. See, for example, Garber, ‘Famous first bubbles’; Stone and Ziemba, ‘Land and stock prices’; Donaldson and Kamstra, ‘A new dividend forecasting procedure’. 72.


pages: 436 words: 114,278

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

"World Economic Forum" Davos, Alan Greenspan, American energy revolution, Asian financial crisis, banking crisis, barriers to entry, Bear Stearns, Bretton Woods, collective bargaining, credit crunch, energy security, energy transition, geopolitical risk, housing crisis, hydraulic fracturing, Ida Tarbell, index fund, Induced demand, interchangeable parts, invisible hand, joint-stock company, market clearing, market fundamentalism, megaproject, moral hazard, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, price discrimination, price elasticity of demand, price stability, sovereign wealth fund, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, transfer pricing, vertical integration

.: UC San Diego, Department of Economics, 2009. Hammes, David, and Douglas Wills. Black Gold: The End of Bretton Woods and the Oil Price Shocks of the 1970s. Available at SSRN: http://ssrn.com/abstract=388283. Harrington, Mark. “Oil Credit Crunch Could Be Worse than the Housing Crisis.” CNBC Commentary. January 14, 2016. http://www.cnbc.com/2016/01/14/oil-credit-crunch-could-be-worse-than-the-housing-crisis-commentary.html. Harvey, Fiona. “World’s Climate Pledges Not Yet Enough to Avoid Dangerous Warming–UN.” Guardian, October 30, 2015. http://www.theguardian.com/environment/2015/oct/30/worlds-climate-pledges-likely-to-lead-to-less-than-3c-of-warming-un.

Like many other financial institutions, Lehman held enormous amounts of low quality household debt securities. Its failure prompted contagion risk and a widespread collapse in market confidence. In October some $10 trillion of global equity value vaporized, in the largest monthly loss ever recorded.93 The world was quickly engulfed in a global credit crunch and economic growth screeched to a halt. We know that consumers don’t quickly adjust their consumption of gasoline when oil prices change—but they do when their income changes. An employed worker has little choice but to pay whatever the pump price is to drive to work, but after losing his job, an unemployed person’s need to drive drops quickly.

The Bank for International Settlements noted an “intense debate” about how falling oil prices would impact economies, flagging in particular the high debt burden of the oil and gas sector, which had grown by 250 percent from 2006 to 2015 and stood at roughly $2.5 trillion.99 Some worried that crashing oil prices could trigger a banking crisis and downturn as the Lehman crisis had spectacularly done six years earlier. “Oil credit crunch could be worse than the housing crisis,” blared one commentary headline on CNBC.100 Others noted that while the oil crisis was leading to losses at Wall Street banks that had lent producers sizable sums, comparisons with the mortgage crisis were overblown as the scale, complexity, and direct economic impacts were less severe in the case of shale oil debt.101 Whatever the true extent of the risk, crashing oil prices in January and early February 2016 exhibited a reminder that there is a downside to price busts, even for economies that ought to benefit from cheaper oil prices.


pages: 397 words: 112,034

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

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

The second problem is that, for structural reasons, a growing number of OECD countries are confronting a very challenging budgetary situation. The credit crunch, bank bailouts, and recession only account for 9 percent of the increase in long-term public debt burdens in major advanced economies. The remaining 91 percent of the long-term fiscal pressure is due to the growth of public spending on pensions, and health and long-term care. In other words, the credit crunch and recession did not create the present pressures on public borrowing and spending. They merely brought forward an age-related fiscal crisis that would have become inevitable once a majority of the baby boomers retired around 2020.

The recovery has taken many by surprise because of the severity of the crisis in the financial markets in late 2008. The stock market fell sharply. The commercial paper market froze. Bond spreads rose to unprecedented levels. Bankers cut credit lines. Consumers reacted to these shocks by slashing their spending, especially in up-market retailers. Corporations sharply curtailed capital spending. As the credit crunch hit the global economy, exports fell sharply as well. How Government Intervention Ended the Financial Crisis Government intervention rescued the economy. The Federal Reserve slashed interest rates to zero and expanded its balance sheet from $900 billion to $2.2 trillion by injecting large amounts of liquidity into the financial system.

Public spending control had been surprisingly effective in most of Europe during the recession, and indeed in the decade before, in contrast to the free-spending policies advocated in the United States by the Obama administration, and practiced covertly by the Bush administration and the Brown government in Britain in the years leading up to the credit crunch. None of this means, however, that the eurozone is about to emerge in 2011 from its long period of economic underperformance in relation to the United States and Britain. Neither does the recent contrast between the bullish sentiment in Europe and the pervasive gloom in the United States and Britain imply that Anglo-Saxon macroeconomic policies of aggressive monetary and fiscal stimulus were counterproductive.


Firefighting by Ben S. Bernanke, Timothy F. Geithner, Henry M. Paulson, Jr.

Asian financial crisis, asset-backed security, bank run, Basel III, Bear Stearns, break the buck, Build a better mousetrap, business cycle, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Doomsday Book, financial deregulation, financial engineering, financial innovation, Glass-Steagall Act, housing crisis, Hyman Minsky, income inequality, invisible hand, Kenneth Rogoff, labor-force participation, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, opioid epidemic / opioid crisis, pets.com, price stability, quantitative easing, regulatory arbitrage, Robert Shiller, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, special drawing rights, tail risk, The Great Moderation, too big to fail

Economies wither when people can’t get home loans, car loans, student loans, or business loans. The hawks believed inflation was a more serious danger, and kept believing that even as the crisis heated up. From Ben’s perspective, though, the Fed’s obsession with inflation and moral hazard during a credit crunch had already created one depression. He didn’t intend to let it create another. These debates were an early indicator of the messy politics of financial crises. French president Nicolas Sarkozy advised Hank to find a convenient villain to deflect the inevitable public backlash; he suggested scapegoating the ratings agencies that had slapped triple-A ratings on shoddy securities.

Home prices stabilized after the Great Recession ended, gradually eliminating trillions of dollars of negative equity, lifting millions of underwater home owners above water. The better economy made almost everything better. U.S. annual auto sales had plunged to 10 million in 2009, but they were back up to pre-crisis levels of 17 million by 2015. The credit crunch ended for most consumers and businesses, although banks remained skittish about lending for longer than we would have liked, especially to potential home buyers. Unemployment came down rapidly from a peak of 10.0 percent in late 2009 to 3.7 percent as we write, and the economy that was shedding more than 2 million jobs a quarter in early 2009 has added some 19 million jobs over a record ninety-seven consecutive months.

and expansion of crisis, 46 and expansion of emergency authorities, 79 and Fannie Mae/Freddie Mac conservatorship, 58, 59 and onset of financial crisis, 1 and politics of crisis management, 9 and TARP, 80, 93–94, 95, 105 capitalism, 36–37, 74, 110 capital levels capitalization strategies, 164 and current state of financial system, 6 and Fannie Mae/Freddie Mac conservatorship, 56, 59 and onset of financial crisis, 30 and policy responses to crisis, 174–82 and politics of crisis management, 126 and post-crisis reforms, 117 and shortcomings of U.S. regulatory regime, 25–26, 27 and TARP, 89–90 Capital Purchase Program (CPP), 163, 176, 177, 208 “CDOs-Squared,” 19 central banks and arsenal for dealing with future crises, 119–20, 123 and Bear Stearns rescue, 48–49 and coordinated interest rate cuts, 197 and Fed liquidity programs, 217n and Lehman failure, 69 and policy responses to crisis, 33, 103–4, 162, 163 and politics of crisis management, 126 and post-crisis reforms, 118 and quantitative easing, 104 and swap lines, 42–43, 196, 217n and TARP, 89 and theoretical approaches to financial crises, 34–36, 38 CEOs and executives of financial institutions, 40–41, 52, 73–74, 82, 91, 101 Chrysler, 95, 97, 105, 208 Citigroup and acceleration of crisis, 21 and federal asset guarantees, 178 government investment in, 176, 177 and Lehman failure, 69 management firings, 73 and policy responses to crisis, 97 private capital raised during crisis, 175, 181 and stress tests, 180 structured investment vehicles, 41 and TARP, 94–95, 96, 101 and taxpayer profit from rescue, 208 and Wachovia crisis, 81, 82 write-down of troubled assets, 40–41 collateral and acceleration of crisis, 20–22, 24 and AIG rescue, 72, 73 and arsenal for dealing with future crises, 118–19 and Bear Stearns rescue, 47, 52 collateralized debt obligations (CDOs), 19, 41 collateralized funding, 24 and Countrywide sale, 42 and Lehman failure, 62, 63, 68, 69 and TARP, 94 and Term Securities Lending Facility, 45 and triage process, 40 commercial banks, 5, 126–27, 173 Commercial Paper Funding Facility (CPFF), 88, 163, 168, 208 commercial paper market, 88 Commodity Futures Trading Commission (CFTC), 23, 116 complacency, 26, 146 Consumer Financial Protection Bureau, 116 consumer lending and debt, 94, 116, 120–21, 149, 169 Continuing Extension Act, 187 corporate bonds, 75 corporate financing, 22 Council of Economic Advisers, 28 Countrywide Financial and AIG rescue, 71 and Bear Stearns rescue, 48, 52 crisis and sale of, 38–40 and expansion of crisis, 46–47 management firings, 73 and onset of financial crisis, 31, 155 and oversight of nonbanks, 23 and post-crisis reforms, 115, 116 and spark of crisis, 18 creative destruction, 36–37 credit booms, 3–4, 12, 13, 16, 117, 150 credit crunch, 36, 108 credit default swaps (CDS) and AIG rescue, 72 and effect of stabilization efforts, 201 and expansion of crisis, 75 and Lehman failure, 69 and phases of financial crisis, 153 and policy responses to crisis, 173 currency exchanges, 42–43, 196 Darling, Alistair, 67–68 debt bank debt, 90 and causes of financial crisis, 3 collateralized debt obligations (CDOs), 19, 41 federal debt levels, 124 household debt levels, 16, 149 Latin American debt crisis, 37 and post-crisis reforms, 112 “runnable” forms of debt, 12, 112 and spark of crisis, 16, 19 and TARP, 87 Debt Guarantee Program, 217n defaults, 22 Defense Appropriations Act, 187 deficit spending, 104, 124–25, 128 Democratic Party, 5, 80, 83, 104–5, 129 deposit insurance, 14–15, 22–23, 34, 162, 163, 172 Deposit Insurance Fund, 81, 88 derivatives and acceleration of crisis, 24 and AIG rescue, 71–72 and Bear Stearns rescue, 48, 53 and Lehman failure, 63 and post-crisis reforms, 112, 114, 116–17 and roots of financial crisis, 13 and shortcomings of U.S. regulatory regime, 26, 28–29 and spark of crisis, 20 Diamond, Bob, 67 Dimon, Jamie, 50 discount window lending and acceleration of crisis, 22 and Countrywide sale, 39 failure to ease crisis, 42 and Fed liquidity programs, 217n and policy responses to crisis, 162, 166, 167 stigma associated with Fed borrowing, 40 and theoretical approaches to financial crises, 34, 35 dividends, 41 Dodd, Christopher, 56, 79–80 Dodd-Frank Wall Street Reform and Consumer Protection Act, 113–16, 120–21, 127, 172 “Doomsday Book,” 118 dot-com bubble, 21 Dugan, John, 91 E. coli effect, 31, 42 economic output, 207 Economic Stimulus Act, 185 electronic banking, 15 Emergency Economic Stabilization Act, 172 emergency powers arsenal for dealing with future crises, 118–25, 211 and Bear Stearns rescue, 49–51 and Countrywide sale, 39 expansion of emergency authorities, 78–83 and onset of financial crisis, 44–45 and TARP, 94 employment levels, 4, 92, 95, 108, 110, 141, 202 Enhanced Leverage Fund, 31 entitlement programs, 124 European banking, 91, 182 European Central Bank (ECB), 35, 42, 89, 196, 197 European recovery, 206 European sovereign debt crisis, 123 Exchange Stabilization Fund, 76–77 executive compensation, 80, 82 FAA Air Transportation Act, 187 failure of financial firms, 8, 36–37.


pages: 92

The Liberal Moment by Nick Clegg, Demos (organization : London, England)

banking crisis, credit crunch, failed state, Glass-Steagall Act, housing crisis, income inequality, mass immigration, mass incarceration, Right to Buy, smart grid, too big to fail, Winter of Discontent

And however long this recession may last one thing is already certain: we will be left with a legacy of massive public debt and the enormous challenge of eradicating a structural deficit that could be as high as 10 per cent of GDP. Britain is, of course, not alone. The whole world’s economy has suffered an enormous shock stemming from the credit crunch and banking crisis. It would be wrong to pretend that Britain is not suffering, in part, as a consequence of this global recession. However much political opponents may like to blame problems on the government of the day, it is only fair to acknowledge that Britain’s problems are not all home-grown.

Both the economic crisis errors of judgement can be traced to their illiberal attitude towards power in both politics and economics. First, they pushed for international deregulation, ignoring or even blocking moves toward better global regulation of international finance that could have prevented or limited the problems that led to the credit crunch. They welcomed with open arms hedge funds that left the US after the Sarbanes-Oxley regulations were imposed. They did all this out of their determination to protect what they saw as our vital competitive edge for the City and a healthy cash cow for Treasury coffers. They were swept up in the glamour and excitement of a gravitydefying City.


pages: 82 words: 24,150

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

Anthropocene, asset-backed security, basic income, Big Tech, bond market vigilante , Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, debt deflation, decarbonisation, degrowth, deindustrialization, don't be evil, financial deregulation, Francis Fukuyama: the end of history, full employment, gig economy, global pandemic, global value chain, green new deal, Greenspan put, income inequality, informal economy, inverted yield curve, invisible hand, Jeff Bezos, liberal capitalism, light touch regulation, lockdown, low interest rates, Martin Wolf, Modern Monetary Theory, moral hazard, move fast and break things, Network effects, North Sea oil, Northern Rock, offshore financial centre, pensions crisis, Philip Mirowski, post-war consensus, price mechanism, quantitative easing, regulatory arbitrage, rent control, reshoring, Rishi Sunak, savings glut, secular stagnation, shareholder value, social distancing, structural adjustment programs, too big to fail, universal basic income, unorthodox policies, Washington Consensus, yield curve

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

Here’s What the Experts Predict’, Forbes, 31 March 2020. 7 Phillip Inman, ‘UK Economy Likely to Suffer Worst Covid-19 Damage, Says OECD’, Guardian, 10 June 2020. 8 International Labour Organization and Organisation for Economic Co-operation and Development, ‘The Labour Share in G20 Economies’, report prepared for the G20 Employment Working Group, Antalya, Turkey, 26–27 February 2015. 9 Shawn Donnan, ‘Globalisation in Retreat: Capital Flows Decline since Crisis’, Financial Times, 21 August 2017; Susan Lund, Eckart Windhagen, James Manyika, Philipp Härle, Jonathan Woetzel and Diana Goldshtein, ‘The New Dynamics of Financial Globalization’, McKinsey Global Institute, August 2017. 10 Chibuike Oguh and Alexandre Tanzi, ‘Global Debt of $244 Trillion Nears Record Despite Faster Growth’, Bloomberg, 15 January 2019. 11 For a discussion of these forecasts, see Grace Blakeley, ‘The Next Crash: Why the World Is Unprepared for the Economic Dangers Ahead’, New Statesman, 6 March 2019. 12 Ibid. 13 Tithi Bhattacharya and Gareth Dale, ‘Covid Capitalism: General tendencies and possible “leaps”’, Spectre, 23 April 2020. 14 See IMF, Policy Responses to Covid-19: Policy Tracker, Washington, DC: International Monetary Fund, 2020. 15 In full, the Commercial Paper Funding Facility, Primary Market Corporate Credit Facility, Secondary Market Corporate Credit Facility, Term Asset-Backed Securities Loan Facility, Primary Dealer Credit Facility and Municipal Liquidity Facility. 16 Scott Minerd, ‘We Are All Government-Sponsored Enterprises Now’, Global CIO Outlook, Guggenheim Investments, 10 May 2020. 17 Philip Turner, ‘Containing the Dollar Credit Crunch’, Project Syndicate, 18 May 2020. 18 Robert Brenner, ‘Escalating Plunder’, New Left Review 123, May-June 2020, p. 22. 1 The Last Days of Finance Capitalism 1 BEA, ‘GDP by State’, Suitland, MD: US Bureau of Economic Analysis, 2020, bea.gov. 2 Drew DeSilver, ‘For Most U.S. Workers, Real Wages Have Barely Budged in Decades’, Washington, DC: Pew Research Center, 7 August 2018. 3 BIS, ‘Total Credit to Non-Financial Corporations (Core Debt) as a Percentage of GDP’, Basel: Bank for International Settlements, 2020, stats.bis.org. 4 Chris Giles, ‘Bank of England Drops Productivity Optimism and Lowers Expectations’, Financial Times, 30 January 2020. 5 World Bank, ‘Gross Fixed Capital Formation (% of GDP)’, World Bank Economic Policy & Debt: National Accounts: Shares of GDP & Other, data.worldbank.org; Office for National Statistics, UK Balance of Payments, The Pink Book: 2019. 6 See, for example, FocusEconomics, ‘23 Economic Experts Weigh In: Why Is Productivity Growth So Low?’


pages: 475 words: 155,554

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

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

I thought I had come up with a pretty pithy answer. ‘No,’ he gently chided me. ‘The most dangerous financial product in the world,’ he paused a moment for effect, ‘is the mortgage.’ The mortgage: from the Old French words mort and gage. Disputed translation: ‘death contract’. Esther’s story In the middle of the credit-crunch crisis of 2008 I met Esther Spick, then a single 34-year-old mum with two kids living in a maisonette in Surrey. It was the first home she’d owned, bought with an entirely inappropriate mortgage in 2005. She had been living on a council estate in Kingston, Surrey, working day and night to get a deposit to get a mortgage for her £235,000 maisonette.

Mark Thorogood, also at Property Park, managed to record the income of a family member at £130,000, a convenient extra digit over the actual figure of £30,000. A special prize must go to Mr Vigneswaran of Cherry Finance, Kingsbury, who was giving mortgage advice as an approved mortgage broker just as the credit crunch hit. The only thing was, he could not speak English. In fact, regulators discovered he knew little about Cherry Finance bar attending an opening ceremony. His son, already removed as an approved broker, had simply got the FSA to set his father up as a so-called ‘approved person’. Spokespersons for the mortgage industry suggest that such practices (and there are hundreds of similar stories) are just the work of a few bad apples.

Inside Track was an extreme example of the dark underbelly of the property market. But the rapid growth of the buy-to-let (BTL) market brings together all the elements fuelling house prices. For a start, BTL changed the British housing dream from owning your own property into owning other people’s property too. Many expected the credit crunch and recession to put paid to BTL. But the cult of the amateur landlord did not just return in the crisis. It prospered. Property values have held, rents have surged, and there have only been a piddling number of repossessions. After the new coalition government slashed planning red tape, mortgage volumes have ballooned.


pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", addicted to oil, airport security, Alan Greenspan, Anthropocene, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean tech, clean water, congestion charging, creative destruction, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, digital map, disinformation, Dr. Strangelove, driverless car, edge city, energy security, European colonialism, export processing zone, failed state, Food sovereignty, gentrification, Gini coefficient, global supply chain, Global Witness, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, Lewis Mumford, loose coupling, machine readable, market fundamentalism, mass incarceration, McMansion, megacity, military-industrial complex, moral panic, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, one-state solution, pattern recognition, peak oil, planetary scale, post-Fordism, private military company, Project for a New American Century, RAND corporation, RFID, Richard Florida, Scramble for Africa, Seymour Hersh, Silicon Valley, SimCity, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight, white picket fence

The fusion of entertainment, media and war into what James Der Derian calls the ‘military-industrial-media-entertainment network’ has been centrally important here.135 ‘With the advent of the so-called war on terror’, wrote Andrew Ross in 2004, ‘the US government’s legitimacy no longer derives from its capacity or willingness to ensure a decent standard of living for those citizens; it depends, instead, on the degree to which they can be successfully persuaded they are on the verge of being terrorized.’136 Even amid the chaos and devastation of the credit crunch, desperate Republican campaign managers widely depicted the Democratic presidential candidate, Barack Obama, as a lurking ally of that ultimate terrorist foe, Osama bin Laden. ‘THE CITIES ARE THE PROBLEM’ The future of warfare lies in the streets, sewers, high-rise buildings, industrial parks, and the sprawl of houses, shacks, and shelters that form the broken cities of our world.137 Urban sites and urban military operations increasingly take centre-stage in all these new conceptualizations of war.

That worked out to 53.2 per cent of all new-vehicle sales, another all-time high. In the first month of 2004, the 70 or more SUV models’ share of the market grew even more, to 54.6 per cent’ of the total market, we learn from an Air War College publication.11 SUV sales declined rapidly in 2007–8 as a result of the US credit crunch and the hike in oil prices. As a result, many car-makers, accustomed to the SUV’s profitability, were now struggling to survive. But the skyrocketing, and hugely profitable, US SUV sales, which exploited massive loop-holes in both emissions regulation and taxation, provides a dramatic parallel to the increasingly aggressive US military incursions in the Persian Gulf between 1991 and 2010.

One influential critic of urban sprawl, Jim Kunstler, is convinced that ‘the grand meta-cycle of the suburban project as a whole’, within which SUVs now play such a major role, is ‘at the end of the cycle’. To him, ‘the remaining things under construction are the last twitchings of a dying organism’ – a process accelerated by the US recession, brought on by a credit crunch generated largely by criminally lax lending of largely fictitious capital to fuel yet another massive round of sprawl and exurbanization.39 Kunstler argues that US suburban history, climaxing in mass SUV ownership and hypersprawl, must be interpreted through the lens of oil geopolitics: The suburban expansion has been based entirely on cheap-and-abundant supplies of oil.


pages: 497 words: 150,205

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

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

The hope is that the ECB will be more independent than national bank supervisors and more effective than the toothless EBA. Before the ECB takes on its new oversight role, it is due to conduct a review of the quality of banks’ assets. The EBA will follow through with what it promises will be rigorous stress tests. Credit crunch Meanwhile, zombie banks continue to drain life out of European economies. In Britain, banks’ outstanding loans to businesses fell by 5.4 per cent – £25 billion – in 2013.79 In the eurozone as a whole, bank credit to businesses fell by 3 per cent in 201380 – with a collapse of credit in southern Europe, notably Spain.81 When challenged, bankers typically claim that they would like to lend more, but that fewer borrowers want to borrow more.

To suggest otherwise is merely a version of the Alesina fallacy. Counting the cost How harmful has austerity been across the eurozone? It’s impossible to be sure, because the eurozone suffers from several problems and it is hard to disentangle, for instance, the depressing impact of austerity from the throttling effect of the credit crunch. For what it’s worth, the IMF calculates that in 2010–11 a fiscal squeeze of 1 per cent of GDP depressed the economy by between 0.9 per cent and 1.7 per cent.228 That is much more than in normal times, when it might shrink the economy by 0.5 per cent. Research by Jonathan Portes, formerly the head of the UK’s Government Economic Service and now director of the National Institute of Economic and Social Research, and his colleague Dawn Holland finds that the fiscal squeeze across the eurozone and Britain has been so harmful that it actually caused government debt to rise as a share of GDP.229 They reckon that the planned austerity in 2011–13 increased Greek government debt by more than 30 per cent of GDP!

Instead of stipulating that banks raise a specific sum of capital, they told them to hit a higher ratio of capital to assets. Since bank share prices were low and earnings meagre, banks opted to shrink their assets rather than raise additional capital. But since banks’ assets are primarily their loans to households and companies along with their government bond holdings, this led to a massive credit crunch and firesales of government bonds. By January 2012, EU leaders realised their mistake, but the damage was already done.287 Smaller businesses were hit hardest.288 Worse, policymakers were about to make an even bigger mistake. Mistake five: threatening to force Greece out of the euro What is there about international summits in France?


pages: 369 words: 94,588

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

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

That is the geographical question we now have to consider. 6 The Geography of It All The crisis that began in highly localised housing markets in the United States in 2007 quickly spread around the world via a tightly networked financial and trading system that was supposed to spread risk rather than financial mayhem. As the effects of the credit crunch spread, it had differential impacts from one place to another. Everything depended on the degree to which local banks and other institutions like pension funds had invested in the toxic assets being peddled from the United States; the degree to which banks elsewhere had copied US practices and pursued high-risk investments; the dependency of local firms and state institutions (such as municipal governments) upon open lines of credit to roll over their debts; the impact of rapidly falling consumer demand in the US and elsewhere on export-led economies; the ups and downs in the demand for and prices of raw materials (oil in particular); and the different structures of employment and of social support (including flows of remittances) and social provision prevailing in this place rather than that.

.), 2006, Another Production is Possible: Beyond the Capitalist Canon, London, Verso. Silver, B., 2003, Forces of Labor: Workers’ Movements and Globalization since 1870, Cambridge, Cambridge University Press. Smith, N., 2008 3rd edition, Uneven Development: Nature, Capital, and the Production of Space, Athens, GA, University of Georgia Press. Turner, G., 2008, The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis, London, Pluto. United Nations Development Program, 1989–2009, Human Development Report (annual issues), New York, Palgrave Macmillan. Walker, R. and Storper, M., 1989, The Capitalist Imperative: Territory, Technology and Industrial Growth, Oxford, Wiley–Blackwell.

The archive can be accessed through http://socialistregister.com/index.php/srv/issue/archive The Monthly Review keeps a lively flow of critical commentary and contemporary information going. See http://www.monthlyreview.org/mrzine/ The materials on Japanese land prices are adapted from G. Turner, 2008, The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis, London, Pluto Press. The data on page 27 on growth of GDP: The World and Major Regions come from A. Maddison, 2007, Contours of the World Economy, 1–2030 AD: Essays in Macro-Economic History, Oxford, Oxford University Press. Index Numbers in italics indicate Figures; those in bold indicate a Table. 11 September 2001 attacks 38, 41–2 subject to perpetual renewal and transformation 128 A Abu Dhabi 222 Académie Française 91 accumulation by dispossession 48–9, 244 acid deposition 75, 187 activity spheres 121–4, 128, 130 deindustrialised working-class area 151 and ‘green revolution’ 185–6 institutional and administrative arrangements 123 ‘mental conceptions of the world’ 123 patterns of relations between 196 production and labour processes 123 relations to nature 123 the reproduction of daily life and of the species 123 slums 152 social relations 123 subject to perpetual renewal and transformation 128 suburbs 150 technologies and organisational forms 123 uneven development between and among them 128–9 Adelphia 100 advertising industry 106 affective bonds 194 Afghanistan: US interventionism 210 Africa civil wars 148 land bought up in 220 neocolonialism 208 population growth 146 agribusiness 50 agriculture collectivisation of 250 diminishing returns in 72 ‘green revolution’ 185–6 ‘high farming’ 82 itinerant labourers 147 subsidies 79 AIG 5 alcoholism 151 Allen, Paul 98 Allende, Salvador 203 Amazonia 161, 188 American Bankers Association 8 American Revolution 61 anarchists 253, 254 anti-capitalist revolutionary movement 228 anti-racism 258 anti-Semitism 62 après moi le déluge 64, 71 Argentina Debt Crisis (2000–2002) 6, 243, 246, 261 Arizona, foreclosure wave in 1 Arrighi, Giovanni: The Long Twentieth Century 35, 204 asbestos 74 Asia Asian Currency Crisis (1997–98) 141, 261 collapse of export markets 141 growth 218 population growth 146 asset stripping 49, 50, 245 asset traders 40 asset values 1, 6, 21, 23, 26, 29, 46, 223, 261 Association of South East Asian Nations (ASEAN) 200 Athabaska tar sands, Canada 83 austerity programmes 246, 251 automobile industry 14, 15, 23, 56, 67, 68, 77, 121, 160–61 Detroit 5, 15, 16, 91, 108, 195, 216 autonomista movement 233, 234, 254 B Baader-Meinhof Gang 254 Bakunin, Michael 225 Balzac, Honoré 156 Bangalore, software development in 195 Bangkok 243 Bank of England 53, 54 massive liquidity injections in stock markets 261 Bank of International Settlements, Basel 51, 55, 200 Bank of New England 261 Bankers Trust 25 banking bail-outs 5, 218 bank shares become almost worthless 5 bankers’ pay and bonuses 12, 56, 218 ‘boutique investment banks’ 12 de-leveraging 30 debt-deposit ratio 30 deposit banks 20 French banks nationalised 198 international networks of finance houses 163 investment banks 2, 19, 20, 28, 219 irresponsible behaviour 10–11 lending 51 liquidity injections by central banks vii, 261 mysterious workings of central banks 54 ‘national bail-out’ 30–31 property market-led Nordic and Japanese bank crises 261 regional European banks 4 regular banks stash away cash 12, 220 rising tide of ‘moral hazard’ in international bank lending practices 19 ‘shadow banking’ system 8, 21, 24 sympathy with ‘Bonnie and Clyde’ bank robbers 56 Baran, Paul and Sweezey, Paul: Monopoly Capital 52, 113 Barings Bank 37, 100, 190 Baucus, Max 220 Bavaria, automotive engineering in 195 Beijing declaration (1995) 258 Berlin: cross-border leasing 14 Bernanke, Ben 236 ‘Big Bang’ (1986) 20, 37 Big Bang unification of global stock, options and currency trading markets 262 billionaire class 29, 110, 223 biodiversity 74, 251 biomass 78 biomedical engineering 98 biopiracy 245, 251 Birmingham 27 Bismarck, Prince Otto von 168 Black, Fischer 100 Blackstone 50 Blair, Tony 255 Blair government 197 blockbusting neighbourhoods 248 Bloomberg, Mayor Michael 20, 98, 174 Bolivarian movement 226, 256 bonuses, Wall Street 2, 12 Borlaug, Norman 186 bourgeoisie 48, 89, 95, 167, 176 ‘boutique investment banks’ 12 Brazil automobile industry 16 capital flight crisis (1999) 261 containerisation 16 an export-dominated economy 6 follows Japanese model 92 landless movement 257 lending to 19 the right to the city movement 257 workers’ party 256 Bretton Woods Agreement (1944) 31, 32, 51, 55, 171 British Academy 235 British empire 14 Brown, Gordon 27, 45 Budd, Alan 15 Buenos Aires 243 Buffett, Warren 173 building booms 173–4 Bush, George W. 5, 42, 45 business associations 195 C California, foreclosure wave in 1, 2 Canada, tightly regulated banks in 141 ‘cap and trade’ markets in pollution rights 221 capital bank 30 centralisation of 95, 110, 113 circulation of 90, 93, 108, 114, 116, 122, 124, 128, 158, 159, 182, 183, 191 cultural 21 devalued 46 embedded in the land 191 expansion of 58, 67, 68 exploitations of 102 export 19, 158 fixed 191, 213 industrial 40–41, 56 insufficient initial money capital 47 investment 93, 203 and labour 56, 88, 169–70 liquid money 20 mobility 59, 63, 64, 161–2, 191, 213 and nature 88 as a process 40 reproduction of 58 scarcity 50 surplus 16, 28, 29, 50–51, 84, 88, 100, 158, 166, 167, 172, 173, 174, 206, 215, 216, 217 capital accumulation 107, 108, 123, 182, 183, 191, 211 and the activity spheres 128 barriers to 12, 16, 47, 65–6, 69–70, 159 compound rate 28, 74, 75, 97, 126, 135, 215 continuity of endless 74 at the core of human evolutionary dynamics 121 dynamics of 188, 197 geographic landscape of 185 geographical dynamics of 67, 143 and governance 201 lagging 130 laws of 113, 154, 160 main centres of 192 market-based 180 Mumbai redevelopment 178 ‘nature’ affected by 122 and population growth 144–7 and social struggles 105 start of 159 capital circulation barriers to 45 continuity of 68 industrial/production capital 40–41 inherently risky 52 interruption in the process 41–2, 50 spatial movement 42 speculative 52, 53 capital controls 198 capital flow continuity 41, 47, 67, 117 defined vi global 20 importance of understanding vi, vii-viii interrupted, slowed down or suspended vi systematic misallocation of 70 taxation of vi wealth creation vi capital gains 112 capital strike 60 capital surplus absorption 31–2, 94, 97, 98, 101, 163 capital-labour relation 77 capitalism and communism 224–5 corporate 1691 ‘creative-destructive’ tendencies in 46 crisis of vi, 40, 42, 117, 130 end of 72 evolution of 117, 118, 120 expansion at a compound rate 45 first contradiction of 77 geographical development of 143 geographical mobility 161 global 36, 110 historical geography of 76, 117, 118, 121, 174, 180, 200, 202, 204 industrial 58, 109, 242 internal contradictions 115 irrationality of 11, 215, 246 market-led 203 positive and negative aspects 120 and poverty 72 relies on the beneficence of nature 71 removal of 260 rise of 135, 192, 194, 204, 228, 248–9, 258 ‘second contradiction of’ 77, 78 social relations in 101 and socialism 224 speculative 160 survival of 46, 57, 66, 86, 107, 112, 113, 116, 130, 144, 229, 246 uneven geographical development of 211, 213 volatile 145 Capitalism, Nature, Socialism journal 77 capitalist creed 103 capitalist development considered over time 121–4 ‘eras’ of 97 capitalist exploitation 104 capitalist logic 205 capitalist reinvestment 110–11 capitalists, types of 40 Carnegie, Andrew 98 Carnegie foundation 44 Carnegie Mellon University, Pittsburgh, Pennsylvania 195 Carson, Rachel: Silent Spring 187 Case Shiller Composite Indices SA 3 Catholic Church 194, 254 cell phones 131, 150, 152 Central American Free Trade Association (CAFTA) 200 centralisation 10, 11, 165, 201 Certificates of Deposit 262 chambers of commerce 195, 203 Channel Tunnel 50 Chiapas, Mexico 207, 226 Chicago Board Options Exchange 262 Chicago Currency Futures Market 262 ‘Chicago School’ 246 Chile, lending to 19 China ‘barefoot doctors’ 137 bilateral trade with Latin America 173 capital accumulation issue 70 cheap retail goods 64 collapse of communism 16 collapse of export markets 141 Cultural Revolution 137 Deng’s announcement 159 falling exports 6 follows Japanese model 92 ‘Great Leap Forward’ 137, 138 growth 35, 59, 137, 144–5, 213, 218, 222 health care 137 huge foreign exchange reserves 141, 206 infant mortality 59 infrastructural investment 222 labour income and household consumption (1980–2005) 14 market closed after communists took power (1949) 108 market forcibly opened 108 and oil market 83 one child per family policy 137, 146 one-party rule 199 opening-up of 58 plundering of wealth from 109, 113 proletarianisation 60 protests in 38 and rare earth metals 188 recession (1997) 172 ‘silk road’ 163 trading networks 163 unemployment 6 unrest in 66 urbanisation 172–3 and US consumerism 109 Chinese Central Bank 4, 173 Chinese Communist Party 180, 200, 256 chlorofluoral carbons (CFCs) 74, 76, 187 chronometer 91, 156 Church, the 249 CIA (Central Intelligence Agency) 169 circular and cumulative causation 196 Citibank 19 City Bank 261 city centres, Disneyfication of 131 City of London 20, 35, 45, 162, 219 class consciousness 232, 242, 244 class inequalities 240–41 class organisation 62 class politics 62 class power 10, 11, 12, 61, 130, 180 class relations, radical reconstitution of 98 class struggle 56, 63, 65, 96, 102, 127, 134, 193, 242, 258 Clausewitz, Carl von 213 Cleveland, foreclosure crisis in 2 Cleveland, foreclosures on housing in 1 Clinton, Bill 11, 12, 17, 44, 45 co-evolution 132, 136, 138, 168, 185, 186, 195, 197, 228, 232 in three cases 149–53 coal reserves 79, 188 coercive laws of competition see under competition Cold War 31, 34, 92 Collateralised Bond Obligations (CBOs) 262 Collateralised Debt Obligations (CDOs) 36, 142, 261, 262 Collateralised Mortgage Obligations (CMOs) 262 colonialism 212 communications, innovations in 42, 93 communism 228, 233, 242, 249 collapse of 16, 58, 63 compared with socialism 224 as a loaded term 259–60 orthodox communists 253 revolutionary 136 traditional institutionalised 259 companies joint stock 49 limited 49 comparative advantage 92 competition 15, 26, 43, 70 between financial centres 20 coercive laws of 43, 71, 90, 95, 158, 159, 161 and expansion of production 113 and falling prices 29, 116 fostering 52 global economic 92, 131 and innovation 90, 91 inter-capitalist 31 inter-state 209, 256 internalised 210 interterritorial 202 spatial 164 and the workforce 61 competitive advantage 109 computerised trading 262 computers 41, 99, 158–9 consortia 50, 220 consumerism 95, 109, 168, 175, 240 consumerist excess 176 credit-fuelled 118 niche 131 suburban 171 containerisation 16 Continental Illinois Bank 261 cooperatives 234, 242 corporate fraud 245 corruption 43, 69 cotton industry 67, 144, 162 credit cards fees vii, 245 rise of the industry 17 credit crunch 140 Credit Default swaps 262 Crédit Immobilièr 54 Crédit Mobilier 54 Crédit Mobilier and Immobilier 168 credit swaps 21 credit system and austerity programmes 246 crisis within 52 and the current crisis 118 and effective demand problem 112 an inadequate configuration of 52 predatory practices 245 role of 115 social and economic power in 115 crises crises of disproportionality 70 crisis of underconsumption 107, 111 east Asia (1997–8) 6, 8, 35, 49, 246 financial crisis of 1997–8 198, 206 financial crisis of 2008 34, 108, 114, 115 general 45–6 inevitable 71 language of crisis 27 legitimation 217 necessary 71 property market 8 role of 246–7 savings and loan crisis (US, 1984–92) 8 short sharp 8, 10 south-east Asia (1997–8) 6, 8, 35, 49, 246 cross-border leasing 142–3 cultural choice 238 ‘cultural industries’ 21 cultural preferences 73–4 Cultural Revolution 137 currency currency swaps 262 futures market 24, 32 global 32–3, 34 options markets on 262 customs barriers 42, 43 cyberspace 190 D Darwin, Charles 120 DDT 74, 187 de-leveraging 30 debt-financing 17, 131, 141, 169 decentralisation 165, 201 decolonisation 31, 208, 212 deficit financing 35, 111 deforestation 74, 143 deindustrialisation 33, 43, 88, 131, 150, 157, 243 Deleuze, Gilles 128 demand consumer 107, 109 effective 107, 110–14, 116, 118, 221, 222 lack of 47 worker 108 Democratic Party (US) 11 Deng Xiaoping 159 deregulation 11, 16, 54, 131 derivatives 8 currency 21 heavy losses in (US) 261 derivatives markets creation of 29, 85 unregulated 99, 100, 219 Descartes, René 156 desertification 74 Detroit auto industry 5, 15, 16, 91, 108, 195, 216 foreclosures on housing in 1 Deutsches Bank 20 devaluation 32, 47, 116 of bank capital 30 of prior investments 93 developing countries: transformation of daily lives 94–5 Developing Countries Debt Crisis 19, 261 development path building alliances 230 common objectives 230–31 development not the same as growth 229–30 impacts and feedbacks from other spaces in the global economy 230 Diamond, Jared: Guns, Germs and Steel 132–3, 154 diasporas 147, 155, 163 Dickens, Charles: Bleak House 90 disease 75, 85 dispossession anti-communist insurgent movements against 250–51 of arbitrary feudal institutions 249 of the capital class 260 China 179–80 first category 242–4 India 178–9, 180 movements against 247–52 second category 242, 244–5 Seoul 179 types of 247 under socialism and communism 250 Domar, Evsey 71 Dongguan, China 36 dot-com bubble 29, 261 Dow 35,000 prediction 21 drug trade 45, 49 Dubai: over-investment 10 Dubai World 174, 222 Durban conference on anti-racism (2009) 258 E ‘earth days’ 72, 171 east Asia crash of 1997–8 6, 8, 35, 49, 246 labour reserves 64 movement of production to 43 proletarianisation 62 state-centric economies 226 wage rates 62 eastern European countries 37 eBay 190 economic crisis (1848) 167 economists, and the current financial crisis 235–6 ecosystems 74, 75, 76 Ecuador, and remittances 38 education 59, 63, 127, 128, 221, 224, 257 electronics industry 68 Elizabeth II, Queen vi-vii, 235, 236, 238–9 employment casual part-time low-paid female 150 chronic job insecurity 93 culture of the workplace 104 deskilling 93 reskilling 93 services 149 Engels, Friedrich 89, 98, 115, 157, 237 The Housing Question 176–7, 178 Enron 8, 24, 52, 53, 100, 261 entertainment industries 41 environment: modified by human action 84–5 environmental movement 78 environmental sciences 186–7 equipment 58, 66–7 equity futures 262 equity index swaps 262 equity values 262 ethanol plants 80 ethnic cleansings 247 ethnicity issues 104 Eurodollars 262 Europe negative population growth in western Europe 146 reconstruction of economy after Second World War 202 rsouevolutions of 1848 243 European Union 200, 226 eastern European countries 37 elections (June 2009) 143 unemployment 140 evolution punctuated equilibrium theory of natural evolution 130 social 133 theory of 120, 129 exchange rates 24, 32, 198 exports, falling 141 external economies 162 F Factory Act (1848) 127 factory inspectors 127 ‘failed states’ 69 Fannie Mae (US government-chartered mortgage institution) 4, 17, 173, 223 fascism 169, 203, 233 Federal Deposit Insurance Corporation (FDIC) 8 rescue of Continental Illinois Bank 261 Federal Reserve System (the Fed) 2, 17, 54, 116, 219, 236, 248 and asset values 6 cuts interest rates 5, 261 massive liquidity injections in stock markets 261 rescue of Continental Illinois Bank 261 feminists, and colonisation of urban neighbourhoods 248 fertilisers 186 feudalism 135, 138, 228 finance capitalists 40 financial institutions awash with credit 17 bankruptcies 261 control of supply and demand for housing 17 nationalisations 261 financial services 99 Financial Times 12 financialisation 30, 35, 98, 245 Finland: Nordic cris (1992) 8 Flint strike, Michigan (1936–7) 243 Florida, foreclosure wave in 1, 2 Forbes magazine 29, 223 Ford, Henry 64, 98, 160, 161, 188, 189 Ford foundation 44, 186 Fordism 136 Fordlandia 188, 189 foreclosed businesses 245 foreclosed properties 220 fossil fuels 78 Foucault, Michel 134 Fourierists 168 France acceptance of state interventions 200 financial crisis (1868) 168 French banks nationalised 198 immigration 14 Paris Commune 168 pro-natal policies 59 strikes in 38 train network 28 Franco-Prussian War (1870) 168 fraud 43, 49 Freddie Mac (US government-chartered mortgage institution) 4, 17, 173, 223 free trade 10, 33, 90, 131 agreements 42 French Communist Party 52 French Revolution 61 Friedman, Thomas L.: The World is Flat 132 futures, energy 24 futures markets 21 Certificates of Deposit 262 currency 24 Eurodollars 262 Treasury instruments 262 G G7/G8/G20 51, 200 Galileo Galilei 89 Gates, Bill 98, 173, 221 Gates foundation 44 gays, and colonisation of urban neighbourhoods 247, 248 GDP growth (1950–2030) 27 Gehry, Frank 203 Geithner, Tim 11 gender issues 104, 151 General Motors 5 General Motors Acceptance Corporation 23 genetic engineering 84, 98 genetic modification 186 genetically modified organisms (GMOs) 186 gentrification 131, 256, 257 geographical determinism 210 geopolitics 209, 210, 213, 256 Germany acceptance of state interventions 199–200 cross-border leasing 142–3 an export-dominated economy 6 falling exports 141 invasion of US auto market 15 Nazi expansionism 209 neoliberal orthodoxies 141 Turkish immigrants 14 Weimar inflation 141 Glass-Steagall act (1933) 20 Global Crossing 100 global warming 73, 77, 121, 122, 187 globalisation 157 Glyn, Andrew et al: ‘British Capitalism, Workers and the Profits Squeeze’ 65 Goethe, Johann Wolfgang von 156 gold reserves 108, 112, 116 Goldman Sachs 5, 11, 20, 163, 173, 219 Google Earth 156 Gould, Stephen Jay 98, 130 governance 151, 197, 198, 199, 201, 208, 220 governmentality 134 GPS systems 156 Gramsci, Antonio 257 Grandin, Greg: Fordlandia 188, 189 grassroots organisations (GROS) 254 Great Depression (1920s) 46, 170 ‘Great Leap Forward’ 137, 138, 250 ‘Great Society’ anti-poverty programmes 32 Greater London Council 197 Greece sovereign debt 222 student unrest in 38 ‘green communes’ 130 Green Party (Germany) 256 ‘green revolution’ 185–6 Greenspan, Alan 44 Greider, William: Secrets of the Temple 54 growth balanced 71 compound 27, 28, 48, 50, 54, 70, 75, 78, 86 economic 70–71, 83, 138 negative 6 stop in 45 Guggenheim Museu, Bilbao 203 Gulf States collapse of oil-revenue based building boom 38 oil production 6 surplus petrodollars 19, 28 Gulf wars 210 gun trade 44 H habitat loss 74, 251 Haiti, and remittances 38 Hanseatic League 163 Harrison, John 91 Harrod, Roy 70–71 Harvey, David: A Brief History of Neoliberalism 130 Harvey, William vii Haushofer, Karl 209 Haussmann, Baron 49, 167–8, 169, 171, 176 Hawken, Paul: Blessed Unrest 133 Hayek, Friedrich 233 health care 28–9, 59, 63, 220, 221, 224 reneging on obligations 49 Health Care Bill 220 hedge funds 8, 21, 49, 261 managers 44 hedging 24, 36 Hegel, Georg Wilhelm Friedrich 133 hegemony 35–6, 212, 213, 216 Heidegger, Martin 234 Helú, Carlos Slim 29 heterogeneity 214 Hitler, Adolf 141 HIV/AIDS pandemic 1 Holloway, John: Change the World without Taking Power 133 homogeneity 214 Hong Kong excessive urban development 8 rise of (1970s) 35 sweatshops 16 horizontal networking 254 household debt 17 housing 146–7, 149, 150, 221, 224 asset value crisis 1, 174 foreclosure crises 1–2, 166 mortgage finance 170 values 1–2 HSBC 20, 163 Hubbert, M.


pages: 424 words: 121,425

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

access to a mobile phone, affirmative action, Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Bear Stearns, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, disruptive innovation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, junk bonds, Kickstarter, low interest rates, M-Pesa, McMansion, Michael Milken, microcredit, mobile money, Money creation, moral hazard, mortgage debt, new economy, Own Your Own Home, Paul Volcker talking about ATMs, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, Savings and loan crisis, savings glut, subprime mortgage crisis, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, W. E. B. Du Bois, white flight, working poor

But there is a Hamiltonian solution to Jeffersonian fears: a public option in banking—a central bank for the poor. The core function of the central bank, or Federal Reserve, is to infuse liquidity into troubled banks so that they can withstand a temporary credit crunch and get back on their feet. A public option would provide the same short-term credit help to individuals so that they, too, can withstand a personal credit crunch and get back on their feet. Indeed, in the modern banking landscape, only a large, liquid lender is able to lower the costs of lending to the poor. Economies of scale and government backing can be used to bring down the costs of lending to the poor.

Even their use of our deposits, for which they pay virtually nothing, is made possible by an insurance scheme backed by the full faith and credit of the federal government.8 Banks also receive direct Federal Reserve money at a cool 1 percent interest, not to mention “discount window” loans, which help banks survive a credit crunch.9 When a bank, just like an individual, cannot pay its bills when they are due,10 the Federal Reserve gives the bank a short-term loan, so it can survive without having to sell off valuable assets. All this federal government support makes the banking sector unlike other businesses that must create their own wealth, without the use of other people’s money or cheap loans, when they fall short.

It takes money out of the economy by selling treasuries to banks, so they hold the government treasuries instead of all that cash. The second lever, the discount rate, or the “discount window,” is used to allow banks to survive a “run,” or a large number of depositors demanding their money all at once. This liquidity, or cheap loans, from the federal government allows banks to remain in business amid a short-term credit crunch or a panic. The third lever permitting the Fed to affect the availability of credit is the reserve requirement it imposes on banks. Banks are required to keep a certain amount of money in reserve that they do not lend out. Banks use this reserve to operate and meet the withdrawal needs of their customers, while the Federal Reserve uses this reserve to achieve its own policy goals of either expanding or contracting the money supply.


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

In public, it remained committed. Barclays announced half-yearly profits growth of 12 per cent on 2 August, referring to a strong performance in the very businesses where sub-prime mortgage problems would surface. A week later the dam broke. On Tuesday 7 August, afterwards widely acknowledged to be the start of the 2007 credit crunch, West LB Asset Management suspended investor redemptions from one of its asset backed securities funds and two days later BNP Paribas froze three of its hedge funds, indicating that they had no way of valuing the complex mortgage related derivatives in them. On 22 August, the credit agency S&P cut the rating on two mortgage backed funds arranged by Barclays and managed by Solent Capital Partners and Avendis Group, after investors refused to buy their debt.14 The funds were wound down and the securities that comprised them sold at a loss.

Winters was an American who moved to London in 1992. Until 2009 he was J. P. Morgan’s boss Jamie Dimon’s most trusted lieutenant, running its investment bank. He was regarded as one of the finest risk managers in the industry, was widely credited with helping the US bank avoid the worst of the credit crunch and received a standing ovation from the bank’s London trading floor on the day his departure was announced after a rumoured disagreement with Dimon.7 He was chosen by Chancellor Osborne to serve on the Independent Commission on Banking and would have been a popular choice with regulators and shareholders.

It wasn’t as if he had failed. It turned out that the marks in Barclays’ balance sheet had been no worse than anyone else’s and the authorities’ suspicions had been ill-founded. The amount it wrote off as a percentage of total loans and advances to customers was the lowest of the major UK banks following the credit crunch. Barclays Capital’s £6.1 billion write-down on mortgage and other credit related exposures in 2009, the year the authorities were most worried about, was easily absorbed by a £7 billion increase in trading income that year. Then there was BGI. He had stopped the board from selling it in 2002 for just over $1 billion and had become executive chair himself.


pages: 311 words: 99,699

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Blythe Masters, book value, break the buck, Bretton Woods, business climate, business cycle, buy and hold, collateralized debt obligation, commoditize, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial engineering, financial innovation, fixed income, Glass-Steagall Act, housing crisis, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kickstarter, locking in a profit, Long Term Capital Management, low interest rates, McMansion, Michael Milken, money market fund, mortgage debt, North Sea oil, Northern Rock, Plato's cave, proprietary trading, Renaissance Technologies, risk free rate, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, short selling, sovereign wealth fund, statistical model, tail risk, The Great Moderation, too big to fail, value at risk, yield curve

Vienna was the home of the great free-market economist Friedrich von Hayek, Brickell’s hero. “[Twenty years ago] we set out to design a business guided by market discipline because we believed that it should be an even better guide to good behavior than regulatory proscription,” he observed. “The credit crunch gives good evidence that market discipline has guided the derivatives business better than regulation has steered housing finance.” Brickell remained as opposed as ever to the idea that governments should intervene. “Hayek [the Viennese economist] believed that markets would create a rhythm of their own, that they are self-healing.

One issue was that, as the problem came to be described, the tremors on Wall Street were now reverberating on Main Street. Banks buckling under their vast losses were slashing loans not just to hedge funds now, but to all sorts of companies. The crucial question now was one of timing: would the banks recover before the credit crunch threw the economy into recession? Solemnly, Paul Tucker, head of markets at the Bank of England, warned that “We face a race [against time]” to see whether “financial conditions…stabilise before macroeconomic slowdown, here and abroad, raises loan defaults.” The signs didn’t look good for recovery at the banks that quickly; the losses just continued to mount.

Six months after the drama of the Bear Stearns deal, he sensed that more trouble and uncertainty were about to strike. On September 7, the Federal Reserve had put the two state-backed mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship,” a move tantamount to nationalization. By the summer, confidence that they would be able to weather the storm of mortgage defaults and the credit crunch had started to slip. The housing market was continuing to deteriorate fast, and the default rate on prime mortgages started to rise. Like the shadow banks and brokers, Fannie and Freddie had been operating with very high levels of assets relative to their equity. The move on September 7 temporarily calmed markets, but it also stoked more uncertainty about long-term prospects.


pages: 328 words: 96,678

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them by Nouriel Roubini

"World Economic Forum" Davos, 2021 United States Capitol attack, 3D printing, 9 dash line, AI winter, AlphaGo, artificial general intelligence, asset allocation, assortative mating, autonomous vehicles, bank run, banking crisis, basic income, Bear Stearns, Big Tech, bitcoin, Bletchley Park, blockchain, Boston Dynamics, Bretton Woods, British Empire, business cycle, business process, call centre, carbon tax, Carmen Reinhart, cashless society, central bank independence, collateralized debt obligation, Computing Machinery and Intelligence, coronavirus, COVID-19, creative destruction, credit crunch, crony capitalism, cryptocurrency, currency manipulation / currency intervention, currency peg, data is the new oil, David Ricardo: comparative advantage, debt deflation, decarbonisation, deep learning, DeepMind, deglobalization, Demis Hassabis, democratizing finance, Deng Xiaoping, disintermediation, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, energy security, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, eurozone crisis, failed state, fake news, family office, fiat currency, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, future of work, game design, geopolitical risk, George Santayana, Gini coefficient, global pandemic, global reserve currency, global supply chain, GPS: selective availability, green transition, Greensill Capital, Greenspan put, Herbert Marcuse, high-speed rail, Hyman Minsky, income inequality, inflation targeting, initial coin offering, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of movable type, Isaac Newton, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, knowledge worker, Long Term Capital Management, low interest rates, low skilled workers, low-wage service sector, M-Pesa, margin call, market bubble, Martin Wolf, mass immigration, means of production, meme stock, Michael Milken, middle-income trap, Mikhail Gorbachev, Minsky moment, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Mustafa Suleyman, Nash equilibrium, natural language processing, negative equity, Nick Bostrom, non-fungible token, non-tariff barriers, ocean acidification, oil shale / tar sands, oil shock, paradox of thrift, pets.com, Phillips curve, planetary scale, Ponzi scheme, precariat, price mechanism, price stability, public intellectual, purchasing power parity, quantitative easing, race to the bottom, Ralph Waldo Emerson, ransomware, Ray Kurzweil, regulatory arbitrage, reserve currency, reshoring, Robert Shiller, Ronald Reagan, Salesforce, Satoshi Nakamoto, Savings and loan crisis, Second Machine Age, short selling, Silicon Valley, smart contracts, South China Sea, sovereign wealth fund, Stephen Hawking, TED Talk, The Great Moderation, the payments system, Thomas L Friedman, TikTok, too big to fail, Turing test, universal basic income, War on Poverty, warehouse robotics, Washington Consensus, Watson beat the top human players on Jeopardy!, working-age population, Yogi Berra, Yom Kippur War, zero-sum game, zoonotic diseases

There are plenty of candidates: a massive market bubble bursting as in 1929; a surge in inflation forcing central banks to tighten monetary policy in a draconian way, leading to an unsustainable rise in interest rates; pandemics worse than COVID-19 as zoonotic diseases transmitted from animals to humans become more frequent and virulent; a corporate debt crisis stemming from a credit crunch as interest rates rise; a new housing bubble and then bust clobbering homeowners and lenders; a geopolitical shock like the war between Russia and Ukraine in 2022 escalating and becoming more severe, leading to further spikes in commodity prices and inflation; other geopolitical risks; and the rising risk of another global recession triggered by the confluence of the above risks.

The public debt of the government is owned by households directly or indirectly—directly when savings are in government bonds; indirectly when savings are deposited in banks that buy government bonds. If banks go bust or if the government defaults, then how will banks pay depositors? This is the doom loop all over again. Defaults as a way of resolving debt problems are ugly business. They cause many complications. First you see a credit crunch. Then banks collapse. Credit dries up. Corporations go bust. People lose jobs. Households lose their incomes and homes. The stock market tanks. It’s not as if the Mother of All Defaults is a nice biblical moratorium where you erase all debt. It’s going to be nasty. Compared to a default and restructuring, a bailout is preferable when the debtor—whether private or public—is short on cash but fundamentally sound, meaning illiquid but not insolvent.

We nudge variables like prices, taxes, wages, and exchange rates to see what happens. We seek combinations that promote growth while dodging calamities that arise from flawed judgment and bad luck. We attempt to balance inflation that comes from excessive increases in the money supply and deflation that at times may derive from a severe recession and a credit crunch. We monitor long- and short-term bond yields along a curve that informs us about expectations of future rates. We watch data for evidence that low unemployment signals higher inflation ahead. Like a board game, rules apply. Unlike a board game, the rules can evolve and the consequences are real.


pages: 261 words: 70,584

Retirementology: Rethinking the American Dream in a New Economy by Gregory Brandon Salsbury

Alan Greenspan, Albert Einstein, asset allocation, Bear Stearns, behavioural economics, buy and hold, carried interest, Cass Sunstein, credit crunch, Daniel Kahneman / Amos Tversky, diversification, estate planning, financial independence, fixed income, full employment, hindsight bias, housing crisis, loss aversion, market bubble, market clearing, mass affluent, Maui Hawaii, mental accounting, mortgage debt, mortgage tax deduction, National Debt Clock, negative equity, new economy, RFID, Richard Thaler, risk tolerance, Robert Shiller, side project, Silicon Valley, Steve Jobs, the rule of 72, Yogi Berra

During the housing boom, millions of Americans used the equity in their homes like house money for home improvements, vacations, new cars, or even more houses.31 And now, for those who rode the perpetual rise of home appreciation, many bets are off. On the House Although there were myriad culprits behind the credit crunch, Boomer behavior such as the wealth effect and house money effect played a prominent role. Robert Shiller’s book Irrational Exuberance, published in 2000, detailed the trouble that awaited us all when the impending Nasdaq bubble burst. He argued that it was the artificial rise in home values, not the tech stock boom, that was creating the dangerous wealth effect.

The term was coined by community activists who noted that the failure of banks to make loans in some low-income neighborhoods was so geographically distinct that it was easy to draw a red line on a map to delineate the practices.34 The CRA was proposed by Senator William Proxmire of Wisconsin for the purpose of eliminating the practices of redlining and “credit exportation,” where money is taken from a low-income community via deposits and lent to borrowers outside of the community.35 In spite of the bill’s laudable goals, it did have its share of opponents, who called it “thinly-disguised credit allocation” that “would represent a foot in the door toward the mandatory allocation of credit.”36 Following the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1975, among others, the CRA laid the groundwork for a practice that some people would call “predatory lending”—others would more bluntly call it lending money to people who had no business borrowing. How predatory and irresponsible were the lending standards that helped create the credit crunch? Consider this excerpt from an article written in November 2008 by Michael Lewis,37 author of Liar’s Poker, regarding a loan company in California. “(It was) moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. (The company) specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible.

As respected financial reporter Jason Zweig has written, “Our investing brains often drive us to do things that make no logical sense—but make perfect emotional sense.”45 Improve Your Retirementology IQ If you start thinking about something that’s already as emotional as a home like it’s an investment, rather than shelter, you may do things that make no logical sense. When it comes to being smart with your house, the difference between boom and bust may well be doing your homework. Check Out Refinancing Options In response to the credit crunch, there’s been plenty of manipulation of interest rates. Today we have some historically low rates and plenty of homeowners who could do well to lower their monthly payments. The best thing any homeowner can do right now—especially a homeowner who has a solid credit history—is to call the company that presently owns his mortgage and see what sort of rates are available.


pages: 620 words: 214,639

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan

Alan Greenspan, asset-backed security, Bear Stearns, book value, call centre, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Deng Xiaoping, diversification, Financial Instability Hypothesis, fixed income, Glass-Steagall Act, Hyman Minsky, Irwin Jacobs, Jim Simons, John Meriwether, junk bonds, Long Term Capital Management, low interest rates, margin call, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, mutually assured destruction, Myron Scholes, New Journalism, Northern Rock, proprietary trading, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Savings and loan crisis, savings glut, shareholder value, sovereign wealth fund, stock buybacks, too big to fail, traveling salesman, uptick rule, vertical integration, Y2K, yield curve

A few hours later, the Labor Department announced that some sixty-three thousand jobs had been lost in February, far more than had been expected. “Godot has arrived,” wrote Edward Yardeni, an economist and Pulitzer Prize—winning author who had been one of Wall Street's most relentlessly upbeat forecasters. “I've been rooting for the muddling through scenario. However, the credit crisis continues to worsen and has become a full-blown credit crunch, which is depressing the real economy.” By March 7, the Carlyle hedge fund was hitting the wall, as more margin calls were pouring in and the fund could not meet them despite having a $150 million line of credit from the Carlyle Group in Washington. The fund's publicly traded shares were suspended.

That image quickly became an apt metaphor for the brutal decline and fall of a once-proud firm, a firm that had survived every other crisis of the twentieth century, from the Depression to World War II to the market crash of 1987, without a single losing quarter but could not make it through the global credit crunch of 2007 and beyond. “Once you have a run on the bank, you are in a death spiral and your assets become worthless,” observed David Trone, a brokerage industry analyst at Fox-Pitt, Kelton. “Banks and brokerages are a house of cards built on the confidence of clients, creditors and counterparties.

“If he doesn't like it, he should do his future business elsewhere,” Greenberg told Landon Thomas Jr. of the New York Times in an inflammatory article that appeared on May 7. It was the first time that either man had spoken publicly about the events that destroyed the company with which they were so closely identified. Greenberg went on to blame Cayne for the demise of Bear Stearns. He said Cayne had not taken his advice as the credit crunch unfolded during the summer of 2007. “Jimmy was not interested in my point of view,” Greenberg said. “He was a one-man show—he didn't listen to anybody. That is when the real break took place.” When Thomas asked him to elaborate on specifically what he had recommended that Cayne do to alleviate the crisis at the firm, Greenberg said only, “You can read about it in my book.”


pages: 350 words: 109,220

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

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

“Although the downside risks to growth have increased somewhat, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected,” the Fed said. (Translation: The odds of recession are growing, but we’re more worried that inflation will take off.) The statement implied that the Fed was shrugging off the unfolding credit crunch. There was no hint of Bernanke’s concern about the risks to the economy posed by disintegrating credit markets. So much for transparency. “Sometimes the role of the release is more to placate nineteen people sitting around the Board table in Washington and less to educate the public,” said ex-Fed staffer Vincent Reinhart, who helped write the statements for six years.

Mishkin, meanwhile, was putting on his own version of a full-court press. He knew that his advocacy of aggressive rate cuts alarmed hawkish bank presidents like Hoenig, but he had allies heading into the December FOMC meeting: Geithner was nearly always more worried than anyone else about the credit crunch. San Francisco’s Yellen and Boston’s Rosengren were also both inclined to cut rates another half-percentage point. The federal funds futures market was betting on a half-point cut as well. Most regional Fed bank presidents, though, used their discount-rate requests as a signal that they were leaning toward a one-quarter point cut.

He and the Richmond Fed’s Jeff Lacker had gone to the same New Jersey high school, although they didn’t know each other then, and were graduate students in economics at the same time at the University of Wisconsin. Rosengren began his Fed career in the Boston Fed’s research department, focusing for a time on the credit crunch and banking woes of New England in the 1990s as well as Japan’s banking crisis. In 2000, he moved into the nitty-gritty of bank supervision and regulation, an unusual move for a Ph.D. economist but one that gave him highly relevant expertise during the Great Panic and a clear view that some fellow bank presidents lacked.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

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

Seeing the danger, the authorities attempted to soften the edict by relaxing its terms and announcing a generous transitional period. But the measure came too late. The property market collapsed as mortgaged land was fire-sold to fund repayments. Mass bankruptcy threatened to engulf the financial system. With Rome in the grip of a credit crunch, the emperor was forced to implement a massive bailout. The Imperial treasury refinanced the overextended lenders with a 100-million sesterces programme of three-year, interest-free loans against security of deliberately overvalued real estate. To the Senate’s relief, it all ended happily: “Credit was thus restored, and gradually private lending resumed.”11 This first flowering of monetary society in Europe was not to last, however.

Readers rushed to consult the great financial historian, Charles Kindleberger.1 To learn of his discovery that “financial crises have tended to appear at roughly ten-year intervals for the last 400 years or so” was either disturbing or comforting, depending on one’s perspective.2 Within a couple of years, however, the economists Carmen Reinhart and Kenneth Rogoff had published an even more comprehensive investigation into the history of financial crises. Its ominous subtitle warned the reader to expect not just four but “Eight Centuries of Financial Folly.”3 And as Tactitus’ account of the credit crunch under the Emperor Tiberius shows, monetary society has been prone to the problem of growing indebtedness ending in a crisis of solvency for much longer even than that. The reason is that this instability is intrinsic to money’s miraculous promise to combine security and freedom. The distinctive claim of money was that it could combine social stability and social mobility in a way that traditional society, with its immutable social structure, never could.

Three English and one Anglo-Indian bank had been forced into liquidation—at a time when there was no deposit insurance. Dozens of bill brokers and finance companies had gone under. But as always, the real ramifications of the crisis were felt far beyond the medieval wards of the City of London and long after the acute panic had subsided. All over the country, the credit crunch resulting from the damage to confidence brought a severe contraction of business. More than a hundred and eighty bankruptcies were recorded in the three months following Black Friday.34 Unemployment rose from 2.6 per cent in 1866 to 6.3 per cent in 1867, and rose again in 1868 before a proper recovery took hold.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

Alan Greenspan, bank run, banking crisis, banks create money, Basel III, Bretton Woods, business cycle, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Greenspan put, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land bank, land reform, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, Post-Keynesian economics, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, Savings and loan crisis, seigniorage, shareholder value, short selling, South Sea Bubble, technological determinism, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

Chapter 8: Making the Transition The transition from the current monetary system to the reformed system is made in two distinct stages: 1) an overnight switchover, when the new rules and processes governing money creation and bank lending take place, and 2) a longer transition period, of around 10-20 years, as the economy recovers from the ‘hangover’ of debt from the current monetary system. Changes are made to the balance sheets of the Bank of England and commercial banks, and additional measures are taken to ensure that banks have adequate funds to lend immediately after the switchover so that there is no risk of a temporary credit crunch (however unlikely). The changes can be made without altering the quantity of money in circulation. The longer-term transition allows for a significant reduction in personal and household debt, as new money is injected into the economy and existing loan repayments to banks are recycled into the economy as debt-free money.

How the Money Creation Committee would work Each month, the Money Creation Committee would meet and decide whether to increase, decrease, or hold constant the level of money in the economy. During their monthly meetings the MCC would decide upon two figures: The amount of new money needed in order to maintain aggregate demand in line with the inflation target (similar to the setting of interest rates today), and; The amount of new lending needed in order to avoid a credit crunch in the real economy and therefore a fall in output and employment (discussed in section 7.6). Both figures would be determined, as is the case now when setting interest rates, by reference to appropriate macroeconomic data, including the Bank of England’s Credit Conditions Survey (a survey of business borrowing conditions, outlined in Box 7.C).

Because banks would only be able to lend out money that had already been deposited in Investment Accounts, a lack of customers willing to invest (perhaps due to a negative outlook for the economy) would negatively affect a banks’ ability to lend, with potentially harmful effects on the economy. The Credit Conditions Survey would help to forewarn the Bank of England if such a situation was imminent, giving it time to provide funding to banks (exclusively for lending to businesses) in order to avert a potential credit crunch. In the longer term the Bank of England could also monitor the interest rate charged on loans to businesses. Generally speaking, a higher interest rate would suggest the need for the Bank of England to intervene to provide funding to the banks. However, there are several drawbacks to this approach.


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

Outside closed factory gates, police fought demonstrations by unpaid workers. Wenzhou’s credit crunch attracted widespread attention at home and abroad. Premier Wen visited the city, accompanied by the Finance Minister and the head of the central bank. His mission was to ‘stop the horse at the edge of the cliff’. Banks were ordered to lend and credit conditions were relaxed – local farmers were even allowed to post pigs as collateral for loans.105 Monetary conditions were eased nationwide. The credit crunch was successfully confined to Zhejiang province. By this date, back-alley banking of the Wenzhou variety had already been overtaken by a new type of lending, one that also took place outside the formal banking system.

The City’s first panic, or ‘sudden damp’ as it was called, broke out in 1621 after Dutch merchants withdrew their capital.3 The 1760s’ building boom ended in June 1772, following the collapse of the Ayr Bank, the Scottish bank managed by a crooked financier, Alexander Fordyce. The Ayr Bank’s failure triggered an international banking panic that brought down one of Amsterdam’s leading firms, Clifford & Sons, thereby exacerbating the credit crunch in the City of London. The successive phases of the credit cycle were described by Lord Overstone, the greatest banker of the Victorian age, who in 1837 characterized the ‘state of trade’ as subject to various conditions which are periodically returning; it revolves apparently in an established cycle.

Its streets were lined with car dealerships for luxury marques – an online video of a Wenzhou wedding motorcade, featuring a procession of Rolls-Royces, Bentleys, Ferraris and Lamborghinis, went viral.102 Towards the middle of 2011, however, the city’s informal banking system suddenly imploded. The proximate cause of the credit crunch was recent interest-rate hikes by the People’s Bank.fn12 The panic started after a local industrial park defaulted on its loans.103 A few months earlier, the owner of the country’s largest spectacle manufacturer had disappeared, leaving behind large debts to private lenders. Pawnshops, credit companies and loan sharks called in their loans and raised their lending rates.


pages: 586 words: 159,901

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

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

From the hype, you'd also think the U.S. was leaving its major rivals in the dust, but comparisons of per capita GDP growth rates don't bear this out. At the end of 1997, the U.S. was tied with France at second in the growth league, behind Canada, and just tenths of a point ahead of the major European countries. Step back a bit, and the U.S. sags badly. For the 1989-95 period, when the U.S. was stuck in a credit crunch and a sputtering recovery, it was at the bottom of the G7 growth league, along with Canada and the U.K. Between 1979 and 1988, there's no contest, with the U.S. tying France for the worst numbers in the G-7. Comparisons with the pre-crisis Asian tigers are hardly worth making. It may be as capitalisms mature, financial surpluses break the bounds of regulated systems, and force an American-style loosening of the bonds.

This would require an extension of the central bank safety net to the entire financial matrix, not merely the commercial banks that were its legal charges. Fighting inflation might entail a terrible financial cost, and so the Fed would be forced to err on the side of indulgence whenever the credit system looked rocky. Perhaps Minsky was a little early — the first financial crisis of the post- WALL STREET 1945 period was the credit crunch of 1966 — but he described the mechanism perfectly: first the rising inflation of the 1960s and 1970s, followed by the Volcker clampdown, which was lifted when it looked like Mexico's default would bring the world banking system down. But the Volcker clampdown required driving interest rates far higher, and for a longer period of time, than anyone would have expected, to shut the economy down, so creative are the innovators at evading central bank restraints.

., 249-251, 297 Colby, William, 104 Colgate-Palmolive, 113 College Retirement Equities Fund (CREF), 289 Collier, Sophia, 310 Columbia Savings, 88 commercial banks, 81-84 commodity prices, futures markets and, 33; see also futures markets common stock, 12 Community Capital Bank, 311 community development banks, 311-314 community development organizations, co-optation of, 315 community land trusts, 314-315 compensatory borrowing, 65 competition managerialist view of, 260 return of, 1970s, 260 Comstock, Lyndon, 311 Conant, Charles, 94-95 Conference Board, 136, 291 consciousness credit and, 236-237 rentier, profit with passage of time, 238 consensus, 133 consumer credit, 64-66, 77 in a Marxian light, 234 in 1930s depression, 156-157 rare in Keynes's day, 242 see also households Consumer Expenditure Survey, 70 consumption, 189 contracts, 249; see afao transactions-cost economics control. 5ee corporations, governance cooperatives, 321 managers hired by workers, 239 weaknesses of ownership structure, 88 corporate control, market for, 277-282 Manne on, 278 corporations debt distribution of, 1980s, 159 and early 1990s slump, 158-161 development, and stock market, 14 emergence, and Federal Reserve, 92-96 emergence of complex ownership, 188 evolution, 253 form as presaging worker control (Marx), 239-240 importance of railroads in emergence, 188 localist critique of, 241 managers' concern for stock price, 171 multinational evolution, and financial markets, 112-113 investment clusters, 111-112 nonfinancial, 72-76 finances (table), 75 financial interests, 262 refinancing in early 1990s, l6l role in economic analysis, 248 shareholders conribute nothing or less, 238 soulful, 258, 263; see afeo social investing stock markets' role in constitution of, 254 transforming, 320-321 virtues of size, 282 corporations, governance, 246-294 Baran and Sweezy on, 258 Berle and Means on, 252-258 abuse of owners by managers, 254 interest-group model, 257-258 Berle on collective capitalism, 253-254 boaids of directors, 27-29, 246, 257, 259, 263, 272 financial representatives on, 265 keiretsu, 275 of a "Morganized" firm, 264 rentier agenda, 290 structure, 299 competition's obsolescence/return, 260 debt and equity, differences, 247 EM theory and Jensenism as unified field theory, 276 financial control 359 WALL STREET meaning, 264 theories of, rebirth in 1970s, 260-263 financial interests asserted in crisis, 265 financial upsurge since 1980s, 263-265 Fitch/Oppenheimer controversy, 261-262 Galbraith on, 258-260 Golden Age managerialism, 258-260 Herman on, 260 influence vs. ownership, 264—265 international comparisons, 248 Jensenism. 5eeJensen, Michael market for corporate control, 277-282 narrowness of debate, 246 Rathenau on, 256 shareholder activism of 1990s, 288-291 Smith on, 255-256 Spencer on, 256-257 stockholder-bondholder conflicts, 248 theoretical taxonomy, 251-252 transactions cost economics, 248-251 transformation, 320-321 useless shareholders, 291-294 correlation coefficient, 116 correlation vs. causation, 145 cost of capital, 184, 298 Council of Institutional Investors, 290 Cowles, Alfred, 164 crack spread, 31 Cramer, James, 103 crank, 243 credit/credit markets assets, holders of, 59-61 as barrier to growth, 237 as boundary-smasher (Marx), 235 centrality of, 118-121 and consciousness, 236-237 European vs. U.S. theories of, 137 function, 59 as "fundamental" (Marx), 244 information asymmetry, 172 market share by lending institution, 81 structure, 58-62 subordination to production (Marx), 237 U.S. international position, 61 see also bond markets; debt; money, psychology of credit crunch 0989-92), 158-161 credit gratuitiVioudhon), 302 credit rationing, 172 in Keynes's Treatise, 193-194 crime, business, 252 crises, corporate, financial interests assert power during, 265 crises, financial, 265 financiers' political uses of, 294-297 increasing prominence starting in 1970s, 222 money and, 93-94 Keynes, 202-205 Marx, 232-236 Third World, 110, 294-295 see also bailouts Crotty, James, 229 crowd psychology, 176-177, 185 currency markets, 41^9 crises, economic causes, 44 gold, 46-49 history, 41^4 mechanics and trading volume, 45—46 during trading week, 130-131 underlying values, 44-45 currency swaps, 35 Dale, James Davidson, 104 Davidson, Paul, 242, 243 Debreu, Gerard, 139 debt appropriate underlying assets, 247 as conservatizing force, 66 ideal level, pre-MM, 150 and 1930s depression, 155-158 and political power, 4, 23 reasons to shun, 149 by sector, 58-59 by type (table), 60 see also credit/credit markets; specific sectors debt deflation (Fisher), 157 modern absence of, 234-235 why there was none in early 1990s, 158-161 deficit financing, 297 deflations.


pages: 300 words: 77,787

Investing Demystified: How to Invest Without Speculation and Sleepless Nights by Lars Kroijer

Andrei Shleifer, asset allocation, asset-backed security, Bernie Madoff, bitcoin, Black Swan, BRICs, Carmen Reinhart, clean tech, compound rate of return, credit crunch, currency risk, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, John Bogle, Kenneth Rogoff, low interest rates, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, Robert Shiller, selection bias, sovereign wealth fund, too big to fail, transaction costs, Vanguard fund, yield curve, zero-coupon bond

While I chuckled at the time, it was interesting and scary how fast the world moves into panic mode, even without an obvious trigger like war, epidemics or natural disasters. This was a panic caused by the falling house of cards that most of us had helped build through the creation, purchase, regulation, complicity, or ignorance of a crazy, headless, expansion of credit. (I recommend How I Caused the Credit Crunch by Tetsuya Ishikawa (2009, Icon Books). Tets, who was very involved with crisis events while at Goldman and Morgan, has written a funny book about the financial crises.) As bad as things were at the worst point of the 2008–09 crisis they could clearly have been much worse. There were still functioning financial markets, no governments had defaulted (they had in fact been able to oversee large and necessary bailouts), there was no hyperinflation or threats of war, and there was no widespread civil unrest.

Index accountants active managers compared with index trackers, 2nd performance over time active personal portfolio management adding up the costs of advisory charges age life stages of financial planning and risk profile AIG allocations see investment allocations alternative investments alternative weightings ‘angel’ investing, 2nd annuities IRR (internal rate of return), 2nd apocalypse investing avoiding fraud and financial disasters and gold as security assets asset classes to avoid concentration risk customisation and noninvestment growth of, and overpayment of fees and institutional investors intangible and liabilities and portfolio theory in the rational portfolio, assets split tangible see also minimal risk assets avoiding fraud banks bailouts cash deposits with and financial disaster and gold as security and property investment Barclays US High Yield index Bernstein, William The Intelligent Asset Allocator bid/offer spread black swan events, 2nd, 3rd Bogle, John bonds bond indices, 2nd dollar domination of ETFs, 2nd and financial planning income from coupon payments indices and the rational portfolio adding other bonds to risk preferences, 2nd rebalancing your portfolio ‘risky’ bonds and liquidity shortterm, 2nd see also corporate bonds; government bonds; minimal risk assets Brazil government bonds broad-based portfolios and liquidity world equities, 2nd, 3rd, 4th, 5th Buffett, Warren, 2nd fee structure capital gains tax (CGT), 2nd, 3rd and gifts car insurance Case-Shiller House Price index, 2nd cash deposits deposit insurance government guarantees risk of CGT see capital gains tax (CGT) civil unrest collectibles commercial property market commodities, 2nd returns form company shares comparison sites, 2nd enhanced independent Contagion (film) corporate bonds adding to minimal risk assets, 2nd, 3rd and financial planning and credit quality ETFs, 2nd and financial planning liquidity of and minimal risk assets and portfolio theory, 2nd and the rational portfolio, 2nd, 3rd adjusting allocations, 2nd risk preferences real return expectations world corporate debt yields, 2nd costs see fees and expenses CRB Commodity index CRB Total Return index, 2nd credit ratings government bonds, 2nd, 3rd, 4th adding to minimal risk assets currency and government bonds, 2nd, 3rd, 4th matching and world equities currency-hedged investment products custody charges customisation Cyprus defined benefits pension schemes defined contribution pension schemes diversification and assets benefits of and corporate bonds, 2nd and equity market risk geographical and government bonds, 2nd and the rational portfolio, 2nd and world equities, 2nd Dow Jones index Industrial Average recovery from losses drop dead allocation early savers edge over the markets see investment edge efficiency frontiers EIS (Enterprise Investment Schemes) Elton, Edwin Modern Portfolio Theory and Investment Analysis emerging market companies listed on Western exchanges Enterprise Investment Schemes (EIS) equities and government and corporate bonds performance and portfolio theory and property investment and the rational portfolio allocations risk preferences, 2nd rebalancing your portfolio risk of diversification and false sense of security recovering from large losses standard deviation, 2nd, 3rd view that markets will always bounce back see also world equities equity risk premium and financial planning ETFs (exchange traded funds), 2nd, 3rd, 4th advantages to owning buying bonds, 2nd, 3rd commodity trading customisation fees and expenses in global property and gold trading implementing and index funds leveraged maturities and minimal risk bonds, 2nd physical or synthetic rebalancing your portfolio and taxes total expense ratio (TER) tracking errors European Union bonds, 2nd expenses see fees and expenses fat tails fees and expenses, 2nd adding up costs alternative investments benefits of paying lower fees and comparison websites financial advisers index trackers compared with active managers and investment edge pension plans and performance impact over time mutual funds, 2nd and the rational investor and the rational portfolio, 2nd rebalancing your portfolio Ferri, Richard All About Asset Allocation financial advisers, 2nd and comparison websites financial crisis 2008–09 and commodities trading and currency matching and government bonds yields and high risk preferences and liquidity and longterm financial planning, 2nd and market risk, 2nd, 3rd, 4th financial planning building your savings and the financial crisis 2008–09, 2nd and investment allocations, 2nd, 3rd and life stages and risk, 2nd risk surveys rules of thumb to consider supercautious savers financial software packages France government bonds fraud, avoiding frequent trading FTSE All-Share index FTSE All-Share Tracker fund FTSE NAREIT Global index, 2nd, 3rd fund pickers future performance mutual funds GDP and corporate bonds and world equity market value, 2nd Germany government bonds gifts and capital gains tax gold, 2nd as security Goldman Sachs government bonds adding to minimal risk assets, 2nd and financial planning and bank deposits banks and government defaults buying in base currency, 2nd credit ratings, 2nd, 3rd, 4th and diversification earnings ETFs, 2nd and the financial crisis (2008) and financial planning inflationprotected liquidity of longerterm maturity minimal risk and world equities, 2nd, 3rd and portfolio theory, 2nd, 3rd and the rational portfolio, 2nd, 3rd adjusting, 2nd, 3rd allocations, 2nd risk preferences real return expectations time horizons yields Greece government debt and bond yields hedge funds, 2nd, 3rd, 4th Japanese government bonds and liquidity high risk preferences home markets overinvestment in Icelandic banks income tax index funds, 2nd and ETFs and government bonds implementing maturities and minimal risk bonds, 2nd total expense ratio (TER) tracking errors index-tracking products, 2nd and active managers adding bonds to a portfolio compared with active managers, 2nd comparison sites, 2nd enhanced independent costs of fund changes and taxes future product development implementing license fees for and liquidity and mutual funds and the rational portfolio, 2nd, 3rd different risk preferences total expense ratio (TER), 2nd versus mutual fund returns over time world equities, 2nd see also ETFs (exchange traded funds); index funds India government bonds inflation earnings from minimal risk bonds inflation-adjusted government bonds inflation-protected bonds returns on world equities information/research costs institutional investors insurance buying deposit insurance schemes intangible assets interest rates cash deposits in banks government bonds, 2nd international investment investment allocations adding other government and corporate bonds and financial planning, 2nd, 3rd flexibility of financial goals life stages rebalancing your portfolio, 2nd investment edge, 2nd absence of, 2nd adding up the costs asset classes to avoid and commodities trading, 2nd and the competition different ways of having and expenses and performance picking your moment and private investments and the rational portfolio reconsidering your edge and world equities ‘invisible hand’ of the market IOUs (promissory notes) IRR (internal rate of return) annuities, 2nd iShares, 2nd Ishikawa, Tets How I Caused the Credit Crunch Japan commodities trading government bonds Nikkei index jewellery leverage ETFs and mortgages portfolios liabilities and the rational portfolio life insurance, 2nd life stages and financial planning liquidity equity portfolio and ‘risky’ bonds and ETFs minimal risk and private investments and the rational portfolio, 2nd, 3rd returns on illiquid investments selling your investment, 2nd localised risks avoiding and noninvestment assets Madoff, Bernie market capitalisation and world equities, 2nd market efficiency and inefficiency Mexico government bonds Microsoft investors, 2nd, 3rd and liquidity, 2nd mid-life savers minimal risk assets, 2nd adding other bonds to corporate bonds, 2nd, 3rd government bonds, 2nd adjusting the risk profile asset classes to avoid buying and diversification and equity markets ETFs and financial planning 50/50 split with world equities, 2nd, 3rd allocations government bonds earnings inflation-protected time horizons of inflationprotected bonds and liquidity as optimal portfolio and portfolio theory, 2nd in the rational portfolio, 2nd, 3rd, 4th, 5th, 6th real return expectations and world equities, 2nd Morgan Stanley mortgages and currency matching and leverage MSCI World Index, 2nd, 3rd, 4th mutual funds fees and performance, 2nd and index trackers national economies and equity market risk OEICs (openended investment companies) oil trading, 2nd optimal portfolio theory minimal risk asset past performance and future performance Paulson, John pension funds, 2nd, 3rd benefits and charges defined benefits schemes underfunded performance and fees index trackers versus active managers versus mutual funds portfolio theory and government bonds optimal and the rational investor price impact private equity capital, 2nd private investments, 2nd and liquidity privatisations and world equities professional investment managers property market investments, 2nd avoiding and financial disasters institutional investors and liquidity and the rational portfolio US subprime housing markets, 2nd, 3rd rational investing, 2nd core of ongoing tasks of rational portfolio adding other bonds to adjusting allocations and equity risk return expectations asset classes to avoid assets and liabilities assets split checklist corporate bonds, 2nd diversification financial benefits of and financial disasters geographical diversification government bonds, 2nd, 3rd, 4th, 5th implementation incorporating other assets and investment edge key components of a and liquidity, 2nd, 3rd and pension plans and portfolio theory and risk preferences risk/return profile, 2nd, 3rd, 4th tailoring to specific needs and circumstances tax adjustments tax benefits of holding and tax efficiency, 2nd, 3rd, 4th world equities, 2nd, 3rd, 4th see also minimal risk assets rebalancing your portfolio ticket size REITs (Real Estate Investment Trusts) residential property market retirees investment allocation retirement annuities and financial planning risk cash deposits credit risk and corporate bonds of equity markets equity risk premium high risk preferences and longterm financial planning, 2nd and the optimised market and the rational portfolio, 2nd, 3rd asset split risk preferences risk expertise websites risk surveys risk/return profile equity markets and financial planning, 2nd, 3rd and long-term financial planning minimal risk assets adding government and corporate bonds to pension plans and portfolio theory and the rational portfolio, 2nd, 3rd, 4th, 5th rebalancing your portfolio world equities riskless investment choice, 2nd S&P 500 index and the CRB Commodity index Index Tracker Portfolio standard deviation stocks volatility savings ‘doing nothing’ with and long-term financial planning life stages SD see standard deviation (SD) selling investments and liquidity software packages Spain government bonds standard deviation (SD) building your savings and equity market risk, 2nd, 3rd synthetic ETFs Taleb, Nassim Nicholas The Black Swan, 2nd tangency points tangible assets tax efficient proxies tax wrappers, 2nd taxes, 2nd advisers or accountants questions to ask benefits of the rational portfolio capital gains tax (CGT), 2nd, 3rd, 4th creating trading lots and financial disaster and pension plans, 2nd rational portfolio adjustment realising losses against tax advice websites tax efficiency and the rational portfolio, 2nd, 3rd, 4th tax schemes tax-sheltered or optimised products transaction tax, 2nd technology-focused funds, 2nd TER (total expense ratio), 2nd This Time is Different: Eight Centuries of Financial Folly (Reinhart and Rogoff) total expense ratio (TER), 2nd transaction taxes, 2nd, 3rd transfer charges turnover costs unit trusts, 2nd United Kingdom bank deposits and credit guarantee equities government bonds credit rating earnings from sterling investors United States corporate bonds, 2nd Dow Jones index, 2nd equity market, 2nd risk, 2nd, 3rd and total expense ratio government bonds credit ratings dollar investors earnings from versus property investment sub-prime housing market, 2nd, 3rd Vanguard, 2nd, 3rd, 4th, 5th, 6th FTSE AllShare index venture capital, 2nd Virgin FTSE All-Share Tracker fund volatility and financial planning predicting future Waal, Edmund de The Hare with Amber Eyes world equities adjusting the rational portfolio alternative weightings defining diversification benefits, 2nd, 3rd ETFs expected returns and financial planning 50/50 split with minimal risk assets, 2nd, 3rd investment allocation and high risk preferences indices liquidity of market value and minimal risk assets, 2nd overweighing ‘home’ equities and portfolio theory and the rational portfolio, 2nd, 3rd, 4th allocations risk preferences real return expectations US market, 2nd ‘Investing Demystified delivers, with great clarity and lucidity, the best possible advice you can get when it comes to personal investments and financial planning.’

Investing Demystified offers invaluable help in doing this.’ Paul Amery, Index Universe ‘In a world complicated by an over-zealous finance industry, it is refreshing to read Investing Demystified, a great and easy read that reveals the simple truth behind successful investments.’ Tets Ishikawa, author of How I Caused the Credit Crunch ‘Doing something is better than doing nothing if you want to retire in comfort. But what can we do if we don’t have an edge in the market? Lars Kroijer takes a refreshing look at how everyday people can improve their fortunes by taking some simple investing steps. But if you want to do better than that, then you will need to find yourself an edge.’


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

Asian financial crisis, behavioural economics, big-box store, business climate, business cycle, carbon footprint, carbon tax, clean tech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, degrowth, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, Herman Kahn, IKEA effect, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jevons paradox, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, ocean acidification, off-the-grid, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, radical decentralization, ride hailing / ride sharing, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, systematic bias, systems thinking, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Yochai Benkler, Zipcar

Economic growth and subjective well-being: Reassessing the Easterlin paradox. Brookings Papers on Economic Activity 1: 1-87. ———.2008b. Happiness inequality in the United States. The Journal of Legal Studies 37 (s2) (June): S33-S79. Stewart, Heather. 2009. This is how we let the credit crunch happen, ma’am . . . The Guardian, July 26. Available from http://www.guardian.co.uk/uk/2009/jul/26/monarchy-credit-crunch (accessed July 27, 2009). Stiglitz, Joseph E., Amartya Sen, and Jean-Paul Fitoussi. 2009. Report by the commission on the measurement of economic performance and social progress. Available from www.stiglitz-sen-fitoussi.fr (accessed September 28, 2009).

If you’re lucky enough to land a good-paying job with a thriving green company, you may want to dive in headfirst. However, as we learned in the 1990s tech boom, there can be an ephemeral quality to a rapidly emerging sector, even for some of the highest-flying companies. In 2008 the surging renewable-energy sector ground to a halt, stymied by the credit crunch. And much of what’s passing as green today is sustainable in one, rather than all, of its dimensions. Hybrid vehicles emit less carbon, but their batteries are toxic. They’re better than BAU vehicles, but cannot yet be produced in large quantities without negative eco-impacts. So while they’re essential, today’s green products and technologies are not a magic bullet.


pages: 229 words: 75,606

Two and Twenty: How the Masters of Private Equity Always Win by Sachin Khajuria

"World Economic Forum" Davos, affirmative action, bank run, barriers to entry, Big Tech, blockchain, business cycle, buy and hold, carried interest, COVID-19, credit crunch, data science, decarbonisation, disintermediation, diversification, East Village, financial engineering, gig economy, glass ceiling, high net worth, hiring and firing, impact investing, index fund, junk bonds, Kickstarter, low interest rates, mass affluent, moral hazard, passive investing, race to the bottom, random walk, risk/return, rolodex, Rubik’s Cube, Silicon Valley, sovereign wealth fund, two and twenty, Vanguard fund, zero-sum game

Underlying fissures created by subprime mortgage losses have cracked open, with a devastating effect on the global financial system. Ordinary citizens are staring down the barrel of an ugly recession. Unemployment is soaring, on an unshakable course to double digits, and homeowners are drowning in foreclosure. The Federal Reserve has slashed interest rates as a credit crunch grips. Governments are forced to turn to their tools of last resort: colossal stimulus measures and nationalization plans to save households and corporations. Then, a week after the U.S. government is forced to bail out mortgage backers Fannie Mae and Freddie Mac, the unthinkable happens: Lehman Brothers, a major investment bank, files for bankruptcy.

The underpinning of their interest is the macro backdrop. The financial crisis is likely to be shorter-lived than the financial markets expect, they believe, because the Federal Reserve is poised to unleash powerful weapons of monetary policy on an unprecedented scale—in coordination with its counterparts overseas. The credit crunch will be overwhelmed by a sea of liquidity. This gift of almost a trillion dollars of freshly printed cash from the Fed alone will lift stock and debt markets to the point that investors will forget the jagged falls and crashes that have been torturing them in recent months. To be blunt, things will not stay cheap for long.

With incoming cash flow under rising pressure, the business needs to refinance, and lenders are reluctant to upsize the vital lines of credit required for working capital. It’s like PetCare went from Most Valuable Player to outcast in no time at all. Within six months, the company will likely face a credit crunch that could prove to be terminal for the business. Enter the Firm. Losing out on the auction for PetCare was a blow for the young partner who led the project; it was his first taste of failure in his new senior role. In hindsight, perhaps losing out was a blessing. He now has the chance to take hold of the company at a lower valuation than it was sold for.


pages: 1,088 words: 228,743

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

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Black Swan, Bob Litterman, bond market vigilante , book value, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, carbon credits, Carmen Reinhart, central bank independence, classic study, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, inverted yield curve, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, pension time bomb, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, seminal paper, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

While recognizing that historical credit spreads overstate the expected return advantage, these spreads are a natural starting point for assessing corporates’ likely expected return advantage over governments. Figure 10.6 displays spread histories dating back to 1926 to show that Great Depression era spreads have still not been matched or exceeded even during the stagflationary recessions between 1973 and 1982 or during the 2008 Credit Crunch. I include a recession “dummy” variable (recessions are shaded) to highlight the strong countercyclicality in spreads. While Baa–Aaa and Aaa–Treasury spreads move together, lower rated bonds (as shown by the Baa–Aaa spread) exhibit more pronounced countercyclical variation than top-rated bonds.

The average realized excess return of MBSs between 1990 and 2009 is 40% of the average OAS level (28 bp vs. 69 bp). This realized performance is clearly disappointing. Some performance attribution gymnastics are needed to understand why. The downtrend in yields and unexpectedly efficient refinancings, some increase in volatilities, and a sharp widening of swap spreads and MBS spreads during the Credit Crunch have all contributed. Arora–Heike–Mattu propose a five-factor empirical model to explain the monthly excess returns on MBSs over Treasuries. The factors include realized and implied volatilities, swap–Treasury spread changes (a liquidity proxy), prepayment surprises, and spread directionality.

I consider the convenience of carry trading and the degree of systematic risk as alternative explanations:• One reason for the poor performance of credit carry is the headwind nature of the sample period (with some net widening of credit spreads between December 1992 and December 2009). Even if we study performance histories ending before the 2007–2008 Credit Crunch, however, long-run excess returns to credit carry are modest. I conjecture that corporate bonds have been the obvious easy way to chase yield, and as a result have tended to be structurally overpriced. Although the currency carry strategy did become overcrowded a few years ago, it was evident for a long time that less speculative capital was allocated to cross-country trading than to within-country opportunities


pages: 385 words: 118,314

Cities Are Good for You: The Genius of the Metropolis by Leo Hollis

Airbnb, Alvin Toffler, banking crisis, Berlin Wall, Big Tech, Boris Johnson, Broken windows theory, Buckminster Fuller, call centre, car-free, carbon footprint, cellular automata, classic study, clean water, cloud computing, complexity theory, congestion charging, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, Deng Xiaoping, digital divide, digital map, Disneyland with the Death Penalty, Donald Shoup, East Village, Edward Glaeser, Elisha Otis, Enrique Peñalosa, export processing zone, Firefox, Frank Gehry, General Motors Futurama, Geoffrey West, Santa Fe Institute, Gini coefficient, Google Earth, Great Leap Forward, Guggenheim Bilbao, haute couture, Hernando de Soto, high-speed rail, housing crisis, illegal immigration, income inequality, informal economy, Internet of things, invisible hand, Jane Jacobs, Jevons paradox, Kickstarter, knowledge economy, knowledge worker, Leo Hollis, Lewis Mumford, Long Term Capital Management, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, Masdar, mass immigration, megacity, negative equity, Neil Armstrong, new economy, New Urbanism, Occupy movement, off-the-grid, openstreetmap, packet switching, Panopticon Jeremy Bentham, place-making, power law, Quicken Loans, Ray Oldenburg, Richard Florida, sharing economy, Silicon Valley, Skype, smart cities, smart grid, spice trade, Steve Jobs, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, The Great Good Place, the High Line, The Spirit Level, the strength of weak ties, The Wisdom of Crowds, Thomas Malthus, trade route, traveling salesman, urban planning, urban renewal, urban sprawl, walkable city, white flight, Y2K, Yom Kippur War

As John Howkins, who coined the phrase ‘creative economy’, states: ‘Creativity is not new and neither is economics, but what is new is the nature and the extent of the relationship between creativity and economics.’8 In 2001 Howkins predicted that the creativity business was worth $2.2 trillion worldwide and was set to grow 5 per cent a year; he was almost right. This sector was the one area of the global economy that was least affected by the credit crunch; in 2008 it generated $592 billion, more than double its turnover in 2002, which suggests an annual growth of 14 per cent. The knowledge economy forces us to think again about how we work, and what we do; it could also allow us to think about the city anew. According to Richard Florida, the extent of the creative classes is having a profound impact on the success of cities.

Most of the time the consequences are not as dire as the death of Trayvon Martin but the effects are as invidious. We have become accustomed to expect people to act selfishly, and as a result do so ourselves. This loss of trust has consequences which we can find all around us. In 2011, following the collapse of the banks in the aftermath of the credit crunch, the revelations of MPs’ expenses in the UK, as well as the phone-hacking scandal that forced News International to admit that it had illegally listened into thousands of private messages, Ipsos MORI conducted a poll on behalf of the UK Office of National Statistics to measure levels of trust within the major professions.

During the housing boom, he argued, it was only the desires of homeowners that mattered. As a result, those who do not own property, or those who cannot afford a deposit, have no stake in the city. In response Harvey offered a simple solution that could be found in the ruins of the housing collapse itself. Following the 2008 credit crunch where so many homes were foreclosed because of the owners’ inability to pay the mortgage, families lost everything and were forced to move away while the bank got little back on their investment. But this makes little sense – it ruins families, destroys communities and weakens cities. If the banks and municipalities were able to rethink this situation, a more hopeful future was possible.


pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

"World Economic Forum" Davos, Alan Greenspan, algorithmic trading, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial engineering, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, Glass-Steagall Act, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Menlo Park, Michael Milken, military-industrial complex, Minsky moment, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, shareholder value, short selling, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Chicago School, Thomas Malthus, too big to fail, trade route

C1. 16 Alan Katz and Ian Katz, “Greenspan Slept as Off-Balance Sheet Toxic Debt Evaded Scrutiny,” Bloomberg News, Oct. 30, 2008. 17 Mark Pitman, “Evil Wall Street Exports Boomed with Fools Born to Buy Debt,” Bloomberg News, October 27, 2008. 18 “Fed Chief Warns of Housing Froth,” Washington Post, June 10, 2005. 19 Michael Lewis, “The End,” Portfolio, November 11, 2008. 20 Gretchen Morgenson, “How the Thundering Herd Faltered and Fell,” New York Times, November 9, 2008, page BU 1. 21 American Theocracy, p. 296. 22 Ibid, p. 292. 23 Katz and Katz, “Greenspan Slept.” 24 Pitman, “Evil Wall Street Exports Boomed.” 25 “A Quiet Windfall for U.S. Banks,” Washington Post, November 10, 2008. 26 “In Praise of a Rocky Transition,” The Nation, December 1, 2008. 27 “Truth or Consequences,” Barron’s, December 29, 2008, and “Credit Crunch: What Credit Crunch?” Reuters, December 11, 2008. 28 “Fed Official: Bank Mergers Must Not Lead to ‘Financial Oligarchy,’ ” Bloomberg News, October 13, 2008. 29 “Up and Down Wall Street,” Barron’s, December 8, 2008. 30 William E. Leuchtenburg, “George, You Were No Herbert Hoover,” The New Republic, October 22, 2008. 31 “Mr.

No expert on exotic finance, he was an academic specialist in monetary policy—a man held out to Congress and the public as understanding how to prevent or ameliorate a great depression. The Fed, in Bernanke’s view, would have to expand the money supply or extend liquidity enough to overcome any credit crunch. As a card-carrying monetarist, he also insisted that no meaningful inflation was building in 2007 and early 2008 even though global commodity price indexes had begun to soar. Thus, and without foresight, did a hapless George W. Bush assemble his last economic team. They would pick up where the original bubble-blower, Alan Greenspan, Fed Chairman between 1987 and early 2006, had left off.

Andrews, “Fed and Regulators Shrugged as the Subprime Crisis Spread,” New York Times, December 18, 2007. 17 “Credit Turmoil ‘Has Hallmarks of Bank Run,’ ” Financial Times, September 2, 2007. 18 Mohamed El-Erian, “In the New Liquidity Factories, Buyers Must Still Beware,” Financial Times, March 22, 2007. 19 David W. Tice, “Report to Shareholders,” Prudent Bear Funds, Inc., April 30, 2007. 20 Satyajit Das, “Credit Crunch: The New Diet Snack of Financial Markets,” www.prudentbear.com, September 5, 2007. 21 Bill Gross, “What Do They Know?”Investment Outlook, www.pimco.com, October 2007. 22 “Testimony of Robert J. Shiller Before the Joint Economic Committee of Congress,” Washington, D.C., September 19, 2007, pp. 1-2. 23 “The R-Word Surfaces on Wall Street,” Financial Times, September 10, 2007. 24 Ibid. 25 “A New Light on Housing’s Role in U.S.


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Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy by Iain Martin

Alan Greenspan, asset-backed security, bank run, Basel III, Bear Stearns, beat the dealer, Big bang: deregulation of the City of London, Bletchley Park, call centre, central bank independence, computer age, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, deindustrialization, deskilling, Edward Thorp, Etonian, Eugene Fama: efficient market hypothesis, eurozone crisis, falling living standards, financial deregulation, financial engineering, financial innovation, G4S, Glass-Steagall Act, high net worth, interest rate swap, invisible hand, joint-stock company, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, long term incentive plan, low interest rates, moral hazard, negative equity, Neil Kinnock, Nick Leeson, North Sea oil, Northern Rock, old-boy network, pets.com, proprietary trading, Red Clydeside, shareholder value, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, value at risk, warehouse robotics

He was beginning an overhaul in an attempt to break down the wall between the teams monitoring retail banks and investment banks, and to refocus the FSA. In chaotic circumstances it was about to be revealed just how unprepared they were for a market meltdown. On 9 August 2007, as RBS raced to buy ABN Amro and the CDO business melted down, the ‘credit crunch’ began properly. That day Robert Peston, on his BBC blog, diagnosed the decision of the French bank BNP Paribas to suspend three of its investment funds as a pivotal moment.10 The funds contained sub-prime material that it was impossible to value, meaning it was impossible to sell. It was junk.

A freeze began in the funding markets, with lenders uncertain whom to trust. Who held this rubbish and in what quantities? It was suddenly, frighteningly, unclear. In such circumstances those banks such as RBS needing to fund themselves with a lot of borrowing were going to find the cost going up. By mid-September the credit crunch spread to the British high street and there were queues outside branches of Northern Rock, as an old-fashioned bank run got under way. The Northern Rock business model had been built on lending large multiples of salary to Britons who wanted to buy a house, on the expectation that it could borrow this on the international ‘wholesale’ money markets, markets that were now freezing.

The liquidity problem was making life very difficult, he explained to Darling, and the Governor of the Bank of England had to do something or little Northern Rock would be the least of their problems. But Mervyn King would not listen, said Goodwin. Darling knew this to be true, as he had had similar conversations with King since the beginning of the credit crunch. King’s view was that the banks had got themselves into this mess and that it would introduce ‘moral hazard’ and ‘rewards for failure’ if the taxpayer were to start bailing them out. It was a fine academic theory, Darling felt, but not much use if the banking system ran out of money in the middle of a panic and then crashed the economy.


pages: 302 words: 84,428

Mastering the Market Cycle: Getting the Odds on Your Side by Howard Marks

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, behavioural economics, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, Glass-Steagall Act, if you build it, they will come, income inequality, Isaac Newton, job automation, junk bonds, Long Term Capital Management, low interest rates, margin call, Michael Milken, money market fund, moral hazard, new economy, profit motive, quantitative easing, race to the bottom, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, secular stagnation, short selling, South Sea Bubble, stocks for the long run, superstar cities, The Chicago School, The Great Moderation, transaction costs, uptick rule, VA Linux, Y2K, yield curve

This is one of the many reasons why the aftermath of an overly generous capital market includes losses, economic contraction, and a subsequent unwillingness to lend. The bottom line of all of the above is that generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities. (“Open and Shut”) ∾ The ultimate purpose of this book isn’t to help you understand cycles after they’ve taken place, like the Global Financial Crisis as described at such great length. Rather it is to enable you to sense where we stand in the various cycles in real time, and thus to take the appropriate action.

But that’s only the first half the process. Even after the fuel for a bonfire has been assembled, there won’t be a conflagration until the second ingredient arrives: an igniter. It usually comes in the form of a recession, which causes corporate profits to decline. This is often accompanied by a credit crunch—the slamming shut of the credit window—such that existing debt can’t be refinanced and goes into default instead. And often conditions are exacerbated by exogenous events that sap confidence and damage the economy and the financial markets. In 1990 these consisted of: the Gulf War, which was set off by the Iraqi invasion of Kuwait; the bankruptcy of many of the prominent, highly levered buyouts of the 1980s; and the imprisonment of Michael Milken (the principal investment banker behind high yield bonds) and the collapse of Drexel Burnham (Milken’s employer and the investment bank most closely associated with high yield bonds).

See Global Financial Crisis of 2007–08 Crutchley, John- Paul, 124 cycles, 3 causation and progression, 30–32, 283, 297–98 cessation of, 178, 180, 285–88, 290 cycle of success, 270–71 definitions of, 40–41 elements of, 18–19, 25–27, 208–10 excess and corrections, 29, 85–86, 293, 299, 307–9 interaction of, 32–33, 167, 186–89, 199–201 listening to, 3–5, 309 major cycles, 267 midpoint and aberrations, 24–29, 266, 296–97 regularity and irregularity, 40–42, 172, 217, 244–45 timing and extent, 24, 39, 145, 282, 295–96 understanding, 17, 22–24, 118, 239, 314–15 See also credit cycle “Death of Equities, The,” 49, 277–78 D Demosthenes, 222, 227, 284 Dimson, Elroy, 13–14, 239 distressed debt investments, 161–62 credit crunch and, 164–66 role of high yield bonds, 163–64 understanding opportunities, 163, 166–67, 241–42, 282 Dow 36,000 (Glassman & Hassett), 219 Dowd, Timothy, 255 Drexel Burnham, 165 Drunkard’s Walk, The (Mlodinow), 42 E economic cycles, 46–47, 64–66, 167 long and short term, 29–30 repetition and fluctuation, 24–25, 97, 135 short-term, 47, 58, 61 economic forecasts, 61–63, 208 Economics and Portfolio Strategy, 13 Economist, The, 141 Eichholtz, Piet, 182 Einstein, Albert, 36 Ellis, Charlie, 5 emotion/psychology, 3, 31, 34, 37, 167 “bubble” and “crash,” 196–98 contrarianism, 133, 135, 142, 234, 244, 301–4 credulousness and skepticism, 90–91, 133, 227 definition of insanity, 36 effect on economic cycles, 83–86, 97–99, 211, 228, 289–92, 298–299 emotionalism or objectivity, 95–96 euphoria and depression, 89, 94, 99, 125, 211, 222, 305, 312 extremes, 113–16, 265 fear, effect on consumption, 59 fear and/or greed, 87–89, 92–93, 114, 221–22, 233–35, 303 humility and confidence, 271–73 investment psychology, 40–42, 93–94, 186–88, 190–91, 214–15, 244 optimism and pessimism, 89–90, 133, 299–301, 302–3 “silver bullet,” 227 F falling knives, 8, 156, 202, 235–36 Federal Reserve Bank, 68, 119, 180, 231 Feynman, Richard, 289 Financial Times, 122, 124 Frank, Barney, 151 Friedman, Milton, 62 fundamentals, 185–87, 189, 209 valuation metrics, 211 future prediction macro prediction, 10 opinions and likelihood, 15, 102, 208, 263–65 qualitative awareness, 214–15 South Sea Bubble, 195–96 G Galbraith, John Kenneth, 5, 34, 63, 125, 178–79, 222 Geithner, Timothy, 155, 239, 287 Glass-Steagall Act, 120, 128 Global Financial Crisis of 2007–08, 36, 59, 119–22, 127–32, 147–57, 180, 233 bear market stages, 193–94 effect on real estate market, 177 lessons from, 239–40 Treasury guarantee of commercial paper, 139–40, 155, 233 Goldman, William, 43 Goldman Sachs, 155 government deficits and national debt, 71–73 economic management tools, 71–73 Graduate School of Business, University of Chicago, 103 Graham, Ben, 189 Greenblatt, Joel, 5 Greenspan, Alan, 217 gross domestic product (GDP) consumption, 59–60 definition of, 47 recession (negative growth), 48 See also productivity H high yield bonds, 44, 106, 108, 131–32, 157, 281–82 history and memory, 34, 42, 178 Arab oil embargo, 292 blue chips or small-capitalization, 274 brevity of, 222 convertible arbitrage, 275 growth and tech stocks, 274 mortgage defaults, 229 one house in Amsterdam, 181–82 permanent prosperity, 288–89 poor performance of stocks, 276–77 projections of the future, 286–87, 311–12 History of the Peloponnesian War (Thucydides), 37–38 Hoover, Herbert, 287 I intrinsic value, 11, 92, 133, 194, 200, 205 when to buy, 237 investing aggressive or defensive, 248, 250–53, 259–60, 295 asset selection, 248, 255–59 bargains or popularity, 273–78 capitulation, 34–35, 194–95 cycle positioning, 248, 250, 252, 254–55, 312–14 definition of, 101–2, 262 fluctuation in, 186–87 growth stocks, 197–98 long or short securities sales, 8 market cycle, return, 204–6 overpayment, 144, 169, 179 philosophy, 4–5, 197, 207 security analysis and value investing, 11 skill or luck, 249, 253–54, 258–59, 272–73 “weighing machine,” 189 See also fundamentals; psychology investment indices, 232t, 238t “it’s different this time,” 37, 197–99 J Jain, Ajit, 5, 276 Janjigian, Jahan, 280 junk bonds.


pages: 312 words: 83,998

Testosterone Rex: Myths of Sex, Science, and Society by Cordelia Fine

"World Economic Forum" Davos, assortative mating, behavioural economics, Cass Sunstein, classic study, confounding variable, credit crunch, Donald Trump, Downton Abbey, Drosophila, epigenetics, experimental economics, gender pay gap, George Akerlof, glass ceiling, helicopter parent, Jeremy Corbyn, longitudinal study, meta-analysis, phenotype, publication bias, risk tolerance, seminal paper

CHAPTER 7: THE MYTH OF THE LEHMAN SISTERS 1. Herbert, J. (2015). Testosterone: Sex, power, and the will to win. Oxford, UK: Oxford University Press. Quoted on pp. 116–118, reference removed. 2. Sunderland, R. (January 18, 2009). The real victims of this credit crunch? Women. The Observer. Retrieved from http://www.theguardian.com/lifeandstyle/2009/jan/18/women-credit-crunch-ruth-sunderland on January 15, 2015. 3. Prügl, E. (2012). “If Lehman Brothers had been Lehman Sisters …”: Gender and myth in the aftermath of the financial crisis. International Political Sociology, 6(1), 21–35. Quoted on p. 21. 4. John Coates, interviewed in Adams, T.

All the actions of testosterone are echoed by the qualities of a successful trader. It does seem remarkable that the artificial world of financial trading should so suit the innate characteristics of young males. —JOE HERBERT, Testosterone1 “IF LEHMAN BROTHERS HAD BEEN LEHMAN SISTERS, RUN BY WOMEN instead of men, would the credit crunch have happened?”2 This question, posed by a Guardian business editor, triggered a “frenzied engagement in the international media with the gender question in international finance.”3 Some commentators, drawing on research reporting links between testosterone levels and risk taking, argued an urgent need for a greater “diversity of hormones”:4 more women (and older men) would make for less testosterone.


pages: 419 words: 130,627

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, bank run, Bear Stearns, Blythe Masters, Bonfire of the Vanities, book value, business logic, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Exxon Valdez, financial innovation, fixed income, G4S, Glass-Steagall Act, Greenspan put, housing crisis, interest rate swap, Jeff Bezos, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, Michael Milken, money market fund, moral hazard, negative equity, Nelson Mandela, Northern Rock, profit motive, proprietary trading, Renaissance Technologies, risk/return, Rod Stewart played at Stephen Schwarzman birthday party, Saturday Night Live, sovereign wealth fund, statistical model, Steve Ballmer, Steve Jobs, technology bubble, The Chicago School, too big to fail, Vanguard fund, zero-coupon bond, zero-sum game

Goldman Sachs’s CEO, Lloyd Blankfein, ventured the opinion that the markets were in the third quarter of the game. Dimon himself was optimistic that the credit crunch might be easing, but he was still disturbed by the weakening economy: “I told my investment banking friends, ‘Lucky for you, you’re probably through a big part of your pain. It’s continuing for some of us with real credit exposures to consumers.’” Although Dimon was right on that last point, all three were wrong about the credit crunch. By the summer, Lehman and Merrill were fighting for their lives. Lehman Brothers got in a pitched public battle with the hedge fund manager David Einhorn, who aggressively shorted the company’s shares, convinced that its accounting couldn’t be trusted.

It wasn’t only Commercial Credit’s customer base that made its business markedly different from that of most banks. Whereas typical banks borrowed money over short periods and lent it over long ones—making them extremely vulnerable to rising interest rates—Commercial Credit lent over short periods while borrowing at long. The advantage of this model was that the company didn’t have to worry about a credit crunch. Its disadvantage was that if rates fell and Commercial Credit was already locked into long-term borrowings, it was vulnerable to being unable to reinvest those borrowings at their longterm cost of capital. In any event, it was a markedly different beast from a neighborhood branch banking business.

The availability of short-term credit had dried up overnight. When France’s biggest bank, BNP Paribas, halted withdrawals of three funds on August 8, because it couldn’t “fairly” value their holdings, panic set in. Despite a $130 billion injection of funds into the market on August 10 by the European Central Bank, a credit crunch had begun in which no one entrusted his money to anyone else anymore, and the normally fluid overnight lending markets evaporated. The Latin root of “credit” is credere, “to believe.” Belief had been obliterated. What comes next is common to all historical financial panics. Individuals who act rationally (i.e., they try to sell, in order to protect their own interests) have an aggregate effect that is ultimately irrational (i.e., with all sellers and no buyers, assets that do have an inherent value are nevertheless deemed worthless).


pages: 430 words: 140,405

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. Mcdonald, Patrick Robinson

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, asset-backed security, bank run, Bear Stearns, Black Monday: stock market crash in 1987, book value, business cycle, Carl Icahn, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, diversification, fixed income, Glass-Steagall Act, high net worth, hiring and firing, if you build it, they will come, it's over 9,000, junk bonds, London Interbank Offered Rate, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, naked short selling, negative equity, new economy, Ronald Reagan, Savings and loan crisis, short selling, sovereign wealth fund, value at risk

Here he was, the head of fixed income, the only expert on the subject on the entire executive committee, and his recommendations to protect the firm were being resolutely ignored. Mike warned them of the coming credit crunch. He warned them of the lethal danger of that $15 trillion to $18 trillion of leverage out there, the credit derivatives issued between 2001 and 2007. It was a paper phantom that Lehman had done more than its fair share to create. At one meeting he pounded the table and shouted, “This is not going to be just a credit crunch. This is going to be the granddaddy of all credit crunches. And you’re trying to buy into a giant global asset bubble.” This took place in the middle of a Dick Fuld–inspired attempt to buy yet another inflated hedge fund.

The short-term paper market ceased to exist. The safest, most solid banks in the world were unable to borrow money. This was not just a difficult time, with banks stopping to catch their breath. This was a meltdown, and commerce in the United States was rapidly stalling. Hank Paulson was facing the beginning of the global credit crunch, the very same one Mike Gelband had warned him about on the telephone from Dick Fuld’s office seventeen months before. Just then Hank was gazing with horror at one of those mysterious Wall Street insider’s charts known in the trade as the TED spread, a measure that perceived credit risk in the general economy.


pages: 309 words: 96,434

Ground Control: Fear and Happiness in the Twenty First Century City by Anna Minton

"there is no alternative" (TINA), Abraham Maslow, Albert Einstein, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Broken windows theory, call centre, crack epidemic, credit crunch, deindustrialization, East Village, energy security, Evgeny Morozov, Francis Fukuyama: the end of history, gentrification, ghettoisation, high-speed rail, hiring and firing, housing crisis, illegal immigration, invisible hand, Jane Jacobs, Jaron Lanier, Kickstarter, moral panic, new economy, New Urbanism, race to the bottom, rent control, Richard Florida, Right to Buy, Silicon Valley, Steven Pinker, the built environment, The Death and Life of Great American Cities, The Spirit Level, trickle-down economics, University of East Anglia, urban decay, urban renewal, white flight, white picket fence, World Values Survey, young professional

Now, a generation later, what began specifically to serve the needs of business has become the standard model for the creation of every new place in towns and cities across the country. Previously, the government and local councils ‘owned’ the city on behalf of us, the people. Now more and more of the city is owned by investors, and its central purpose is profit. The credit crunch may have slowed the sell-off, but every former inner-city industrial area is trying to emulate this model, from the waterfronts of Salford Quays and Cardiff to the controversial demolition programmes of the old industrial northern cities. This is the architecture of post-industrial New Labour, a government which witnessed the largest amount of construction in Britain since the post-war period.

A microcosm of what was later rolled out with Pathfinder across the north, Going for Growth was Newcastle city council’s twenty-year strategy to reverse population loss by demolishing thousands of homes and ‘remodelling’ parts of the city – the ‘inner core’, which also happened to have stunning riverside views – into ‘urban villages’, which would attract the middle-income people leaving the city for the suburbs and the green belt. Today there are huge swathes of green areas where hundreds of homes once were, with new plans for Scotswood, in the West End, stalled. The controversial proposals were hit when the Labour council failed to be re-elected in 2004 and were dealt a further blow by the credit crunch. In an echo of the conversations I later had in Derker and in Liverpool, Rose McCourt, from Save our Scotswood, the local campaign protesting against Going for Growth, had described to me how there had been no consultation with residents about the plans to demolish their homes. ‘We first heard about Going for Growth with a phone call from the Newcastle Journal, when the reporter told us street by street which homes were earmarked for demolition.’

It might seem reasonable to expect that as prices come down, the affordability crisis will ease, but because housing relies on mortgage finance, it doesn’t work like that. The economic downturn has led to falling house prices, but it has been nowhere near the level needed to allow people on lower incomes on to the housing ladder, particularly because the credit crunch means mortgages are much harder to obtain, leading to the lowest number of first-time buyers since records began. At the same time there have been bizarre and unexpected impacts on other parts of the housing market, the downturn colliding with the Pathfinder policy and the extreme shortage of housing.


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

asset-backed security, backtesting, banking crisis, barriers to entry, Bear Stearns, beat the dealer, Bernie Madoff, Black-Scholes formula, book value, British Empire, business cycle, buy and hold, buy the rumour, sell the news, Claude Shannon: information theory, clean tech, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, do what you love, Edward Thorp, family office, financial independence, fixed income, Flash crash, global macro, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Jones Act, legacy carrier, Long Term Capital Management, managed futures, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, merger arbitrage, Michael Milken, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, proprietary trading, quantitative easing, quantitative trading / quantitative finance, Reminiscences of a Stock Operator, Right to Buy, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Savings and loan crisis, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

I said there was going to be a total credit crunch, an equity market meltdown, and a flight to quality bonds. Had you adjusted your portfolio to reflect these expectations? No, it just dawned on me as I was giving the speech. I went back to the office and thought, $9 billion of stocks going into a credit crunch; I don’t want any of this crap. I got the fund manager into my office and said, “Look, August was not that great.” The strategy was down about 5 percent in August. I continued, “Honestly, I don’t believe in this anymore. There’s going to be a credit crunch, and the stuff you’ve got is going to be absolutely toxic.

A couple of weeks later, I went to give a talk at an investor conference in Lugano. Whenever I give a talk on global markets, I never write anything down. I just speak off the cuff. As I am presenting this speech, I find myself giving this huge rant about how I believed there was going to be a global credit crunch. I said, “Asking people in the credit market how they feel is like asking someone who has jumped out of the 50th floor window how he feels as he passes floor 10. He is currently all right, but he is not going to be soon.” I heard myself coming out with this stream of consciousness. You didn’t plan this talk?

My response was, “You are not relative to anything, my friend. You can’t be in the relative game just when it suits you and in the absolute game just when it suits you. You are in the absolute return game, and the fact that you use the word relative means that I don’t want you anymore.” What made you so convinced of an impending credit crunch? It was just the huge excess leverage in the system everywhere you looked, and when LIBOR jumped by 10 basis points, it was like seeing the first crack. What happened to LIBOR liquidity after that point? It went straight down. The LIBOR–OIS spread started to widen. What is the OIS? The OIS is the overnight index swap, which is a weighted average of overnight lending rates.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

Albert Einstein, barriers to entry, Bear Stearns, Bernie Madoff, business cycle, collapse of Lehman Brothers, compensation consultant, Cornelius Vanderbilt, corporate governance, corporate social responsibility, creative destruction, credit crunch, false flag, financial engineering, Ford Model T, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, Kickstarter, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators

More recently, the wild property and share speculation in Japan in the 1980s helped create the horrific pile of perhaps $1.5 trillion of bad loans in their banking system. Cheap money stimulated pointless over-investment, which has added to the woes. This reckless squandering has seen Japan’s economy steadily slither into virtual slump, record levels of unemployment, decimated share and property markets and a painful credit crunch. Chancellor’s book quotes the extraordinary story of Mrs Onoue, a lowly Osaka restaurateur who in the midst of the bubble was allowed to borrow a total of $23 billion to buy shares. Reportedly her portfolio was controlled by a ceramic toad, which was said to receive trading tips from the gods.

In these circumstances, audit committee meetings are prolonged and tense because the auditors do not want to be sued if things go horribly wrong in six months, and no one wants to be prosecuted for misleading shareholders. And, for the indebted, there are bank covenants – promises made to the bank in return for obtaining a loan. Covenants keep finance directors up at night. My contacts at the major lenders tell me many hundreds of corporate borrowers breached covenants in the credit crunch, especially in sectors such as retailing, construction and capital goods. But the banks cannot call in all their debts and appoint administrators – the wave of insolvencies would drown them. Instead, banks raise rates and charge big fees. ‘This is no time for ease and comfort. It is the time to dare and endure’ Winston Churchill It becomes apparent that many leaders are really just suited to the good times.


pages: 1,242 words: 317,903

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

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Financial Crisis Inquiry Commission, “The Financial Crisis Inquiry Report: The Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States” (Financial Crisis Inquiry Commission, January 2011), 150–53, http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_full.pdf. 29. “Global Credit Crunch: Deutsche Bank Head Calls for Government Help,” Der Spiegel, March 18, 2008, http://www.spiegel.de/international/business/global-credit-crunch-deutsche-bank-head-calls-for-government-help-a-542140.html. 30. Martin Wolf, “The Rescue of Bear Stearns Marks Liberalization’s Limit,” Financial Times, March 26, 2008, http://www.ft.com/intl/cms/s/0/8ced5202-fa94-11dc-aa46-000077b07658.html#axzz3ZBRa IhqN. 31.

The essence of the Ford presidency, Greenspan argued at a White House meeting on September 25, should be to reverse this self-reinforcing pattern of softheaded decisions.64 Other Ford advisers agreed in principle with Greenspan, but they worried that New York’s bankruptcy could trigger knock-on problems for the economy. Burns in particular predicted havoc. Banks were stuffed with New York bonds whose value would collapse, leaving banks too weak to lend; a credit crunch would follow. Even if the banks proved unexpectedly resilient, there were other possible channels of contagion. For one thing, a default in New York could destroy financial confidence in other American cities. Finding it hard to borrow, municipal governments would lay off police officers and teachers.

Volcker had been outvoted by his fellow governors at the Fed. Greenspan could not take dominance for granted. A few days after Andrea set off with Cheney, on August 21, Greenspan presided over the next FOMC meeting. The case for cutting interest rates was in one sense stronger than ever: if the U.S. economy had been flailing under the impact of the credit crunch before Kuwait’s invasion, the outlook now was surely worsening. Rising oil prices would claim a growing share of Americans’ spending, leaving less demand for U.S. products; and geopolitical uncertainty would hurt bonds and stocks, raising the cost of capital to companies. Already a falling bond market had raised long-term borrowing costs by more than 50 basis points: Saddam Hussein had effectively tightened U.S. monetary policy without the Fed’s doing anything.7 But rather than supporting the economy and countering the Saddam effect by cutting short-term interest rates, Greenspan wanted to be tough.


pages: 382 words: 100,127

The Road to Somewhere: The Populist Revolt and the Future of Politics by David Goodhart

Affordable Care Act / Obamacare, agricultural Revolution, assortative mating, Big bang: deregulation of the City of London, borderless world, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, call centre, capital controls, carbon footprint, central bank independence, centre right, coherent worldview, corporate governance, credit crunch, Crossrail, deglobalization, deindustrialization, Donald Trump, Downton Abbey, Edward Glaeser, en.wikipedia.org, Etonian, European colonialism, eurozone crisis, falling living standards, first-past-the-post, gender pay gap, gig economy, glass ceiling, global supply chain, global village, Great Leap Forward, illegal immigration, income inequality, informal economy, Jeremy Corbyn, job satisfaction, knowledge economy, labour market flexibility, low skilled workers, market friction, mass immigration, meritocracy, mittelstand, Neil Kinnock, New Urbanism, non-tariff barriers, North Sea oil, obamacare, old-boy network, open borders, open immigration, Peter Singer: altruism, post-industrial society, post-materialism, postnationalism / post nation state, race to the bottom, Richard Florida, Ronald Reagan, selection bias, shareholder value, Skype, Sloane Ranger, stem cell, the long tail, Thomas L Friedman, transaction costs, trickle-down economics, ultimatum game, upwardly mobile, wages for housework, white flight, women in the workforce, working poor, working-age population, World Values Survey

He also thinks there was at times a triumphant atmosphere in Brussels at the end of the Cold War, a feeling that Europe could step up as an equal of the US. The strict rules that required countries to have budget deficits of no more than 3 per cent of GDP and debt to GDP ratios of no more than 60 per cent were allowed to slip soon after the Euro’s launch and then blown apart when the sovereign debt crisis struck in 2009. Unlike the 2007/8 credit crunch, the Eurozone crisis was one of the most widely predicted economic disasters of modern times. The apparently reduced risk of lending in hard Euros to weaker economies and governments like Greece and Spain created unsustainable government deficits in the case of Greece and an unsustainable property bubble in Spain (and Ireland).

All large companies have to present ‘social plans’ when they are making workers redundant and the plans have to be approved by worker representatives. It is often cheaper to retrain a worker for another line of business than to sack him or her. Despite all the familiar failings described above, Britons have seen a steady improvement in their conditions of life in the last seventy years—at least until the credit crunch of 2007/2008. The standard reformist critiques of the modern capitalist economy and society in terms of inequality and job insecurity turn out to be only part of the story—and, as we have seen, often rather exaggerated. What these critiques, and their associated policy prescriptions are missing, is a sense of the dislocation—as much psychological as income-related—created by the shift from an industrial to a knowledge-based economy.

.: product lines of, 86 Appiah, Kwame Anthony: 117 assortative mating: 188 Aston University: 164 austerity: 98, 200 Australia: 4, 160 Austria: 56, 69–70 authoritarianism: 8, 12, 30, 33, 44, 57; concept of, 57; hard, 45 Baggini, Julian: observations of British class system, 59 Bangladesh: 130 Bank of England: personnel of, 86 Bartels, Larry: Democracy for Realists, 61 Bartlett, Jamie: Radicals, 64 Basel Accords: 85 BASF: 176 Bayer: 176 Belgium: 73, 75, 101; Brussels, 53, 89, 93, 95, 98 Berlusconi, Silvio: 65 birther movement: 68 Bischof, Bob: head of German-British Forum, 174 Blair, Tony: 10, 76, 159, 189; administration of, 218; foreign policy of, 96; speeches of, 3, 7, 49; support for Bulgarian and Romanian EU accession, 26; unravelling of legacy, 221 Bloomsbury Group: 34 Bogdanor, Vernon: concept of ‘exam-passing classes’, 3 Boyle, Danny: Summer Olympics opening ceremony (2012), 111, 222 Branson, Richard: 11 Brexit (EU Referendum)(2016): 1–2, 19, 27, 81, 89, 93, 99–100, 125, 233; negotiations, 103; polling prior to voting, 30, 64; Remainers, 2, 19–20, 52–3, 132; sociological implications of, 4–7, 13, 53–4, 118, 126, 167–8, 225; Stronger In campaign, 61; Vote Leave campaign, 42, 53, 72, 91, 132; voting pattern in, 7–9, 19–20, 23, 26, 36, 52, 55–6, 60, 71, 74, 215, 218 British Broadcasting Corporation (BBC): 112, 145; Newsnight, 60; personnel of, 15; Radio 4, 31, 227; Today, 60 British Empire: 107 British National Party: European election performance of (2009), 119; supporters of, 38 British Future: 19 British Private Equity and Venture Capital Association: personnel of, 135 British Social Attitudes (BSA) surveys: 153; authoritarian-libertarian scale, 44–5; findings of, 38–9, 44, 106–7, 120, 202, 206–7, 218; immigration survey (2013), 44; personnel of, 218–19 British Values Survey: establishment of (1973), 43; groups in, 43 Brooks, Greg: Sheffield report, 155 Brown, Belinda: 205, 207–8 Brown, Gordon: 106; abolition of Married Couples Allowance, 204; budget of (2006), 147–8; political rhetoric of, 16–17 Brummer, Alex: Britain for Sale, 173 Bulgaria: 26; accession to EU, 225 (2007); migrants from, 126; population levels of, 102 Burgess, Simon: 131 Burggraf, Shirley: Feminine Economy and Economic Man, The, 194 Cahn, Andrew: 98 Callaghan, Jim: Ruskin College speech (1976), 154 Callan, Eamonn: 191 Callan, Samantha: 202, 212 Cambridge University: 35, 179, 186; faculty of, 37; students of, 158–9 Cameron, David: 71, 103, 179, 183, 189; administration of, 226; cabinet of, 187 Canada: 160; mass immigration in, 119 capital: 9, 100; cultural, 190; human, 34; liberalisation of controls, 97; social, 110 capitalism: 7, 11; organised, 159 Care (Christian Action Research & Education): 203 Carswell, Douglas: 13 Case, Anne: 67 Casey, Louise: review of opportunity and integration, 129 Catholicism: 15, 213; original sin, 57 Cautres, Bruno: 72 Center for Humans and Nature: 30 Centre for Social Justice: 206; personnel of, 202 chauvinism: 33; decline in prevalence of, 39; violent, 106 China, People’s Republic of: 10, 95, 104, 160; accession to WTO (2001), 88; manufacturing sector of, 86; steel industry of, 87 Chirac, Jacques: electoral victory of (2002), 49 Christianity: 33, 69, 83, 156 citizenship: 68, 121–2; democratic, 7; global, 114; legislation, 103; national, 5; relationship with migration, 126; shared, 113; temporary, 126 Clarke, Charles: British Home Secretary, 84 Clarke, Ken: education reforms of, 158–9 Clegg, Nick: 11, 13, 189 Cliffe, Jeremy: 10–11; ‘Britain’s Cosmopolitan Future’ 216; observations of social conservatism, 217 Clinton, Bill: 29, 76; administration of, 218 Clinton, Hillary: electoral defeat of (2016), 67–8 Coalition Government (UK) (2010–16): 13, 54, 226; cabinet members of, 16; immigration policies of, 124–5 Cold War: end of, 83, 92, 95, 98 Collier, Paul: 110; view of potential reform of UNHCR, 84 colonialism: 87; European, 105 communism: 58 Communist Party of France: 72 Confederation of British Industry (CBI): 164 confirmation bias: concept of, 30 Conservative Party (Tories)(UK): 19, 207; dismantling of apprenticeship system by, 157; ideology of, 76, 196; members of, 31, 164, 187; Party Conference (2016), 226; Red Toryism, 63; supporters of, 24, 35, 77, 143, 216–17 conservatism: 4, 9; cultural, 58; social, 217; Somewhere, 7–8; working-class, 8 Corbyn, Jeremy: elected as leader of Labour Party, 20, 53, 59, 75, 78 Cowley, Philip: 35 Crosland, Tony: Secretary of Education, 36; two-tier higher education system proposed by, 158 Crossrail 2: 228; spending on, 143 Czech Republic: 69, 73 D66: supporters of, 76 Dade, Pat: 43–4, 219; role in establishment of British Values Survey, 43, 218–19 Daily Mail: 227; reader base of, 4 Danish Peoples’ Party: 55, 69–70, 73; ideology of, 73 Darwin, Charles: 28 death penalty: 44; support for, 39, 216–17 Deaton, Angus: 67 deference, end of: 63 Delors, Jacques: 96, 103–4; President of European Commission, 94 Democratic Party: ideology of, 62, 65; shortcomings of engagement strategies of, 66–7 Demos: 137 Dench, Geoff: 207; concept of ‘quality with pluralism’, 214; Transforming Men, 209 Denmark: 69, 71, 99; education levels in, 156 Diana, Princess of Wales: death of (1997), 107 double liberalism: 1, 11, 63 Duffy, Gillian: 124 Dyson: 173; Dyson effect, 173 Economist: 10, 210, 216 Eden, Anthony: administration of, 187 Eichengreen, Barry: 91 Elias, Norbert: 119 Employer Skills Survey: 163 Engineering Employers Federation: 166 Englishness: 111 Erdogan, Recep Tayyip: 218 Essex Man/Woman: 186 Estonia: population levels of, 102 Eton College: 179, 187 Euro (currency): 100–1; accession of countries to, 98–9 European Commission: 26, 97 European Convention on Human Rights: 83–4 European Court of Justice (ECJ): 103 European Economic Community (EEC): 92; British accession to (1973), 93; Treaty of Rome (1957), 101 European Exchange Rate Mechanism (ERM): 97–8 European Parliament: elections (2009), 71–2; elections (2014), 72 European Union (EU): 10, 25, 53, 76, 89, 92–4, 99–100, 120, 124, 160, 215, 221–2, 229, 233; Amsterdam Treaty (1997), 94; Common Agricultural Policy, 92, 96; establishment of (1957), 91–2; freedom of movement principles, 100–1, 163–4; Humanitarian Protection Directive (2004), 83; integration, 50, 98–9, 173; Lisbon Treaty (2009), 94; Maastricht Treaty (1992), 94, 96, 103; members states of, 16, 31, 55, 71, 216; personnel of, 128; Schengen Agreement (1985), 94–5, 99, 117; Single European Act (1986), 94; Treaty of Nice (2000), 94 Euroscepticism: 69 Eurozone Crisis (2008–): 92, 99 Evening Standard: 143–5 Facebook: 86 family culture: 196–7; childcare, 202–3; cohabitation, 196, 211; divorce figures, 196–7; gender roles, 206–13; legislation impacting, 195–6; lone parents, 196; married couples tax allowance, 225; relationship with state intrusion, 200–2; tax burdens, 203–4; tax credit systems, 202, 204–5, 225 Farage, Nigel: 11; leader of UKIP, 72; political rhetoric of, 20 Fawcett Society: surveys conducted by, 195–6 federalism: 69 feminism: 185, 199, 205; gender pay gap, 198–9; orthodox, 194 Fidesz: 69, 71, 73 Fillon, François: 73 Financial Times: 91, 108, 115, 138, 145, 147 Finkelstein, Daniel: 34 Five Star Movement: 53, 55, 64, 70, 73 Florida, Richard: concept of ‘Creative Class’, 136 Foges, Clare: 183 food sector: 17, 102, 125, 126 Ford, Robert: 35, 150 foreign ownership: 172–74, 230 Fortuyn, Pim: assassination of (2002), 50, 69 France: 69, 75, 94–6, 101, 173; agricultural sector of, 96; compulsory insurance system of, 222; Paris, 104, 143; high-skill/low-skill job disappearance in, 151; Revolution (1789–99), 106 Frank, Thomas: concept of ‘liberalism of the rich’, 62 Franzen, Jonathan: 110 free trade agreements: opposition to, 62 Freedom Party: 69; electoral defeat of (2016), 70; ideology of, 73; supporters of, 70 French Colonial Empire (1534–1980): 107 Friedman, Sam: ‘Introducing the Class Ceiling: Social Mobility and Britain’s Elite Occupations’, 187 Friedman, Thomas: World is Flat, The, 85 Front National (FN): 53, 69, 72–3; European electoral performance of (2014), 72; founding of (1973), 72; supporters of, 72 Gallup: polls conducted by, 65 Ganesh, Janan: 115, 145 gay marriage: 5, 76; opposition to, 46–7; support for, 26, 220 General Electric Company (GEC) plc: 172, 175 German-British Forum: members of, 174 Germany: 70, 73, 86, 94, 96, 100–1, 173–4, 209; automobile industry of, 96; chemical industry of, 176; compulsory insurance system of, 222; education sector of, 166; high-skill/low-skill job disappearance in, 151; labour market of, 147; Leipzig, 58; Ludwigshafen, 176; Reunification (1990), 96, 147, 176; Ruhr, 176–7 Ghemawat, Prof Pankaj: 85–6 Gilens, Martin: study of American public policy and public preferences, 61–2 Glasman, Maurice: 227 Global Financial Crisis (2007–9): 56, 169–70, 177; Credit Crunch (2007–8), 98, 177 Global Villagers: 31–2, 44–5, 160, 226; characteristics of, 46; political representation of, 75; political views of, 109, 112 globalisation: 9–10, 50–2, 81–2, 85, 87–8, 90–1, 105–6, 148; economic, 9; global trade development, 86–7; growth of, 85–6; hyperglobalisation, 88–9; relationship with nation states, 85–6; sane, 90 Golden Dawn: 74; growth of, 105 Goldman Sachs: personnel of, 31 Goldthorpe, John: 184–5, 189–90 Goodhart, David: 12 Goodwin, Fred: 168 Goodwin, Matthew: 150 Gordon, Ian: 137–8, 140 Gould, Philip: 220 Gove, Michael: 64, 91 great liberalisation: 39–40, 47; effect of, 40 Greater London Authority (GLA): 143 Greece: 53, 56, 69, 74, 99, 105; Athens, 143; government of, 98 Green, Francis: 163 Green Party (UK): supporters of, 38 Group of Twenty (G20): 89 Guardian: 14, 210 Habsburg Empire (Austro-Hungarian Empire): collapse of (1918), 107 Haidt, Jonathan: 11, 30, 33, 133; Righteous Mind, The, 28–9 Hakim, Catharine: 205 Hall, Stuart: 14–15 Hames, Tim: 135–6 Hampstead/Hartlepool alliance: 75 Hanson Trust: subsidiaries of, 175 Hard Authoritarian: 43–7, 51, 119, 220; characteristics of, 24–5; political views of, 109 Harris, Gareth: 137; ‘Changing Places’, 137 Harvard University: faculty of, 57 Heath, Edward: foreign policy of, 96 Higgins, Les: role in establishment of British Values Survey, 43 High Speed 2 (HS2): 228 High Speed 3 (HS3): aims of, 151, 228 Hitler, Adolf: 94 Hoescht: 176 Hofstadter, Richard: ‘Everyone is Talking About Populism, But No One Can Define It’ (1967), 54 Holmes, Chris: 151 homophobia: observations in BSA surveys, 39; societal views of, 39–40, 216 Honig, Bonnie: concept of ‘objects of public love’, 111 Huguenots: 121 Huhne, Chris: 16, 32 human rights: 5, 10, 55, 113; courts, 113; legislation, 5, 83–4, 109, 112; rhetoric, 112–13 Hungary: 53, 64, 69, 71, 73–4, 99, 218; Budapest, 218 Ignatieff, Michael: leader of Liberal Party (Canada), 13 Imperial Chemical Industries (ICI): 172, 174–5; personnel of, 169; subsidiaries of, 175 Inbetweeners: 4, 25, 46, 109; political views of, 109 India: 104 Inglehart, Ronald: theories of value change, 27 Insider Nation: concept of, 61, 64; evidence of, 61–2 Institute for Fiscal Studies (IFS): 201; findings of, 211–12 International Monetary Fund (IMF): 86–7, 102 interracial marriage: societal views of, 40 India: 10, 160 Ipsos MORI: polls conducted by, 42, 122 Iraq: 84; Operation Iraqi Freedom (2003–11), 82 Islam: 50; Ahmadiyya, 84; conservative, 131; Halal, 68; hostility to, 73; Qur’an, 50 Islamism: 130 Islamophobia: 130 Italy: 55, 64, 69–70, 73, 96; migrants from, 125 Jamaica: 14 Japan: 86; request for League of Nations racial equality protocol (1919), 109 Jews/Judaism: 121, 259; orthodox, 131; persecution of, 17 jingoism: 8 Jobbik: 53, 64, 74 Johnson, Boris: 145 Jones, Sir John Harvey: death of (2008), 169 Jordan, Hashemite Kingdom of: government of, 84 Jospin, Lionel: defeat in final round of French presidential elections (2002), 49 Judah, Ben: This is London: Life and Death in the World City, 145 Kaufmann, Eric: 8–9, 131, 219, 227; ‘Changing Places’, 137 Kellner, Peter: 78 King, Mervyn: Governor of Bank of England, 86 Kinnock, Neil: 98 knowledge economy: 147, 149, 154, 166, 221 Kohl, Helmut: 94 Kotleba: 74 Krastev, Ivan: 55, 65, 82–3 labour: 9, 89–90, 149; eastern European, 125–6; gender division of, 197; hourglass labour market, 150, 191; living wage, 26, 152; market, 95, 101–2, 124, 140, 147–8, 150–2, 156–7, 181, 225 Labour Party (Denmark): 77 Labour Party (Netherlands): 50; supporters of, 76 Labour Party (UK): 2, 23, 53, 57, 72, 123, 157, 159, 207; Blue Labour, 63; electoral performance of (2015), 75; European election performance (2014), 72; expansion of welfare state under, 199–200; members of, 14, 20, 36, 59, 61, 77–8, 84; Momentum, 53; New Labour, 33, 75, 107, 123, 155, 159, 167, 196, 207, 220, 226, 232; Party Conference (2005), 7; social media presence of, 79; supporters of, 17, 35, 75, 77, 143, 221; voting patterns in Brexit vote, 19 Lakner, Christoph: concept of elephant curve, 87 Lamy, Pascal: 97 Latvia: adoption of Euro, 98–9; migrants from, 25–6 Laurison, Daniel: ‘Introducing the Class Ceiling: Social Mobility and Britain’s Elite Occupations’, 187 Law and Justice Party: 69, 71, 73 Lawson, Nigel: 205 Le Pen, Jean-Marie: victory in final round of French presidential elections (2002), 49, 69 Le Pen, Marine: 53; electoral strategies of, 73 Leadbeater, Charles: 53 League of Nations: protocols of, 109 left-behinders: 20 Lega Nord: 69 Levin, Yuval: Fractured Republic, The, 232 liberal democracy: 2, 31, 55 Liberal Democrats: 23, 53–4; members of, 16; supporters of, 38, 78 Liberal Party (Canada): members of, 13 liberalism: 4–5, 12–13, 29–31, 55, 76, 119, 127–8, 199, 233; Anywhere, 27–8; baby boomer, 6; double, 1, 63; economic, 11; graduate, 216–17; meritocratic, 34; metropolitan, 216; orthodox, 13–14; Pioneer, 44; social, 4, 11 libertarianism: 8, 11, 22, 39, 44 Libya: 84; Civil War (2011), 225 Lilla, Mark: 35 Lind, Michael: 105, 135 Livingstone, Ken: 136 Lloyd, John: 56 London School of Economics (LSE): 54, 137–8, 140, 183 Low Pay Commission: findings of, 170 Lucas Industries plc: 172 male breadwinner: 149, 194, 195, 198, 206, 207 Manchester University: faculty of, 131 Mandelson, Peter: British Home Secretary, 61; family of, 61 Mandler, Peter: 135 Marr, Andrew: 53, 181 Marshall Plan (1948): 92 mass immigration: 14, 55, 104–5, 118–19, 121–4, 126–7, 140, 228–9; accompanied infrastructure development, 137–9; brain-drain issue, 102; debate of issue, 81–2; freedom of movement debates, 100–3; housing levels issue, 138–9; impact on wages, 152; integration, 129–32, 140–2; non-EU, 124–5; opposition to, 16–17, 120, 220 May, Theresa: 63, 179, 183, 198–9; administration of, 173, 176, 187, 191, 230; British Home Secretary, 124–5; ‘Citizens of Nowhere’ speech (2016), 31; political rhetoric of, 15, 31, 226 McCain, John: electoral defeat of (2008), 68 meritocracy: 152, 179–80, 190; critiques of, 180–1; perceptions of, 182–3 Merkel, Angela: reaction to refugee crisis (2015), 71 Mexico: borders of, 21 migration flows: global rates, 82, 87; non-refugee, 82 Milanovic, Branko: 126; concept of elephant curve, 87 Miliband, Ed: 78, 189 Mill, John Stuart: ‘harm principle’ of, 11–12 Millennium Cohort Study: 159 Miller, David: concept of ‘weak cosmopolitanism’, 109 Mills, Colin: 185 Mitterand, François: 94, 97 mobility: 8, 11, 20, 23, 36, 37, 38, 153, 167, 219; capital: 86, 88; geographical, 4, 6; social, 6, 33, 58, 152, 168, 179, 180, 182, 183–191, 213, 215, 220, 226, 231 Moderate Party: members of, 70 Monnet, Jean: 94–5, 97, 103–4 Morgan Stanley: 171 Mudde, Cas: observations of populism, 57 multiculturalism: 14, 50, 141–2; conceptualisation of, 106; laissez-faire, 132 narodniki: 54 national identity: 14, 38, 41, 111–12; conceptualisations of, 45; indifference to, 41, 46, 106, 114; polling on, 41 nationalism: 38, 46–7, 105; chauvinistic, 107, 120; civic, 23, 53; extreme, 104; moderate, 228; modern, 112; post-, 8, 105–6, 112; Scottish, 221 nativism: 57 Neave, Guy: 36 net migration: 126; White British, 136 Netherlands: 13–14, 50, 69, 73, 75, 99–100; Amsterdam, 49, 51; immigrant/minority population of, 50–1; Moroccan population of, 50–1 Netmums: surveys conducted by, 205–6 New Culture Forum: members of, 144 New Jerusalem: 105 New Society/Opinion Research Centre: polling conducted by, 33 New Zealand: 160 Nextdoor: 114 non-governmental organizations (NGOs): 21; refugee, 82 Norris, Pippa: 57 North American Free Trade Agreement (NAFTA): 91; opposition to, 62 North Atlantic Treaty Organization (NATO): 85, 92; personnel of, 84 Norway: 69 Nuttall, Paul: leader of UKIP, 72; Obama, Barack: 67; approval ratings of, 60; electoral victory of (2012), 68; healthcare policies of, 22–3; target of birther movement, 68 O’Donnell, Gus: background of, 15–16; British Cabinet Secretary, 15 O’Leary, Duncan: 232 Open University: Centre for Research on Socio-Cultural Change (CRESC), 172–3 Operation Iraqi Freedom (2003–11): political impact of, 56 Orbán, Victor: 69, 218 Organisation for Economic Co-operation and Development (OECD): 201, 204; report on education levels (2016), 155–6; start-ups ranking, 173 Orwell, George: Nineteen Eighty-Four, 108–9 Osborne, George: 189; economic policies of, 4, 226 Oswald, Andrew: 171 Ottoman Empire: collapse of (1923), 107 outsider nation: concept of, 61, 64 Owen, David: 99 Oxford University: 15, 35, 179, 186; Centre on Skills, Knowledge and Organisational Performance, 151; faculty of, 31, 151; Nuffield College, 32 Pakistan: persecution of Ahmadiyya Muslims in, 84 Parris, Matthew: 115 Parsons, Talcott: concept of ‘achieved’ identities, 115 Party of Freedom (PVV): 69; ideology of, 73; supporters of, 50, 76 Paxman, Jeremy: 42 Pearson: ownership of Higher National Certificates (HNCs)/Higher National Diplomas (HNDs), 157 Pegida: ideology of, 73 Pessoa, Joao Paulo: 88 Phalange: 74 Phillips, Trevor: 133 Pioneers: characteristics of, 43–4 Plaid Cymru: supporters of, 38 Podemos: 53, 64 Poland: 56, 69, 73; migrants from, 25–6, 121 Policy Exchange: ‘Bittersweet Success’, 188 political elites: media representation of, 63–4 populism: 1, 5, 13–14, 49–52, 55–6, 60, 64, 67, 69–74, 81; American, 54, 65; British, 63; decent, 6, 55, 71, 73, 219–20, 222, 227, 233; definitions of, 54; European, 49, 53, 65, 68–9, 74; left-wing, 54, 56; opposition to, 74; right-wing, 33, 51, 54 Populists: 54 Portillo, Michael: 31 Portugal: migrants from, 121, 125 post-industrialism: 6 post-nationalism: 105 poverty: 83, 168; child, 183–4, 200, 204; extreme, 87; reduction of, 78, 200; wages, 231 Powell, Enoch: ‘Rivers of Blood’ speech (1968), 127 Professionalisation of politics: 59 Progress Party: 69 progressive individualism: 5 Progressive Party: founding of (1912), 54 proportional representation: support for, 228 Prospect: 14, 91, 136 Prospectors: characteristics of, 43 Protestantism: 8, 213 Putin, Vladimir: 218 Putnam, Robert: 22; theory of social capital, 110 racism: 32, 73–4, 134; observations in BSA surveys, 39; societal views of, 39; violent, 127 Rashid, Sammy: Sheffield report, 155 Reagan, Ronald: 58, 63; approval ratings of, 60 Recchi, Ettore: 104 Refugee Crisis (2015–): 83–4; charitable efforts targeting, 21–2; government funds provided to aid, 83; political reactions to, 71 Relationships Foundation: 202 Republic of Ireland: 99; high-skill/low-skill job disappearance in, 151; property bubble in, 98 Republican Party: ideology of, 62, 65; members of, 68 Resolution Foundation: 87–8; concept of ‘squeezed middle’, 168–9; reports of, 171 Ricardo, David: trade theory of, 101 Robinson, Eric: 36 Rodrik, Dani: 82, 89; concept of ‘hyperglobalisation’, 88; theory of ‘sane globalisation’, 90 Romania: 26; accession to EU, 225 (2007); migrants from, 102, 126 Romney, Mitt: electoral defeat of (2012), 68 Roosevelt, Theodore: leader of Progressive Party, 54 Rousseau, Jean-Jacques: 156 Rowthorn, Bob: 149 Royal Bank of Scotland (RBS): personnel of, 168 Royal College of Nursing: 140 Rudd, Amber: foreign worker list conflict (2016), 17 Ruhs, Martin: 126 Russell Group: 55; culture of, 37; student demographics of, 130–1, 191 Russian Federation: 2, 92; Moscow, 218; St Petersburg, 218 Rwanda: Genocide (1994), 82 Saffy factor: concept of, 199, 221–2 Scheffer, Paul: 85; ‘Multicultural Tragedy, The’ (2000), 49–50 Schumann, Robert: 94 Sciences Po: personnel of, 104 Scottish National Party (SNP): 1, 23, 54, 112; electoral performance of (2015), 75; ideology of, 53 Second World War (1939–45): 105, 194; Holocaust, 109 Security and identity issues: 41, 78, 81 Settlers: characteristics of, 43 Sikhism: 131 Singapore: 101, 128; education levels in, 156 Slovakia: 69, 73–4 Slovenia: adoption of Euro, 98–9 Smer: 69, 73 Smith, Zadie: 141–2 Social Democratic Party: supporters of, 75–6 social mobility: 6, 33, 58, 179–80, 183, 187, 189–91, 220; absolute mobility, 184, 188; relative mobility, 184; slow, 168; upward, 152 Social Mobility Commission: 161, 179–80 socialism: 49, 72, 183, 190 Somewheres: 3–5, 12–13, 17–18, 20, 41–3, 45, 115, 177, 180, 191, 214, 223, 228; characteristics of, 5–6, 2, 32; conflict with Anywheres, 23, 79, 81, 193, 215; conservatism, 7–8; employment of, 11; European, 103; immigration of, 106; moral institutions, 223–4; political representation/voting patterns of, 13–14, 24–6, 36, 53–5, 77–9, 124, 227; political views of, 71, 76, 109, 112, 119, 199, 218, 224–6, 232; potential coalition with Anywheres, 220, 222, 225–6, 233; view of migrant integration, 134 Sorrell, Martin: 31 Soskice, David: 159 South Korea: 86 Soviet Union (USSR): 92, 188; collapse of (1991), 82, 107 Sowell, Thomas: 30; A Conflict of Visions, 29 Spain: 53, 56, 64, 74; government of, 98; migrants from, 125; property bubble in, 98 Steinem, Gloria: 198 Stenner, Karen: 30, 44, 122, 133, 227; Authoritarian Dynamic, The, 30–1 Stephens, Philip: 108 Sun, The: 227 Sutherland, Peter: 31–2 Sutton Trust: end of mobility thesis, 183–5 Swaziland: 135 Sweden: 56, 70, 100; general elections (2014), 70; Stockholm, 143; taxation system of, 222 Sweden Democrats: 70; electoral performance of (2014), 70; ideology of, 73 Switzerland: 37 Syria: Civil War (2009–), 82, 84 Syriza: 53, 69 Taiwan: 86 Teeside University: 164 terrorism: jihadi, 71, 74, 129 Thatcher, Margaret: 58, 63, 95, 189, 205; administration of, 169; economic policies of, 176 Third Reich (1933–45): 104; persecution of Jews in, 17 Times Education Supplement: 37 Timmermans, Frans: EU Commissioner, 128 Thompson, Mark: Director-General of BBC, 15 trade theory: principles of, 101 Transatlantic Trade and Investment Partnership (TTIP): 89; support for, 225 Trump, Donald: 50, 62, 74, 85; electoral victory of (2016), 1–3, 5–7, 13, 27, 30, 64–8, 81, 232; political rhetoric of, 14, 22–3, 51, 54, 66–7; supporters of, 56, 67 Tube Investments (TI): 172 Turkey: 218 Twitter: use for political activism, 79 Uber: 140 UK Independence Party (UKIP): 53, 55, 63–4, 69, 71–3, 228; electoral performance of (2015), 75; European election performance (2009), 71–2; members of, 13; origins of, 72; supporters of, 24, 35, 38, 72, 75, 143, 168, 216, 222 ultimatum game: 52 Understanding Society: surveys conducted by, 37–8, 202 unemployment: 101–2; gender divide of, 208–9; not in employment, education or training (Neets), 151–2, 190; youth, 139, 151–2, 166 Unilever: 175 United Kingdom (UK): 1–3, 8, 11–12, 21, 27–8, 31, 33, 41, 44, 59–60, 69, 73, 75, 81, 83, 91, 111–12, 147, 165, 173, 180, 193–5, 199, 204, 217, 227; Aberdeen, 136; accession to EEC (1973), 93; Adult Skills budget of, 161, 225; apprenticeship system of, 154, 157, 162–3, 166; Birmingham, 7, 123, 166; Boston, 121; Bradford, 133, 136; Bristol, 136; British Indian population of, 77; Burnley, 151; Cambridge, 136; City of London, 95, 106, 174; class system in, 58–9, 75, 123, 135–6, 149–52, 172, 182–3, 186, 195; Dagenham, 136; Department for Education, 206; Department for International Development (DfID), 224; Divorce Law Reform Act (1969), 196; economy of, 152, 170; Edinburgh, 54, 136; education sector of, 35, 147, 154–8; ethnic Chinese population of, 77; EU citizens in, 101; Finance Act (2014), 211; Foreign and Commonwealth Office (FCO), 224; Glasgow, 136; high-skill/low-skill job disappearance in, 150–1; higher education sector of, 35–7, 47, 159–62, 164–7, 179, 208, 230–1; Home Office, 17; House of Commons, 162; general election in (2015), 60; House of Lords, 31; Human Rights Act, 123, 225; income inequality levels in, 169–70, 172, 177, 184–5; labour market of, 16, 26, 124, 140–1, 148, 150–1, 152, 225; Leicester, 133; Leeds, 161; London, 3–4, 7, 10–11, 18–19, 24, 26, 34, 37, 59, 79, 101, 114–15, 119, 123, 131, 133–45, 151, 168, 216, 218, 226, 228, 232–3; Manchester, 123, 136, 151, 161, 228; manufacturing sector of, 17, 88; mass immigration in, 122–4, 126–7, 228–9; Muslim immigration in, 41–2, 44; Muslim population of, 127, 130; National Health Service (NHS), 72, 91, 111, 120, 140, 144, 200–1, 229; National Insurance system of, 204; Newcastle, 131, 136, 161; Northern Ireland, 38; Office for Fair Access, 180; Office for Standards in Education, Children’s Services and Skills (Ofsted), 155; Office of National Statistics (ONS), 138, 144–5; Oldham, 133; Olympic Games (2012), 111, 143, 222; Oxford, 136; Parliamentary expenses scandal (2009), 56, 168; Plymouth, 131; public sector employment in, 171, 208–9, 229–30; regional identities in, 3–4, 186; Rochdale, 124; Scotland, 110, 138; Scottish independence referendum (2014), 53, 110; self-employment levels in, 171; Sheffield, 161; Slough, 131, 133; social mobility rate in, 58, 184–5, 187; start-ups in, 173–4; Stoke, 121; Sunderland, 52, 172; Supreme Court, 66; taxation system of, 222; Treasury, 16; UK Border Agency, 108; vocational education in, 163; voting patterns for Brexit vote, 7–9, 19–20, 23, 26, 36, 52; wage levels in, 168; Wales, 138; welfare state in, 199–203, 223–4, 231–2; Westminster, 54, 58, 60; youth unemployment in, 151–2 United Nations (UN): 102, 198; Conference on Trade and Development (UNCTAD), 10; Declaration of Human Rights (1948), 109; Geneva Convention (1951), 82–4; High Commission for Refugees (UNHCR), 82, 84; Security Council, 99 United States of America (USA): 1–2, 6–7, 22–3, 36–7, 51, 57, 60, 74, 86, 89, 94, 128, 168, 193, 208, 227; 9/11 Attacks, 130; Agency for International Development (USAID), 224; Asian population of, 68; borders of, 21; Chinese Exclusion Act (1882), 54; class identity in, 65–6; Congress, 67; Constitution of, 57; education system of, 166; higher education sector of, 167; Hispanic population of, 67–8, 85; House of Representatives, 67; immigration debate in, 67–8; Ivy League, 36, 61; New York, 135; political divisions in, 65; Senate, 67 University College London (UCL): Imagining the Future City: London 2061, 137, 139 University of California: 165 University of Kent: 36 University of Sussex: 36 University of Warwick: 36; faculty of, 171 Vietnam War (1955–75): 29 Visegrad Group: 69, 73, 99 Vlaams Belang: ideology of, 73 wages for housework: 194 Walzer, Michael: 117–18 War on Drugs: 62 WEIRD (Western, Educated, Industrialised, Rich and Democratic): 27 Welzel, Christian: Freedom Rising, 27 Westminster University: 165 white flight: 129, 134, 136 white identity politics: 9, 67 white supremacy: 8, 68, 73–4 Whittle, Peter: 144 Wilders, Geert: 50, 76 Willetts, David: 164, 185 Wilson, Harold: electoral victory of (1964), 150 Wolf, Prof Alison: 162, 164–5; XX Factor, The, 189, 198 working class: 2–4, 6, 51–2, 59, 61, 65; conservatism, 8 political representation/views of, 8, 52, 58, 63, 70, 72; progressives, 78–9; voting patterns of, 15, 52, 75–6; white, 19, 68 World Bank: 84 World Trade Organisation (WTO): 10, 85, 89–90, 97; accession of China to (2001), 88 World Values Survey: 27 xenophobia: 2, 14, 50–1, 57, 71, 119, 121, 141, 144, 225 York, Peter: 138 York University: 36 YouGov: personnel of, 78; polls conducted by, 16–17, 42, 66, 79, 114, 132, 141 Young, Hugo: 93 Young, Michael: 119, 190; Rise of the Meritocracy, The, 180–1 Yugoslav Wars (1991–2001): 97 Yugoslavia: 97 Zeman, Milos: President of Czech Republic, 73


pages: 182 words: 53,802

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

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

These were among the social and political consequences of democratic politicians enacting policies that enrich the few while impoverishing the majority; policies based on the interests of the robber barons and on the flawed theories of ‘defunct’ economists. As this goes to press, almost nine years have passed since the ‘credit crunch’ of August 2007. Yet the global economy struggled to recover from that crisis and the easy (unregulated) credit-fuelled bubbles that were violently burst by rising real rates of interest. Instead of recovery, the crisis simply rolled around the global economy. It was at its most intense at the core – the US and the UK – but subsequently moved across to Europe and in particular the Eurozone.

CHAPTER 5 Class Interests and the Moulding of Schools of Economic Thought Economic fundamentals are all sound; it’s a good time for tighter credit conditions … the recent sell-off in financial markets is good news … The world economy is strong enough to cope with the consequences. The Economist, 4–10 August 2007 Editors and journalists at the Economist magazine were not the only professional economists to make entirely the wrong call in the week that inter-bank credit ‘crunched’ and the 2007–09 global financial crisis began in earnest.1 Most academic economists shared their blind spot for the likely impact of financial deregulation on the financial system, the global economy and societies around the world. A great deal of the power exercised by financiers operating in financial markets derives from the studied indifference of orthodox academic economists to the production of money and the social construct that is the rate of interest on money.


pages: 220

Startupland: How Three Guys Risked Everything to Turn an Idea Into a Global Business by Mikkel Svane, Carlye Adler

Airbnb, Ben Horowitz, Benchmark Capital, Burning Man, business process, call centre, Chuck Templeton: OpenTable:, cloud computing, credit crunch, David Heinemeier Hansson, Elon Musk, fail fast, housing crisis, Jeff Bezos, Kickstarter, Marc Benioff, Menlo Park, remote working, Ruby on Rails, Salesforce, Sand Hill Road, Silicon Valley, Silicon Valley startup, Skype, software as a service, South of Market, San Francisco, Steve Jobs, subscription business, Tesla Model S, web application

I was surprised by the level of interest but also so heartened. They wanted to invest because they believed in us. They believed in the crazy idea that we could make something out of nothing. It’s also just as true that we were really lucky with the timing. The climate for individual investors was perfect. We were still months away from the credit crunch in 2008. Real estate in Denmark was crazy hot. People had equity in their houses, and they had disposable money. They saw this as another opportunity. My old friend Michael Hansen, the big-hearted, bigmouthed so-called king of Denmark, invested a bit. My friend Joachim, a television producer, invested and told his boss, who also invested.

The Game Is Not Over Second Chances Again! We weren’t desperate for money at this point, but we did want capital to grow the business, and we didn’t have a lot of choices. Denmark still didn’t have any real investment scene, U.S. venture capital firms weren’t routinely investing in small Danish startups, and the credit crunch was still casting a shadow—making it even less likely to get funding. It was just before the New Year. I had spent so much of 2008 on the road trying to get money. Now we would enter 2009 without anything to show for it. Devdutt had graciously left the door open, and now going back to CRV looked like the best option—the only option.


pages: 194 words: 56,074

Angrynomics by Eric Lonergan, Mark Blyth

AlphaGo, Amazon Mechanical Turk, anti-communist, Asian financial crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, blockchain, Branko Milanovic, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collective bargaining, COVID-19, credit crunch, cryptocurrency, decarbonisation, deindustrialization, diversified portfolio, Donald Trump, Erik Brynjolfsson, Extinction Rebellion, fake news, full employment, gig economy, green new deal, Greta Thunberg, hiring and firing, Hyman Minsky, income inequality, income per capita, Jeremy Corbyn, job automation, labour market flexibility, liberal capitalism, lockdown, low interest rates, market clearing, Martin Wolf, Modern Monetary Theory, precariat, price stability, quantitative easing, Ronald Reagan, secular stagnation, self-driving car, Skype, smart grid, sovereign wealth fund, spectrum auction, The Future of Employment, The Great Moderation, The Spirit Level, universal basic income

Given this, when a bunch of mortgage companies and mortgage bond funds started failing in 2007, it didn’t take long for it to develop into a full-blown crisis. The losses in these markets ate through the banks’ relatively small equity base, rendering them insolvent. The system as a whole had a heart attack called the “credit-crunch”. In short, Capitalism v.3.0’s combination of rising inequality and stagnant wages could be made to work so long as inflation was low (yes), interest rates were initially high but fell over time, encouraging further borrowing (yes), and the ability to borrow was unlimited. When the system crashed in 2008, it exposed just how much leverage there was in the banks.

AfD (Alternative für Deutschland) 114 Afghanistan 6 aging population 10, 13, 14, 95, 106–11 and consumption 109–10 and government bonds 138–9, 152 and inequality 56–7, 58, 107–10 and inter-generational transfer 106–107 and poverty 57, 107 as stressor 57, 91, 106, 110, 111, 116, 118 and technological change 90, 106, 122 AIG 85, 124 Amazon 96, 98, 104, 142, 143–4 Anderson, Elizabeth 176 anger 2–3, 7–9, 10, 11–12, 159, 161 misplaced 13 as opportunity 16 and play 153 private see private anger public see public anger reducing see calming strategies anxiety/stress 9, 13–14, 50, 53, 55–6, 88, 118, 161 and cognitive effort 89–90, 91 and job insecurity 95–6 three causes of 91 and uncertainty see uncertainty Apple 96, 142, 143 Aristotle 59, 153 artificial intelligence (AI) 14, 102–106, 142 Asian financial crisis (1998) 77, 140 asset ownership 130–31, 133, 136, 140–41 Atkinson, Tony 80, 173 austerity policies 2–3, 6, 15, 34–5, 41, 48, 84 and euro crisis 44–5 and low interest rates 135 Australia 125 Austria 3 baby boomers 107–108, 110, 111, 175 Bank of England 84, 103, 120, 145, 148 TFS scheme 149–50, 166 banks 1, 6, 15, 33–5, 42, 44, 48, 145–50 and capital/liquidity ratios 126 and direct support for consumption 145–8 and dual interest rates 149–50 and economic models 3, 4 failure of 119–21, 122 and helicopter money 131, 146 independence of 78, 79 and leverage see financial leverage and problem of low interest rates 120–21, 122, 131, 135 regulations on 125–6, 127, 129, 132 restrictions on 72, 77 see also financial crisis (2008) Beck, Aaron 171–2 Bernanke, Ben 6, 148 Biden, Joe 106 billionaires 4 Bitcoin 102, 103 Blackrock 165 blockchain technology 14, 103 Blyth, Mark 172, 175 bonuses 81, 85, 124 Brazil 11, 127 Brexit 4, 7, 11, 22, 24, 37, 38, 55, 117, 154 and austerity policies 41, 45 and immigration 111, 112, 114, 116 and job insecurity 100–101 Brill, Stephen 175 Britain (UK) 3, 38, 119, 155, 162, 164 aging population in 107, 110 austerity policies in 41 dual interest rates in 149–50 and EU see Brexit fear of immigration in 27 gig economy in 100 and government bonds 135, 140 government spending in 71 immigration in 111, 112, 114, 115–16 inequality in 6 interest rates in 145 nationalism in 23 Thatcherism in 75, 76 Brittan, Samuel 151 Brynjolfsson, Erik 173 budget deficits 71, 75 Buffett, Warren 130 calming strategies 12, 15, 118, 122, 123–57 and data dividend see data dividend and direct support for consumption 145–8 and dual interest rates 149–50 and economic diversity 153–6 and inequality see inequality, strategies to reduce and national wealth fund see NWF and regulations on banks 125–6, 127, 129, 132 and sustainable investment see sustainable investment Canada 125 cancer 53, 87, 88, 106 capital 4 cost of 137, 139, 153 and dispersion 97–98 as “fictitious” commodity 65 formation, rate of 108 global 40, 42, 43, 49, 50, 58 and labour 50, 60, 69, 72 and neoliberalism 75, 76, 77, 79 protection of, following financial crisis 85 versus capital 97, 98 Capital in the Twenty-First Century (Piketty) 49, 108–10 capital/liquidity ratios 126 capitalism 64–5 and commodities 65–6 capitalism as computer 11, 61–72 fixing 124–25 hardware of 62–3, 117 software of 63–4, 68–71 and unemployment/inequality 66–7 version 1.0 68–9 version 1.0 crash 64, 66, 67, 71, 73, 83, 118 version 2.0 69–73, 74, 75, 76, 116 version 2.0 crash 70–71, 73, 83–4, 118 version 3.0 74–80, 98–9, 117, 125, 140–41 version 3.0 crash 116 car industry 100–101 caring industry 104 Case, Anne 54, 176 centrism, political 38, 48, 118–19, 121, 160–61, 162 CEOs (chief executive officers) 4 Chamberlain, Joseph 66 Chile 3 China 42, 63, 64, 78, 93, 137, 151, 156 Citibank 81, 82 cities 55, 56 climate change 104, 111, 121, 129, 131, 153, 159–60 and investment see sustainable investment Clinton, Hillary 160 Coggan, Philip 172 cognitive effort 89–90, 91 Cold War 28, 48 ending/legacy of 5, 23, 26, 29, 30, 37, 116 communism 68, 71 competition/competitiveness 47, 65, 94, 95, 111, 116, 125 and technology 105 see also product market competition computer analogy see capitalism as computer constrained volatility 85 consumption, direct support for 145–8, 150–51, 160 consumption, distribution of 52–3, 58 Corbyn, Jeremy 119 corporations 6, 20, 57 and competition 95, 96 and data dividend see data dividend corruption 8, 29, 61, 130 Covid-19 163 culture 160 Czech Republic 146, 147, 155 data dividend 141–4, 160, 162 and monopolies 142, 143, 144 and privacy 141–2 and property rights 142–3 de-unionization 50, 95, 99 Deaton, Angus 54, 176 debt 75, 84, 120, 132, 145, 150 and demography 109, 111, 131 government 136–7, 151, 152 net 136 deflation 65, 69, 120, 128, 144, 148 demand management 44–5, 47, 126–7 democracy 16, 25, 29, 39, 40, 104, 117, 130 and markets 68 demography see aging population Denmark 64, 164 depression see recession deregulation 28, 40, 48, 50, 58, 75 and inflation 127 as micro-stressor 94, 96, 99, 101, 118 DGSE (dynamic stochastic general equilibrium) models 3–4 Doughnut Economics (Raworth) 131–2, 165 dual interest rates 131–2, 149–50, 174 Dublin (Ireland) 17–18 economic change 9–10, 29, 43, 153 see also fiscal reform; recession economic growth 2, 6, 41, 69, 71, 86 and demography 108–10 and immigration 116 and inequality 76, 79–80 and quality of jobs/wages 46, 47, 85 economic ideology 28 economics 12, 54–5 shortcomings of models 3–5, 6, 7 education 24, 53, 58, 135, 141 tuition fees/student loans 107, 111 electoral politics 5–6, 104 and demographics 107, 110 and tribalism 13, 22, 24–7, 29, 30, 31 electric vehicles 153 elites 2–3, 5, 6, 7, 9, 37 in cities 55, 56 and corruption 8, 29 and ethical norms 20 and financial crisis 43–4 manipulation of tribal identity by 22, 24, 61, 116, 161 policy failures of 48–9 Engbom, Niklas 175–6 environmental degradation 29, 161 see also climate change environmental and social governance 168 ethical norms 20 euro crisis 7, 37, 44, 77, 144 Europe 34, 42, 137, 140 inequality in 41, 53, 56, 58 migrant crisis in 7 tribalism in 30 European Central Bank (ECB) 34, 84, 146, 155, 164–5 TLTRO programme 147–8, 166 European Union (EU) 22, 33, 34–5, 37, 43, 119 austerity policies in 2, 36, 48 and financial crisis (2008) 82 micro-stressors in 47–8 and nationalism 154–6 and neoliberalism 76, 77 unemployment in 44–5 see also Brexit eurozone 45, 65, 83, 148, 151, 155 exchange rates 72, 134 Extinction Rebellion 8, 131–2 Facebook 27, 96, 98, 142, 143 fake news 26 Farage, Nigel 17, 161 Farmer, Roger 174 fascism 45–6, 66, 67–8, 71 fear 16, 17, 94, 113, 117, 150, 161 and media 26, 27 and politics 7, 45 financial crisis (2008) 1–2, 6, 26, 29, 30, 39, 48, 127, 163 and automation 102–103 and bail-out of banks 84 fragility of recovery from 46, 85, 89, 121 further reading on 172–3 and globalized financial system 84 and growth of populism 85 and inequality 79–80 and low interest rates 135 and regulation of banks 129 financial leverage 72, 81–3, 85, 99, 126, 157 and credit crunch 83 and interest rates 81–2 financial market deregulation 77 fiscal councils 150–51 fiscal reform 15, 150–53, 162 Fischer, Stan 148, 165 Florence (Italy) 87–8 foodbanks 6, 53 football fans 8, 19, 56 France 2, 3, 20, 55, 56, 71, 101, 154, 156 and NWF 135 Franklin, Benjamin 87 free markets 30, 69, 118 Friedman, Milton 118 full employment 40, 47, 60, 66, 71–2, 79, 85, 175 and inflation 73–4, 76 without inflation 121, 125, 126 future 101–102, 111 Garcia family, parable of 33–5, 43 Gates, Bill 130 GDP (gross domestic product) 5, 44, 76, 79, 100–101, 106, 151, 152 and NWF 135, 141 Germany 3, 11, 34, 38, 42, 62–3, 66, 151, 154, 156, 167 and migrant crisis 111, 113–14 and NWF 135 Gibley, Bruce Cannon 175 gig economy 94, 98, 99–100 global economy 12, 39–40, 50, 53, 58, 133 and nationalism 154 and neoliberalism 77 globalization 5, 39, 41, 42–3, 48, 77, 117 hyper- 40 and inequality 80 and inflation 127 and insecurity 101 and labour market 42, 43 and nationalism 154 Gold Standard 65, 67 Google 96, 98, 104, 142 government bonds 72, 131, 133, 135, 137, 138–9, 152 as insurance policies 139, 140 government borrowing 134–5, 137, 152–3 and cost of capital 137, 139, 153 and low inflation 128, 138–40, 150 and NWF 136–137, 138–40 Great Depression 40, 44, 66, 69, 120 Great Moderation 6, 120 Greece 35, 38, 44, 45, 106–07, 110, 144 green revolution see sustainable investment gross domestic product see GDP Guilluy, Christophe 55 Gulf States 133, 134 Hayek, Friedrich 118 healthcare 47, 53–4, 58, 123–4, 135, 139 and access to data 141–2 and NWF 141 and uncertainty/probability 92 hedge fund managers 4 helicopter money 131, 146, 166 Hildebrand, Philipp 165 Hong Kong 2–3, 140, 164 Hopkin, Jonathan 172 Hopkins, Ellen 123 housing 71, 113, 114, 135 Hungary 11, 23, 30 Iceland 1–2, 8, 20 immigration 5, 7, 26, 27, 111–17, 164 economic effects of 115–16 and housing/training 113, 114 and income distribution 112, 113, 114–15 and manipulation by media/politicians 111, 115 as stressor 113, 115 and technological change 106 and tribalism 95, 111, 112, 113 income see wages income distribution 43, 50, 51 and Keynesian economics 71 and neoliberalism 80, 81 independent fiscal councils 150–51 India 23, 127 individualism 29, 154 Indonesia 3 inequality 3, 4, 6, 15, 29, 30, 40–41, 43, 49–57, 58, 61, 79, 118 difficulties in measuring 50–53 and distribution of income/consumption 53–4 and financial crisis (2008) 79–80, 83, 85 further reading on 173, 176 intergenerational 56–7, 107–10 and populism 54–5 and uncertainty 49–50 inequality, strategies to reduce 121–2, 129–31, 132, 162 asset ownership 130–31, 133, 136, 140–41 and data dividend 141–4 National Wealth Fund see NWF optimal/effective 132–3 and universal basic income (UBI) 141, 144 wealth tax 130, 132 inflation 5, 40, 51–2, 53, 69 death of 126, 128 and full employment 73–4, 76, 121, 122, 125 and global financial markets 78 and interest rates 75, 81–2, 120 low see low inflation and oil prices 96–7 and printing money 78, 128, 145 and raising taxes 129 and recession 144–5 and regulation of banks 125–6, 127, 132 and stagflation 40, 74, 120, 128 inheritance 132, 133, 160 national 136 innovation see technological change insurance industry 93 interest rates 15, 33–4, 75, 81–2, 165–6 dual, and sustainable investment 131–2, 149–50 low, problem of 120–21, 122, 131, 132, 135, 146–8, 152 negative, problem of 15, 148, 149, 150 and spending 147 internet 25 investment spending 40, 60, 69 and future expectations 103 and global capital flows 77–8 and inflation 74 public sector 67, 70–71 sustainable see sustainable investment IRA (Irish Republican Army) 17 Iraq 6 Ireland 17–18, 23, 24 Islam 27 Italy 35, 37, 38, 39, 44, 66, 71, 87–8, 144, 156, 167 aging population in 110 poverty in 47 tribalism in 45–6 Japan 26, 84, 110, 137, 140, 148 job security/insecurity 34, 50, 56, 61, 94, 95–6, 100–101 and technology 102 Kalecki, Michał 60–61, 73–5, 120, 121, 127 Keynes, John Maynard/Keynesian economics 60, 66–7, 68–70, 92, 103, 118, 127, 151 General Theory of Employment, Interest and Money 66, 175 and inflation 67, 69, 128 labour market 35, 40–41, 42, 43, 44 and automation 102–106 deregulation 50, 95, 99, 122, 127 dispersion in 98–9 and full employment see full employment and immigration 115–16 in Keynesian system 71–2 and labour as commodity 59, 60, 65–6, 73, 85 and protectionism 59–61, 66 and secular stability 125, 126 and training 62–3 see also wages Lagarde, Christine 167 Lerner, Abba 118 libertarianism 63 Lonergan, Eric 174 Los Indignatios 85 low inflation 79, 134, 157 and full employment/secular stability 126 and government spending/borrowing 128, 138–40, 150, 152 and recession 144–5, 150, 162 Luce, Edward 164 Ludd, Ned/Luddites 102 machine learning (MI) 102–104 see also artificial intelligence macroeconomics 9, 13, 47, 89 failure of 119–20 and uncertainty 94 Macron, Emmanuel 162 Mair, Peter 172 markets 30, 59–61, 62, 66–7 and democracy 68 and quantity theory of money 68–9 see also labour market Mauss, Marcel 21–2 Mazzucato, Mariana 156 media 11, 43, 47 and technological change 98, 102–103, 105 and tribalism 24–5, 26–7, 29, 31, 61, 116, 161 Merkel, Angela 114 Mexico 63 micro-stressors 47–8, 53, 84, 91 and aging populations see aging populations and change 94 and fourth industrial revolution 94 and immigration see immigration microeconomics 9, 13–14, 160 migrant crisis 7, 111 Milanovic, Branko 52, 80 minimal group paradigm 21 Minsky, Hyman 128 mobile phones 53, 96, 97, 142 modern monetary theory (MMT) 118, 128–9 money, printing 78, 128, 145 monopolies 142, 143, 144 moral outrage 8, 13, 15, 35–6, 57–8, 117, 130, 161 and inequality see inequality as rational 36 and tribalism, compared 19, 20, 22, 29, 30–31, 36 triggers for 36 mortgages 34, 35, 38, 82, 111, 137, 145 nation state 39–40, 48, 50, 117, 119 national wealth fund see NWF nationalism 5, 11, 23, 29, 31, 39, 41, 116, 119 as positive 153–6 neoliberalism 4, 28–9, 37, 75–8, 122 and global capital flows 77–8 and inequality 51, 52, 53 NHS (National Health Service) 107 Nissan 100–101 Nixon, Richard 26 Northern Ireland 17–18, 23, 24 Norway 133, 134 Nussbaum, Martha 16, 35, 36 NWF (national wealth fund) 15, 132, 133–41, 143, 152, 168 and aging population 138–9 and asset ownership 133, 136, 140–41 and government borrowing/debt 136–7, 138–40 and growth of global stock market 137–8 and individual trust funds 135 and negative interest rates 134–5, 136 and risk 136, 137–8 sovereign 133–4 and trade surplus 134 Obama, Barack 29, 46 oil prices 96–7 Orban, Viktor 23, 30, 161 “Panama Papers” 2, 20 pensions 57, 63, 106–107, 138 perpetual loans 147–8 Philadelphia Eagles 20 Pickett, Kate 168 Piketty, Thomas 49, 52, 80, 108–10 play 153 Poland 11, 30 Polanyi, Karl 59–61, 64–5, 67, 175 political centrism 38, 48, 118–19, 121, 160–61, 162 political disengagement 29 political economy 12, 13 political identity 22–3, 29–30, 37, 48, 116, 117 further reading on 172 political parties 5–6, 7, 28 politics, new 15–16, 58, 160 populism 11, 27, 39 and financial crisis 86 three genres of 54–5 Portugal 35, 38, 44, 144 poverty 47, 67, 72, 80, 115 and demographics 57, 107 power 4, 48 powerlessness 9, 41 price stability 76, 79, 128, 147 private anger 7, 8, 9, 10, 13–14, 36, 117 and cognitive effort 89–90, 91 see also anxiety/stress private sector debt 131, 145 and government borrowing 134–5, 137, 138–40 investment 67, 70, 149–50, 151 liability in financial crisis 85, 127 privatization 28, 40, 96, 107 probability 91–3 product market competition 94, 95–8, 116, 125 and deregulation/privatization 96–7 and dispersion 97, 98–9 intensification of 96, 101 and technological change 96, 97–8, 99 productivity 40 and technological innovation 9, 10, 15, 102, 104–105 and wages 71, 72, 74, 76 profit margins 98, 101, 105, 143 property prices 34, 38 property rights 142, 143, 154 protectionism 59–60, 61, 66 public anger 7, 8–9, 10, 89, 98, 117–18 economic causes of 13 see also moral outrage; tribalism/tribal anger public housing 71, 113, 114 public sector investment 67, 70–71 public services 24, 115, 116 quantitative easing (QE) 146–7, 167 quantity theory of money 68–9, 78 racism 26, 54, 55, 115 Raworth, Kate 131–2, 173 Reagan, Ronald 26, 75, 118 recession 15, 29, 30, 34–5, 44, 49, 55, 58, 84, 152, 153 and dual interest rates 150 and interest rates 75, 120–21 and investment spending 60, 70, 71 and low inflation 144–5, 150, 162 and MMT 128–9 and stock markets 139, 140 see also euro crisis referenda 37 regeneration, economic 132 regional development 15, 115, 116, 149, 153, 156 Renzi, Matteo 37 risk 91–2, 127, 136, 137, 153 Roberts, Carys 174 robotics see artificial intelligence Rodrik, Dani 4, 39, 40 Russia 11, 41 Sahm, Claudia 150–51 Salvo, Francesca 87–8 Sandbu, Martin 174 Sanders, Bernie 128, 164 savings 93 scale economies 98, 99, 142 Scottish nationalism 7, 119 secular stability 125, 126, 127 service-based economy 52 Singapore 133, 134, 162 SMEs (small- and medium-sized enterprises) 164–5, 166 social democracy 63–4 social media 26, 27, 90, 98 Solow growth model 109 sovereign wealth funds 133–4 sovereignty 39 Spain 33–5, 38, 44, 45, 144 protests against austerity in 85 spending increasing 145, 147, 151 investment 40, 60 power 145 public sector 67, 70–71, 128, 151 restrictions on 41, 44, 149 sports fans 8, 19–20, 21, 25 sports industry 99 stagflation 40, 74, 120, 128 status-injury 36, 54 stock markets 63, 137–8, 139–40 stress see anxiety/stress strikes 73, 74 student loans 111 supply–demand 60, 96, 104 sustainable investment 131–2, 149–50, 152, 153 Sweden 63–4, 72–3 Syria 111, 113 Tavris, Carol 36, 171 taxes 40, 50, 57, 108, 116, 124 cuts in 34, 44, 111, 151 dodging 2, 6, 20, 132–3, 143 political opposition to 129, 130, 132, 133 raising 152 on wealth 129, 130, 132, 140 Tea Party movement 85 technocracy 37, 42–3, 48, 160–61 technological change 29, 58, 96, 109 and aging population 90, 106, 122 and competition 96, 97–8 and dispersion of returns 97 and fourth industrial revolution 94 further reading on 173–4 and inequality 50, 53 and labour market 102–104 and media 24–5, 27 as micro-stressor 88, 91, 94, 96, 97–8, 99, 101–102, 105, 116, 118 and productivity 9, 10, 15, 105, 122 and rate of diffusion 14 and uncertainty 101–102 telecommunications 96, 97, 142 terrorism 17, 18, 27 Thatcher, Margaret 75, 76, 118, 131 Thunberg, Greta 150 TLTRO programme (European Central Bank) 147–8 trade 21–2, 26, 42, 78, 154 and neoliberalism 78 trade surplus 134 trade unions 28, 42, 63, 66, 72, 73, 76, 79 trade wars 21–2, 26 training 62–3, 93, 113, 114, 141 tribalism/tribal anger 8–9, 11, 18–31, 41, 45–6, 117 and central/eastern Europe 23, 30 destructiveness of 24 and ethical norms 20 and fascism 68 and financial crisis 86, 89 and global politics 21–2, 26, 28–9 and immigration 95, 111, 112, 113 manipulation by politicians/media of 13, 22, 24–7, 29, 30, 31, 35, 61, 95, 116, 161 and minimal group paradigm 21 and moral outrage, compared 19, 20, 22, 29, 30–31, 36 and political identity 22–23, 29–30 social function of 20–21 and sport fans 19–20, 25 see also nationalism trickling down/up 79–80 trilemma, political 39 trucking industry 103 Trump, Donald 11, 22, 23, 25–6, 27, 33, 38, 119, 126, 161 and deregulation 129 election of 41–2, 54 tax cuts of 11 Turkey 11 universal basic income (UBI) 141, 144 Ukraine 11 uncertainty 9–10, 43, 49–50, 65, 91–4, 99, 118, 161 and aging populations see aging populations and emerging technologies 102–103, 106 and healthcare 92 and immigration see immigration reducing 93–4 and risk/probability 91–3 and skills development 93 unemployment 2, 30, 34, 44–5, 48, 58, 66, 72, 84, 167 and inflation/interest rates 74, 75, 125 unfairness 25, 36, 105 United States (US) 3, 38, 93, 118, 129, 164 aging population in 107–108, 110, 111 automation in 103, 104–105 financial crisis in (2008) 82–3, 84, 85 gig economy in 100 healthcare in 47–8, 53–4, 58, 106, 123–4 independent fiscal councils in 150–51 inequality in 50, 51, 53–4, 58, 80–81 Keynesian system in 71, 72–3 labour market in 42, 44, 46, 62 micro-stressors in 47–8 neoliberalism in 76 and NWF 135 stock market in 63 tribalism in 23, 25, 29 wealth tax in 130 US Federal Reserve 6, 46, 84, 108, 110, 120, 148, 151 voice, loss of 37–9, 43, 48, 58 Volcker, Paul 75, 81–2 voting 37–8 see also electoral politics wages 2, 60 and automation 105 and competition 96–7, 98 and consumption 53–4, 58, 72 distribution of see income distribution growth in, without inflation 125 and immigration 115–16 and inequality 4, 50–53, 58 and neoliberalism 76, 77 and oil prices 96–7 and productivity 72, 76 stagnation in 34, 47, 58, 80–81, 83, 84, 85 and supply/demand 65–6 Wall Street Crash 67 Warren, Elizabeth 130, 132 Watson’s Analytics 19 wealth, distribution of 4, 15, 29, 30 welfare state 71 WhatsApp 2 Wilkinson, Richard 176 wind power, investment in 150 Wolf, Martin 80, 173 World Trade Organization (WTO) 42 Wren-Lewis, Simon 151 Yates, Tony 151 “Yellow Jackets” protests 2, 20, 55, 56


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", accounting loophole / creative accounting, bank run, banking crisis, banks create money, behavioural economics, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, capitalist realism, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, currency risk, David Graeber, debt deflation, dematerialisation, disintermediation, Dogecoin, emotional labour, eurozone crisis, fiat currency, financial engineering, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, gentrification, German hyperinflation, Goldman Sachs: Vampire Squid, Herbert Marcuse, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kickstarter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, Minsky moment, mobile money, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, Neal Stephenson, negative equity, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, post-Fordism, Post-Keynesian economics, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Satoshi Nakamoto, scientific management, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

See also specie CoinLab, 369 Coinye West, 370n40 Coleman, James, 287n collateralized debt obligations (CDOs), 123, 214 Collège de Sociologie (College of Sociology), 165, 172–73, 203 Collins, Daryl, 289–90 Collins, Randall, 292 colonialism, 60, 64, 230, 240, 243 Commerzbank, 258n38 commodity fetishism, 72, 195, 215, 273, 299, 340 commodity money, 23, 53, 83 commodity theory of money, 236, 359 commons, 249, 268, 380 communism, 49, 84, 250, 361 complementary currency, 5, 14, 214, 237, 315, 360 compound interest, 146–47, 153, 156, 159 Comte, Auguste, 316 conceptual utopia, 317, 328, 330 confidence, 16, 31n24, 45, 124, 353, 362, 374n, 383, 387; and Ponzi finance, 58, 117–18; in society, 137 consumerism, 171, 197, 341; militant, 338 consumers, 65, 307, 310, 355; and debt, 91, 110, 128; and deflation, 72; in Hardt and Negri, 247, 249; and inflation, 72; and just pricing, 356; and local currencies, 374n; versus producers, 109, 375; and unequal pricing, 326, 327, 328–29; wasteful, 164n; as workers, 81, 86, 356 contactless, payment, 377 contagion, financial, 2, 43n, 77; and violence, 44 cool money, 193–94, 391 Cooley, Charles, 276 cooperatives, 84, 86, 345 Copernican revolution, 169 counterfeit money, in Baudelaire, 182, 185; in Derrida, 165, 182, 185, 186, 188, 198, 209; and finance, 199; in Nietzsche, 137; as simulacra, 200; and sovereignty, 224, 226; and war, 43 countergift, 25 cowrie shells, 21, 300 credit, 6, 11; versus cash, 104; and colonialism, 64; debt free, 356; in Harvey, 67–68; versus money, 73; mutual, 316, 353; old-style versus interest-bearing, 94; and social peace, 96–97. See also credit creation; free credit Crédit Agricole, 258 credit contraction, 57, 61, 79, 118–19, 134. See also credit crisis; credit crunch credit creation, 74, 374 credit crisis, 52, 56, 57, 61, 70–71, 73, 76, 79, 88; and social inequality, 79. See also credit contraction; credit crunch credit crunch, 50, 58. See also credit contraction; credit crisis credit inflation, in Marx, 56–57, 58, 61; in Minsky, 117 credit money, 12, 52, 65, 80, 81, 344, 376; accumulation of, 55, 69, 73; in Baudrillard, 194; versus commodity money, 51, 62, 73, 78, 96, 100; as debt, 58–59; defined, 55; in Deleuze and Guattari, 234–35; and the financial system, 56, 108, 218; and gold, 73–74; and hoarding, 54, 58; Marx’s theory of, 55–59; and the monetary base, 78–79; in Minsky, 121; private forms of, 121; and regular money, 55, 87; versus token money, 54–55, 58; and trust, 97, 98 credit money regime, 98–99 Crédit Mutuel, 365 credit rating agencies, 132 credit ratings, 43n, 124 credit theory of money, 93, 104–5, 236, 359 creditworthiness, 91, 106; institutionalization of, 218–19 creolization, 302 Crouch, Colin, 76 cryptoanarchism, 363 cryptography, 42; and Bitcoin, 362 cultural labor, 76 cultural sociology, of prices, 62n24 cultural turn, 81 culture, 13; and money, 13–14 cumal (slave-girls), 97 currency, 73; versus money, 5.

Marx’s prediction was also given a leading role in a best-selling account of the subprime crisis, The Storm, whose author (Vince Cable) subsequently became (as Business Secretary) a member of the Coalition Government in the United Kingdom (Cable 2009: 8). The quotation was a fake.4 Marx’s presence in this crisis has been compelling.5 Had he really told us so, as the placard proclaimed? Did his arguments capture the underlying causes of the credit crunch? Could a theory of money based on his work—formulated in the nineteenth century—really help to explain the global imbalances that fueled the subprime crisis, as well as the various other crises (e.g., the crisis in the Eurozone) that followed? Three and a half years after the Lehman bankruptcy, the Financial Times ran a series of articles under the heading “Capitalism in Crisis.”

Third, hoarding creates the need for credit money, as well as for fiat money, as alternative means of circulation to real money (or hard cash). Fourth, credit money creates the illusion that capital is self-expanding and leads to the formation of fictitious capital. Fifth, the existence of fictitious capital makes the cycle of speculative bubbles and crashes an inevitable feature of capitalism. Sixth, a credit crunch always follows from the formation of a speculative bubble, creating a sudden demand for real money, or hard cash. When reading through these steps, it is not difficult to see how one could imagine Marx saying, “I told you so.” In the 2007–8 crisis, we saw a sudden credit depreciation trigger a flight from risk, whereby investors sought to offload financial instruments in a rush for the safe haven of money, or at the very least, the higher rated sovereign bonds, such as U.S.


pages: 215 words: 55,212

The Mesh: Why the Future of Business Is Sharing by Lisa Gansky

"World Economic Forum" Davos, Airbnb, Amazon Mechanical Turk, Amazon Web Services, banking crisis, barriers to entry, Bear Stearns, bike sharing, business logic, carbon footprint, carbon tax, Chuck Templeton: OpenTable:, clean tech, cloud computing, credit crunch, crowdsourcing, diversification, Firefox, fixed income, Google Earth, impact investing, industrial cluster, Internet of things, Joi Ito, Kickstarter, late fees, Network effects, new economy, peer-to-peer lending, planned obsolescence, recommendation engine, RFID, Richard Florida, Richard Thaler, ride hailing / ride sharing, sharing economy, Silicon Valley, smart grid, social web, software as a service, TaskRabbit, the built environment, the long tail, vertical integration, walkable city, yield management, young professional, Zipcar

While we may not have been wildly discussing this book per se, Tim O’Reilly, Dale Dougherty, Bill McDonough, Bob Epstein, Larry Lessig, Esther Dyson, Jane Goodall, and Paul Hawken have left me frequently provoked, and for that I thank you. The Mesh References Adams, Anna. “Sharing Gardens to Grow Veg.” BBC News, February 26, 2009, http://news.bbc.co.uk/2/hi/uk_news/7911975.stm (accessed March 17, 2010). Adejobi, Alicia. “Credit Crunch Forces Smart Shopping: UK Boutiques and Clothes Swapping Parties.” Orato, August 18, 2009, http://www.orato.com/home-family/credit-crunch-forces-smart-shopping (accessed March 16, 2010). Alexander, Christopher. The Timeless Way of Building. New York: Oxford University Press, 1979. Alter, Lloyd. “9 Hip Housing Alternatives to the Mortgaged Single Family Home.” Planet Green, November 3, 2009, http://planetgreen.discovery.com/home-garden/hip-housing-alternatives. html (accessed March 17, 2010).


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, Charles Babbage, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, financial engineering, Ford Model T, forensic accounting, Frederick Winslow Taylor, G4S, Glass-Steagall Act, high-speed rail, information security, intangible asset, Internet of things, James Watt: steam engine, Jeremy Corbyn, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, Savings and loan crisis, savings glut, scientific management, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

The chairman of one FTSE100 company reportedly thought the scope for abuse so great that the new standard was a ‘rogues’ charter’.24 (And an academic study after the crisis would find that most finance professionals thought the standard ‘had undermined UK financial reporting integrity before the credit crunch’.)25 At precisely the wrong time, prudence became a poor accounting relation indeed. THE FALLING ROCK The first bank to fall as a result was Northern Rock. The solidly named bank that emerged from a building society set up in the nineteenth century for workers in the north-east of England was, by the early twenty-first, a less circumspect outfit.

Of this, £13m was for consultancy and accounting advice on the bank’s largely ill-fated new ventures.47 In the year that RBS finally collapsed, Deloitte would pocket £59m, taking its total earnings from the bank to more than £200m. But increasing his firm’s fee income was what Connolly had been elected by his partners to do. Nobody could argue that he didn’t deliver, from RBS and other clients. In the year of the financial crisis, The Times would report that he had ‘steered Deloitte to a credit-crunch-busting 16% jump in 2008 pre-tax profits to £654 million’. His own pay vaulted 22% to £5.7m.48 Bean counters didn’t make that kind of money by giving clients a hard time, and from the outset, a closeness with the RBS boardroom was apparent. ‘The relationship between Fred Goodwin and Deloitte & Touche was inappropriate, ineffective and incestuous,’ one senior RBS executive from the time later recalled.49 Numbers that emerged in the wake of the crash certainly suggested this was one of the less demanding auditor–client relationships.

‘The relationship between Fred Goodwin and Deloitte & Touche was inappropriate, ineffective and incestuous,’ one senior RBS executive from the time later recalled.49 Numbers that emerged in the wake of the crash certainly suggested this was one of the less demanding auditor–client relationships. When in 2011 the Financial Services Authority reported on the failure of RBS, it revealed that the bank had been consistently valuing CDOs and other asset-backed securities more generously than its peers. At the end of 2007, with the credit crunch now gripping the markets, European banks were assessing so-called ‘super senior’ CDO tranches (once considered safe) as worth 72% of their nominal value, while US banks were marking them at just 53%. RBS had them on its books at 90%. The regulator concluded that ‘there was a bias to optimism by RBS senior management in its approach to CDO valuation issues at end 2007 and the start of 2008, and an acceptance of that optimism by RBS’s auditors . . . which with hindsight is difficult to justify’.50 This was, however, insufficient to warrant any sanction for the bankers ‘in light of Deloitte’s sign-off of the accounts’.


pages: 1,066 words: 273,703

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

"there is no alternative" (TINA), "World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bond market vigilante , book value, Boris Johnson, bread and circuses, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, business logic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, company town, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial engineering, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, high-speed rail, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, low interest rates, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, military-industrial complex, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, opioid epidemic / opioid crisis, paradox of thrift, Peter Thiel, Ponzi scheme, Post-Keynesian economics, post-truth, predatory finance, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, Steve Bannon, structural adjustment programs, tail risk, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

Draghi, “Unemployment in the Euro Area,” https://www.kansascityfed.org/publicat/sympos/2014/2014Draghi.pdf. 73. For this and the following see Barber and Atkins, FT interview transcript: Mario Draghi. 74. Bastasin, Saving Europe, 343–345. 75. E. Kuehnen, “ECB Wall of Cash Averts Credit Crunch,” Reuters, February 27, 2012, https://uk.reuters.com/article/us-ecb-m3/ecb-wall-of-cash-averts-credit-crunch-idUSTRE81Q0XP20120227. 76. J. Cotterill, “Keep On Carrying On LTROs,” Financial Times, October 7, 2011; and “ECB Announces Details of Refinancing Operations from October 2011,” http://www.ecb.europa.eu/press/pr/date/2011/html/pr111006_4.en.html. 77.

As America’s home prices almost doubled in the ten years leading to 2006, this raised household wealth by $6.5 trillion, delivering a giant boost not just to the United States but to the world economy.2 As US consumer spending surged toward $10 trillion, it added $937 billion to global demand between 2000 and 2007.3 Fluctuations on such huge scales can clearly help account for a business-cycle downturn in 2007. But to explain how this could trigger a financial crisis, with bank failures spreading panic and a credit crunch across the world, there is one crucial thing to add: Real estate is not only the largest single form of wealth, it is also the most important form of collateral for borrowing.4 It is mortgage debt that both amplifies the broader economic cycle and links the house price cycle to the financial crisis.5 Between the 1990s and the outbreak of the crisis in 2007, American housing finance was turned into a dynamic and destabilizing force by a fourfold transformation—the securitization of mortgages, their incorporation into expansive and high-risk strategies of banking growth, the mobilization of new funding sources and internationalization.

It was the scale and urgency of this action that finally brought home to Ben Bernanke and Hank Paulson the true severity of the situation. As Larry Elliott, economics editor of the Guardian, commented: “As far as the financial markets are concerned, August 9 2007 has all the resonance of August 4 1914. It marks the cut-off point between ‘an Edwardian summer’ of prosperity and tranquility and the trench warfare of the credit crunch—the failed banks, the petrified markets, the property markets blown to pieces by a shortage of credit.”9 Quite how bad things were soon going to get was suggested three weeks later, when on September 14, Northern Rock, one of Britain’s largest mortgage lenders, failed. On TV screens, the Northern Rock panic looked like a classic bank run.


pages: 251 words: 63,630

The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World by Shaun Rein

business climate, credit crunch, Deng Xiaoping, Donald Trump, facts on the ground, glass ceiling, high net worth, high-speed rail, illegal immigration, income per capita, indoor plumbing, job-hopping, Maui Hawaii, middle-income trap, price stability, quantitative easing, Silicon Valley, Skype, South China Sea, Steve Jobs, thinkpad, trade route, trickle-down economics, upwardly mobile, urban planning, women in the workforce, young professional, zero-sum game

Optimism and confidence, born from being raised with nothing but making it big through their own sweat and grit, seemed to ooze from their pores. They knew they could overcome any challenges with enough hard work and patience. To my left a number of the executives gathered to talk about joining forces to lobby the government more. They were worried about a credit crunch hitting small and medium enterprises, and they wanted to join together to present their case to the government to remedy the situation. Concerns about underground banks, loan sharks really, calling in loans was starting to become a topic of conversation. Listening to the discussion, it was clear these were some of the savviest businessmen not just in China but in the world.

Japanese economic growth driven by future ideas on high-speed train scandal Ningbo’s bridge risks of too much subway construction superiority of consumer activism consumer electronics consumer market, Chinese growth of taste preferences of consumption American’s addiction to in China, optimism and China’s economy and Chinese women’s influence on in U.S. fueled by cheap labor wealth and increase in See also luxury brands copper, demand for corn, demand for corruption, in China as barrier to China’s rise in central vs. local governments China vs. Middle East educational reform and food production safety and in government government eradication attempts high-speed train scandal credit crunch. See debt; financial crisis Crichton, Michael CTRIP cultural imperialists Cultural Revolution freedom and, perception of government rules, reactions to and impact on society optimism in China and Red Guards scholars, harassment of turmoil and pain during universities closed during Ye Xiangzhen, suffering during younger vs. older generation, views on currency Australian dollar, appreciation of Chinese renminbi, appreciation of U.S. dollar, decline in D dairy industry Mengniu Dairy milk scandal Yili Dairy dairy scandal Dalai Lama Dalian, China Danone Da Vinci furniture Davis, Bette debit cards debt American’s addiction to of China Europe, debt crisis in of Japan for real estate, limits on in China United States, downgrading of young Chinese, acceptance of See also financial crisis Dell Dell, Michael Deloitte Deng Pufang Deng Xiaoping deportations, U.S.


pages: 492 words: 118,882

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory by Kariappa Bheemaiah

"World Economic Forum" Davos, accounting loophole / creative accounting, Ada Lovelace, Adam Curtis, Airbnb, Alan Greenspan, algorithmic trading, asset allocation, autonomous vehicles, balance sheet recession, bank run, banks create money, Basel III, basic income, behavioural economics, Ben Bernanke: helicopter money, bitcoin, Bletchley Park, blockchain, Bretton Woods, Brexit referendum, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, cashless society, cellular automata, central bank independence, Charles Babbage, Claude Shannon: information theory, cloud computing, cognitive dissonance, collateralized debt obligation, commoditize, complexity theory, constrained optimization, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, crowdsourcing, cryptocurrency, data science, David Graeber, deep learning, deskilling, Diane Coyle, discrete time, disruptive innovation, distributed ledger, diversification, double entry bookkeeping, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, financial intermediation, Flash crash, floating exchange rates, Fractional reserve banking, full employment, George Akerlof, Glass-Steagall Act, Higgs boson, illegal immigration, income inequality, income per capita, inflation targeting, information asymmetry, interest rate derivative, inventory management, invisible hand, John Maynard Keynes: technological unemployment, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, knowledge economy, large denomination, Large Hadron Collider, Lewis Mumford, liquidity trap, London Whale, low interest rates, low skilled workers, M-Pesa, machine readable, Marc Andreessen, market bubble, market fundamentalism, Mexican peso crisis / tequila crisis, Michael Milken, MITM: man-in-the-middle, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, natural language processing, Network effects, new economy, Nikolai Kondratiev, offshore financial centre, packet switching, Pareto efficiency, pattern recognition, peer-to-peer lending, Ponzi scheme, power law, precariat, pre–internet, price mechanism, price stability, private sector deleveraging, profit maximization, QR code, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, Real Time Gross Settlement, rent control, rent-seeking, robo advisor, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, seigniorage, seminal paper, Silicon Valley, Skype, smart contracts, software as a service, software is eating the world, speech recognition, statistical model, Stephen Hawking, Stuart Kauffman, supply-chain management, technology bubble, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Nature of the Firm, the payments system, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, trade liberalization, transaction costs, Turing machine, Turing test, universal basic income, Vitalik Buterin, Von Neumann architecture, Washington Consensus

ISCE Publishing. Pfleiderer, P. (2014). Chameleons: The Misuse of Theoretical Models in in Finance and Economics . Stanford Graduate School of Business. Pierce, A. (2008, November 05 ). The Queen asks why no one saw the credit crunch coming . Retrieved from The Telegraph: http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html Rand, U. W. (2015). An Introduction to Agent-Based Modeling: Modeling Natural, Social, and Engineered Complex Systems with NetLogo . MIT Press. Romer, P. M. (May 2015). Mathiness in the Theory of Economic Growth.

If households and businesses find themselves too constrained to pay off debts or take on more debt, then on the flipside, creditors become reluctant to extend new loans or renew standing commitments as they are uncertain if debtors are capable of servicing the debt. As a result, the cost of credit goes up, making debt unattractive and, in some cases, unsustainable. The interconnection of markets further spreads this effect, such that a credit crunch in one sector can induce a wave of foreclosures and threaten the banking sector, which in turn can produce a sovereign debt crisis if the banks need to be bailed out by their governments. This in turn adds fuel to the fire, as the expectation of bailouts could lead to lower repayment discipline among private-sector creditors, especially if debt problems are amply widespread in the economy to render punishment threats non-credible (Arellano and Kocherlakota, 2014).


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

In an article published in 1983 he claimed to have rescued the Fisher debt-deflation hypothesis by adding the idea of the credit crunch.17 This would be the missing link between deflation and dramatic declines in nominal incomes. As prices fall, the real debt burden of debtors rises; but, far from benefiting, it actually hurts creditors because falling asset prices, rising loan impairments and bankruptcies lead to a fall in the value of assets on bank balance sheets. These collateral effects lessen the incentive for creditors to lend, resulting in a credit crunch, which then hits aggregate demand in the economy through a fall in consumption and investment.

Buccleuch, Henry Scott, 3rd Duke of budget deficits and austerity Burns, Arthur Burns, Mary business cycle theory Fisher Hayek Schumpeter Callaghan, James Cambridge School see also Keynes, John Maynard; Marshall, Alfred; Robinson, Joan Cambridge University Girton College Kings College Newnham College St Johns and women Canon capital accumulation capital investment capitalism in aftermath of 2008 financial crisis and communism derivation of term and Engels and the financial crisis of 2008 free-market and Hayek inequality and capitalist economies laissez-faire see laissez-faire and Marx and the Occupy movement and Schumpeterian ‘creative destruction’ socialism vs welfare state capitalism car industry Carney, Mark Carter, Jimmy Case, Elizabeth central banks Bank of England Bank of Japan European Central Bank Fed see Federal Reserve forward guidance macroprudential policy monetary policy tools see also quantitative easing (QE) Chamberlin, Edward Chicago School see also Friedman, Milton Chile China 1949 revolution asset management companies banking system Beijing Consensus Communist Party corporate debt Cultural Revolution domestic innovation economic transformation ‘effect’/‘price’ employment system entrepreneurs exports Five Year Plan (1953) foreign direct investment (FDI) and Germany industrialization and reindustrialization inequality innovation challenge legal institutions manufacturing Maoism and Marx national debt openness ‘paradox’ poverty reduction privatization R&D investment regional free trade agreement renminbi (RMB) as second largest economy services sector shadow banking smartphones social networks trade-to GDP ratio and the USSR wage increases women Churchill, Winston class Engels’ The Condition of the Working Class in England and Marx middle see middle class and Ricardo wage earner class Classical School of economics see also Mill, John Stuart; Ricardo, David; Smith, Adam Clinton, Bill Clinton, Hillary cloth clothing Coase, Ronald Cold War Collectivist Economic Planning collectivization Collier, Paul Columbia University communism Bolshevik Party and capitalism Chinese Communist League First International Marxism see Marxism and Robinson Socialist/Second International Third International USSR see Soviet Union Vietnamese vs welfare state capitalism Communist League comparative advantage theory competition ‘competing down’ (Schumpeter) imperfect between money providers perfect and Robinson wages and competitiveness computers Conard, Ed construction consultancy firms consumerism consumption and comparative advantage theory consumer spending and marginal utility analysis convergence hypothesis corn, free trade in Corn Laws repeal and Ricardo corporate debt Cowles Commission Crafts, Nicholas crafts credit crunch credit default swaps (CDS) credit rating Crimean War crypto-currencies currency crises first-generation second-generation third-generation currency stability Cyprus death duties debt Chinese corporate debt-deflation spiral and government bonds indexation and protection from and Minsky’s financial instability hypothesis mortgage debt national see national debt private corporate as share of GDP decentralization defence deflation debt-deflation spiral Fisher and combating deflation Japan self-fulfilling deindustrialization and globalization premature reversing/reindustrialization and trade US Deng Xiaoping depression see Great Depression (1930s); Long Depression (1880s); recession/depression diminishing returns to capital distributive lag model Douglas, David, Lord Reston Douglas, Janet DuPont East Asian ‘tiger’ economies see also Hong Kong; Singapore; South Korea; Taiwan eastern Europe Eastman Kodak Econometric Society Econometrica economic development challenges and Beijing Consensus financial/currency crises and institutions and Lewis model Myanmar and North and path dependence poverty eradication/reduction South Africa Sustainable Development Goals Vietnam and Washington Consensus economic equilibrium economic freedom economic growth and austerity barriers convergence hypothesis development challenges see economic development challenges drivers of 2 see also innovation; institutions; public investment; technology endogenous growth theories inclusive growth through investment Japan’s growth and Japan’s ‘lost decades’ Lewis model mercantilist doctrine of and new technologies policy debates on raising and poverty reduction and productivity debate/challenge slow growth and the future Solow model UK government’s renewed focus on and unemployment Economic Journal economic rent Ricardo’s theory of economies ‘animal spirits’ of crises see financial crises deflation see deflation emerging see emerging economies equilibrium in GDP see gross domestic product global macroeconomic imbalances growth of see economic growth inequality and capitalist economies inflation see inflation and international trade and investment see investment; public investment national debt see national debt QE see quantitative easing rebalancing of recession see recession/depression services economy see services sector and stagnant wages state intervention Economist education higher role in reducing inequality universal Eliot, T.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

In the George W. Bush years, things got worse. The federal government became habituated to borrowing. Taxes never covered spending‌—‌but still, even in 2004, the worst of those years, federal borrowing never breached the $500 billion level. And just as well: $500 billion is a lot of money. Then came the credit crunch. Lehman, AIG, General Motors‌—‌the first, most colorful phase of the current credit crisis. In 2008, the deficit hovered close to $500 billion. The following year, it was approaching $1,500 billion, or $1.5 trillion if you prefer. Just pause for a moment to consider how much money that is. Numbers that large become difficult to comprehend, because of the absence of obvious comparisons.

We’re about to start examining the scale of possible losses still to come in the current credit crisis; but before we do so, I need to make a couple of important points. They cut two ways. First, it is not only the banking system which holds poor-quality assets. Many of those assets will have ended up with insurance companies, pension funds, and central banks, for example. In the 2008–9 phase of the credit crunch, about two-thirds of the total losses ended up being absorbed by the banking system, and about a third by insurance companies and other investors.4 In the absence of a better guess, I’d say that the same division of probable losses to come still holds true. That first point is helpful. Systemic risks stem largely from the banking sector, so if losses are shared more widely, the banking sector is that little bit more robust.

For the first quarter of 2011‌—‌and bear in mind that only twenty-seven banks were involved in this study‌—‌the total of nonperforming loans was some $200 billion as compared with the reported total of $129 billion.12 That’s potentially as much as $70 billion smuggled away in games of extend and pretend. Misrepresentation on that scale is somewhat alarming, to put it mildly. On the other hand, in the context of the figures we’ve been looking at so far, $70 billion sounds manageable. But don’t be fooled. The IMF estimated the total losses arising from the first phase (2007–10) of the credit crunch (more on this at the end of the chapter). Excluding sovereign losses (which didn’t play a part in that phase) and residential mortgages (which we’ve already covered), the IMF estimated that losses in the corporate and other consumer sectors amounted to approximately $2.2 trillion, of which about $1.4 trillion ended up pounding bank balance sheets.


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

A post-crash genre of books had sprung up with titles promising drugs, sex and extravagantly bad behaviour: Binge Trading: The Real Inside Story of Cash, Cocaine and Corruption in the City; Gross Misconduct: My Year of Excess in the City; Confessions of a City Girl: The Devil Wears Pinstripes. Barbara Stcherbatcheff’s story starts in a strip club, which also occupies significant sections of Tetsuya Ishikawa’s How I Caused the Credit Crunch: A Vivid and Personal Account of Banking Excess. The best known of those books is Cityboy: Beer and Loathing in the Square Mile by Geraint Anderson. In this semi-fictional autobiography, he spends 200 pages drinking, snorting coke, ogling strippers, chasing whores and, above all, complaining about hangovers.

(Davies) 1 financial sector (see also bankers; banks; City; global financial crisis): amorality in 1, 2, 3, 4 ‘animal’ types within 1 blame culture in 1 blog’s negative comments on 1 Brown’s praise for 1 and caveat emptor 1, 2, 3, 4, 5, 6 and charity donations 1 code of silence governs 1, 2, 3, 4 competition vs co-operation in 1 countries/blocs played against each other by 1 ethical dilemmas in 1 immune to exposure 1 and insider jokes 1 IT’s role in 1, 2 and patches and workarounds 1 ‘map’ of 1 and mergers and acquisitions 1, 2, 3, 4 countries’ legal systems affected by 1 number of employees in 1 politicians identify with 1 post-crash books about 1, 2 PR people within 1, 2 and project finance 1 protest demonstrations against 1 regulators identify with 1 remuneration in 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 bonuses 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and leisure-time spending 1 restructuring in 1 scandals within 1, 2, 3 (see also rogue traders) Barings 1 FX 1, 2 HSBC 1, 2 JP Morgan 1, 2 LIBOR 1, 2, 3 London Whale, see Iksil, Bruno Société Générale 1 UBS 1 sport and war analogies within 1 whistle blowers within 1, 2, 3 women in, men’s attitudes towards 1 Financial Services Authority 1 Financial Times 1, 2 F9 model monkeys 1 Fool’s Gold (Tett) 1 Freud, Sigmund 1 Fukushima 1 FX scandal 1 GDP (gross domestic product) 1 Geithner, Timothy 1 Gekko, Gordon (film character) 1, 2 global financial crisis, see financial crash Goldman Sachs 1, 2, 3 as exception to short-termism 1 Geithner’s and Clinton’s lucrative speeches to 1 London trading floor of, a ‘toxic and destructive environment’ 1 as ‘pure’ investment bank 1 banking licence subsequently acquired by 1 Smith’s book on 1 Smith’s NYT piece on 1, 2 Goodfellas 1 greed 1, 2, 3, 4, 5, 6 gross domestic product (GDP) 1 Gross Misconduct: My Year of Excess in the City (Thompson) 1 Guardian: distrust of 1 finance blog of: first interviews posted on 1 ‘Going native …’ subtitle of 1 readers’ comments posted on 1, 2, 3, 4, 5, 6, 7, 8 responses to interviews on 1, 2 traditional banking said to be under-represented on 1 guardiannews.com/jlbankingblog, see under Guardian Haldane, Andrew 1 Halliburton 1 Hancock, Matthew 1 Harrington, William J 1 hedge funds 1, 2, 3 and ‘unorthodox’ investment strategies 1 high-frequency trading 1, 2, 3, 4 high-net-worth individuals 1 house prices 1 How I Caused the Credit Crunch: A Vivid and Personal Account of Banking Excess (Ishikawa) 1 HSBC 1 annual results announcement of 1, 2 and drugs money 1, 2 mixed investment–commercial nature of 1 human resources (HR) (see also recruitment), and redundancy 1, 2 Iksil, Bruno (‘London Whale’) 1, 2 incentives: and accountancy firms 1 ‘perverse’ 1, 2, 3, 4, 5 need to remove 1 short-termism encouraged by 1 Initial Public Offering (IPO) 1, 2 insurance: banking’s overlap with 1 enormous reach of 1 investment banks (see also banks): ‘animal’ types within 1 books about 1 as ‘casinos’ 1, 2, 3 and ‘castes’ 1 vs commercial 1, 2 commercial banks begin to take over 1 culpability of, in global financial crash 1 daily routine of 1, 2, 3 definition of, clarified 1 and dot-com bubble 1, 2, 3 job titles within 1, 2, 3 radically changed ownership structure of 1 and risk and compliance 1, 2, 3, 4, 5, 6 (see also regulators) risk-taker–risk-bearer dichotomy in 1 and ‘rock’n’roll trader’ 1 speculation by 1 subcultures engendered by 1 Iraq 1 Ishikawa, Tetsuya 1 IT 1, 2 jlbankingblog, see under Guardian job titles, in investment banks 1, 2, 3 JP Morgan 1 Blair’s role in 1, 2, 3 rogue trader at 1, 2 Kerviel, Jérôme 1 KPMG 1 Krugman, Paul 1 Lagarde, Christine 1 Large Hadron Collider 1 Leeson, Nick 1 Lehman Brothers: capital buffers of 1 collapse of 1, 2, 3, 4, 5 inadequate buffers of 1 as ‘pure’ investment bank 1 Lewis, Michael 1 Liar’s Poker (Lewis) 1, 2 LIBOR scandal 1, 2, 3 Lloyds, annual results announcement of 1, 2 London riots 1 London Stock Exchange, and ‘my word is my bond’ 1, 2 London Whale, see Iksil, Bruno Master of the Universe 1, 2, 3 Masters of Nothing: How the Crash Will Happen Again Unless We Understand Human Nature (Hancock, Zahawi) 1 Masters of the Universe 1 passim, 1, 2 (see also banker types) cold fish’s scorn for 1 criticism of sector resented by 1 sector readily defended by 1 megabanks 1 (see also banks) mergers and acquisitions 1, 2, 3, 4 countries’ legal systems affected by 1 Merrill Lynch 1 middle office 1, 2, 3, 4, 5 more power and status in, post-crash 1 Monkey Business: Swinging through the Wall Street Jungle (Rolfe, Troob) 1 Moody’s 1, 2 Morgan Grenfell 1 My Life as a Quant (Derman) 1 ‘my word is my bond’ 1, 2 neutrals 1, 2, 3, 4, 5, 6, 7 (see also banker types) in political parties 1 New York Times 1, 2, 3, 4 9, 5 trader exploits 1 Nissen, George 1 Occupy London 1 operational risk 1 The Origin of Financial Crises (Cooper) 1 ‘other people’s money’ mentality 1 Oxfam 1 Paulson, Hank 1 Permanent Subcommittee on Investigations (US) 1 politicians: as best chance to wrest power from financial sector 1 identification of, with financial sector 1 justified cynicism about 1 neutrals among 1 powerlessness of, in face of global finance 1 private schools formerly attended by 1 teeth grinders among 1 project finance 1, 2 prop trading 1, 2, 3, 4 Prudential Regulation Authority 1 PwC 1 quants (quantitative analysts) 1, 2, 3, 4 ‘animal’ types among 1 with Asperger’s 1, 2 geeks among 1 rating agencies 1, 2, 3, 4, 5 and CDOs 1 Moody’s 1, 2 ‘oligopoly’ of 1 paid by banks 1 RBS, annual results announcement of 1, 2 recruitment 1, 2 (see also redundancy) and short-termism 1 redundancy 1, 2, 3, 4, 5, 6 (see also recruitment) as ‘enhanced severance’ 1 as rite of passage 1 termed ‘the cull’ 1 in UK vs US 1, 2 and work-related visas 1 regulators 1 fighting symptoms rather than cause 1 and Financial Services Authority, Financial Conduct Authority, Prudential Regulation Authority 1 identification of, with financial sector 1 ‘idiots’ description applied to 1, 2 ‘losing people at all levels’ post-crash 1 numbers working for 1 and self-declaration 1 religion 1 remuneration 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 bonuses 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and leisure-time spending 1 restructuring 1 riots, in London 1 risk: ability to weigh 1 and departmental specialisations 1 managers, salaries of 1 operational 1 sovereign 1 takers of vs bearers of 1 risk and compliance 1, 2, 3, 4, 5, 6 (see also regulators) disparaged 1 and self-declaration 1 ‘rock’n’roll trader’ 1 rogue traders 1 at Barings 1, 2 at JP Morgan 1 at Société Générale 1 at UBS 1, 2 Rosenbaum, Ron 1 Rubin, Robert 1 Rusbridger, Alan 1 Saddam Hussein 1 Salomon Brothers 1 Samuel Montagu 1 Sants, Hector 1 scandals 1, 2, 3 (see also rogue traders) Barings 1 FX 1, 2 HSBC 1, 2 JP Morgan 1, 2 LIBOR 1, 2, 3 London Whale, see Iksil, Bruno Société Générale 1 UBS 1 school system, UK 1 Schroders 1 Schumer, Charles E 1 short-termism 1, 2 Sid (trader, broker) 1 passim, 1, 2 Smith Brothers 1 Smith, Greg 1, 2, 3, 4 social Darwinism 1 Société Générale 1 mixed investment–commercial nature of 1 Sorkin, Andrew Ross 1 sovereign risk 1 Sports Illustrated 1 Square Mile, see City Stcherbatcheff, Barbara 1 Stock Exchange, former 1 Summer, Lawrence 1 ‘tax optimisation’ 1 technical analysis 1 teeth grinders 1, 2, 3, 4 (see also banker types) in political parties 1 Tett, Gillian 1 ‘too big to fail’ 1, 2, 3, 4 and ability to blackmail 1 ‘too big to manage’ 1 Traders, Guns and Money (Das) 1 Twin Towers: terrorist attacks on 1, 2 trader exploits 1 UBS 1 rogue trader at 1 van Ees, Peter 1 Van Rompuy, Herman 1 venture capitalists 1 Verey, Michael 1 volatility 1 Voss, Rainer 1, 2, 3 Wall Street 1, 2, 3 Watergate 1 Wawoe, Kilian 1, 2 Weber, Axel 1 Weiser, Stanley 1 whistle blowers 1, 2, 3 ‘Why I Am Leaving Goldman Sachs’ (Smith) 1, 2 Why I Left Goldman Sachs (Smith) 1 The Wolf of Wall Street 1 Wolfe, Tom 1 working hours 1, 2, 3 World Trade Center: terrorist attacks on 1, 2 trader exploits 1 Zahawi, Nadhim 1 About the Author Joris Luyendijk was born in Amsterdam.


pages: 222 words: 50,318

The Option of Urbanism: Investing in a New American Dream by Christopher B. Leinberger

addicted to oil, American Society of Civil Engineers: Report Card, asset allocation, big-box store, centre right, commoditize, credit crunch, David Brooks, desegregation, Donald Shoup, Donald Trump, drive until you qualify, edge city, Ford Model T, full employment, General Motors Futurama, gentrification, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, knowledge economy, Lewis Mumford, McMansion, mortgage tax deduction, new economy, New Urbanism, peak oil, Ponzi scheme, postindustrial economy, RAND corporation, Report Card for America’s Infrastructure, reserve currency, Richard Florida, Savings and loan crisis, Seaside, Florida, the built environment, transit-oriented development, urban planning, urban renewal, urban sprawl, value engineering, walkable city, white flight

Congress set up a bail-out agency, the Resolution Trust Corporation (RTC), in 1989, to assume title to the hundreds of billions of dollars of real estate assets and bad loans from failed S&Ls and banks. The lending ban on the industry severely limited construction in the country. The Urban Land Institute, a leading real estate think tank, set up the Credit Crunch Task Force to work with the Federal Reserve to lift the ban. The reaction of the Federal Reserve to the Credit Crunch Task Force, according to Bob Larson, a senior executive with the Wall Street investment banking firm of Lazard Feres & Company, and a member of the task force, was “the Fed told us ‘real estate . . . we know the industry is huge but we know very little about it.


pages: 247 words: 68,918

The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer

"World Economic Forum" Davos, affirmative action, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, centre right, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, cuban missile crisis, Deng Xiaoping, diversified portfolio, Doha Development Round, Exxon Valdez, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Glass-Steagall Act, global reserve currency, global supply chain, household responsibility system, invisible hand, joint-stock company, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, low skilled workers, mass immigration, means of production, megacity, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Naomi Klein, Nelson Mandela, new economy, offshore financial centre, open economy, race to the bottom, reserve currency, risk tolerance, Savings and loan crisis, shareholder value, Shenzhen special economic zone , South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, trade route, tulip mania, uranium enrichment, Washington Consensus, Yom Kippur War, zero-sum game

In any case, pure capitalism has never existed in the real world, and only the most ideologically committed of economic anarchists believe that it should. Markets can’t meet every human need, fear and greed ensure that markets will never work perfectly, and no market participant enjoys perfect information. Market failure didn’t begin with the global recession of 2009, the bank failures of 2008, the credit crunch of 2007, the savings-and-loan crisis of the 1980s,3 or even the stock market crash of 1929. Those investing heavily in the South Sea Company in 1720, the victims of irrational exuberance over the firm’s monopoly on trade in the South Seas, might have saved themselves some heartache had they learned the lessons of the Dutch tulip mania of 1637.4 Each successive market meltdown creates a temporary surge of momentum behind government efforts to ensure that it never happens again.

Together they dominate Abu Dhabi’s business community, in part via an organization known as the UAE Offsets Group, a collection of thirty to forty men with ties to both the al-Nahyans and the UAE’s largest companies and development projects. For many years, relations between the al-Maktoums of Dubai and al-Nahyans of Abu Dhabi have generated friction, competition, and rivalry. The financial crisis and credit crunch of 2008 hit Dubai especially hard, fundamentally shifting the balance of power within the UAE toward Abu Dhabi and the al-Nahyans. As money stopped flowing into Dubai from abroad, large-scale infrastructure projects ground to a halt, shrinking the local labor force. Thousands of foreigners lost work permits in the construction sector.


pages: 351 words: 102,379

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

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andy Kessler, Asian financial crisis, Bear Stearns, Berlin Wall, book value, break the buck, BRICs, business cycle, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Dr. Strangelove, Emanuel Derman, Fall of the Berlin Wall, fear of failure, financial engineering, fixed income, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, junk bonds, Ken Thompson, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Michael Milken, Mikhail Gorbachev, money market fund, moral hazard, naked short selling, NetJets, Northern Rock, oil shock, paper trading, proprietary trading, risk tolerance, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, uptick rule, value at risk, éminence grise

In addition to tough questions about what had come to be known as “Bear Weekend,” he knew another subject was likely to arise: Fannie Mae and Freddie Mac, the so-called government-sponsored enterprises that bought up mortgages. The GSEs, which were blamed for inflating the housing bubble, had been political and ideological hot buttons for decades, but never more so than at that moment. With Bear Stearns’ failure, the senators might even begin connecting the dots. One of the first causalities of the credit crunch was two Bear Stearns hedge funds that had invested heavily in securities backed by subprime mortgages. It was those mortgages that were now undermining confidence in the housing market—a market that Fannie and Freddie dominated, underwriting more than 40 percent of all mortgages, most of which were quickly losing value.

As he fumed to the Washington Post: Ianthe Jeanne Dugan, “Battling Rumors on Wall St.; Lehman Brothers Chairman Launches Aggressive Defense,” Washington Post, October 10, 1998. “We learned we need a lot of liquidity”: Fuld, in an interview with Craig, “Lehman Finds Itself,” Wall Street Journal. white paper he presented in Davos: Russo’s presentation, titled “Credit Crunch: Where Do We Stand?,” was originally given at the Group of Thirty meeting on November 30, 2007. He updated the paper for the World Economic Forum in January 2008. See http://www.group30.org/pubs/pub_1401.htm. for $21 million were finished: A broker told the New York Post: “It’s got great bones, but it needs tons of work,” estimating that the renovation of Fuld’s apartment would cost $10 million more.

At a news conference in Mumbai on May 7: “We have no present intention of raising any more capital.” See Nick Antonovics, “Merrill CEO Says Won’t Need More Capital,” Reuters, March 8, 2008; “Full Text of Interview with Merrill Lynch CEO John Thain,” Nikkei Report, April 4, 2008; John Satish Kumar, “Credit Crunch: Merrill’s Thain Backs Auction-Rate Securities,” Wall Street Journal, May 8, 2008. as “the most vulnerable brokerage after Lehman”: Reinhardt Krause, “Lehman Bros. Extends Slide as Wall St. Doubts Future,” Investor’s Business Daily, June 13, 2008. For a single day John Thain had the job he had wanted for his entire career: Kassenaar and Onaran, “Merrill’s Repairman,” Bloomberg Markets.


The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt

American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, behavioural economics, Bernie Madoff, biodiversity loss, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, electricity market, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Glass-Steagall Act, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low interest rates, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, military-industrial complex, minimum wage unemployment, moral hazard, Paradox of Choice, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, price elasticity of demand, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, search costs, shareholder value, sugar pill, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra

Clearly, there is an externality in banking since failure by any one bank negatively affects the reputation of all banks – and not just banks’ reputations with households; it even affects their reputations with each other. For example, in the 2008/09 crisis banks became so suspicious of each other that they refused to lend to each other – exacerbating the credit crunch. This is often referred to as a ‘systemic externality’ since problems at one bank have implications for the banking system as a whole. Limited rationality Real estate and stock market bubbles are driven by investor overconfidence. Akerlof and Shiller (2009) argue that this overconfidence is fed by ‘stories’ that gain such widespread acceptance that they seem undeniably true.

Many of them in the 2008/09 crisis had liabilities far exceeding the (now reduced) value of their assets and were effectively insolvent – hence the call for massive government bailouts. In such circumstances even sound businesses are unable to find the funding they require and may be forced into bankruptcy. This is what is meant by a ‘credit crunch’. Interest rates may be low (even approaching zero) but loans are difficult to obtain – especially if you need the money! This is a classic case of how the demand and supply model is inadequate to explain the credit market. 258 Stiglitz (2003) argues that the main problems were caused by deregulation.

., 186 cooperation, importance of, 21 cooperative (or collusive) behaviour, 129–30 cooperative firms, 116 coronary heart disease, in civil service, 214 corporations, power of, 84, 110–14; relation to individual, 18–20 see also multinational corporations costs, private versus social, 150–3 costs of production, theories of, 94–100, 102–6; empirical support lacking, 105–6 Cowell, Frank, 207 credit crunch, 258 credit default swaps (CDS), 257, 261–2 credit markets, in USA, 256 crime rates, 20 Crusoe, Robinson, 27–8, 91 cycles, 15, 147–8 Daly, Herman, 253 Dasgupta, Partha, 231, 232 Davis, Lance, 240 Dayton-Johnson, J., 26 deadweight loss, 125, 136, 137, 138, 139–40 Deaton, Angus, 88–9 demand: relation with marginal revenue, 101; theory of, 74–81 demand and supply model, 53 demand curve, 46–7, 76, 77, 104, 107, 131 democracy, 21, 86, 91, 115–16, 167, 217; economic, 116, 234 Denmark, taxation in, 210–11 deregulation, 143, 144, 261–2; impact of, 259–61 Dewald, W.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, book value, Bretton Woods, British Empire, business cycle, buy and hold, California energy crisis, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, Glass-Steagall Act, Greenspan put, guns versus butter model, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, junk bonds, low interest rates, margin call, market bubble, Mary Meeker, McMansion, Menlo Park, Michael Milken, money market fund, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, Robert Solow, rolodex, Ronald Reagan, Sand Hill Road, Savings and loan crisis, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, stock buybacks, stocks for the long run, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

A front-page headline from the January 31, 1990, New York Times read: “Recession Chances Have Diminished, Greenspan Says.”33 In August of 1990, he pronounced, “ ‘those who argue that we are already in a recession are reasonably certain to be wrong.’”34 The recession’s official starting date was July 1, 1990.35 Greenspan never mentioned the existence of a recession until four years later. In 1994, Alan Greenspan produced a history lesson that served the interests of Alan Greenspan. He spoke of a credit crunch in the spring of 1989. The Federal Reserve chairman had anticipated the problem: “In an endeavor to defuse these financial strains, we moved short-term rates lower in a long series of steps in the summer of 1992, and we held them at unusually low levels until the end of 1993—both absolutely, and, importantly, relative to inflation.”36 Greenspan’s reconstruction of his own actions grew more heroic: “Lower interest rates fostered a dramatic improvement in the financial condition of borrowers and lenders.

Beckner, Back from the Brink: The Greenspan Years (New York: John Wiley & Sons, 1996), p. 215. 3 James Grant, The Trouble with Prosperity: The Loss of Fear, the Rise of Speculation, and the Risk to American Savings (New York: Times Books, 1996), p. 192. 4 Beckner, Back from the Brink, p. 245. In early 1991, Greenspan told the Senate Banking Committee that the Fed had seriously considered buying commercial bank loans to ease the credit crunch. The looming question, Greenspan explained, was whether the Fed should become “effectively a commercial banker.” Ibid., p. 226. 5 Ibid., p. 432: “Bush made what is known as a recess appointment while Congress was not in session. Greenspan’s term as chairman expired on August 11, 1991, and his term as governor on January 31, 1992.

He may not have heightened the hysteria sweeping Britain, but he could have kept his mouth shut. 14 Interview with Leslie Stahl, 60 Minutes, September 16, 2007. 15 Jane Wardell, “Greenspan Defends Subprime,” Associated Press, October 2, 2007. 16“World Markets Still Affected by Fear: Greenspan,” Le Figaro, September 23, 2007. 17“UK More Vulnerable than America to the Credit Crunch, Greenspan says,” Daily Te l eg raph (London), September 18, 2007. After Britain, he was seen in Vienna, where he said, “[T]here is no doubt about the fact that low interest rates for longterm government bonds have caused the real estate bubble in the US” and “[real estate] prices are going to fall much lower yet.”19 In Amsterdam, Greenspan fueled a cabinet crisis (about unemployment) when he told the press and ING Bank’s guests that the unemployment numbers are so low in the United States because it’s easy to fire an employee and it’s also easy to find a job. 20 The author grew more defensive.


pages: 756 words: 120,818

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

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

Such an approach would be unlike that used in the United States after the global financial crisis and in Europe in the aftermath of the eurozone crisis, both of which left socioeconomic carnage in their wakes. To a certain extent the Chinese authorities have been taking actions that appear consistent with a realization of the dangers of a credit crunch and have been becoming steadily more adept at acting and communicating than some Western policy makers in the run-up to the global financial crisis. This increasingly vigilant attitude is in contrast to the attentiveness of UK politicians like Alistair Darling, who as the UK’s chancellor of the exchequer found out about the global financial crisis when passing the newsstand of a Majorca supermarket.

“Rheinish capitalism” refers to the European approach to corporate finance, which relies more heavily on the financing of business by banks than by debt and equity markets, on dual board structures, and on a lesser emphasis on mergers and acquisitions.33 In China, and more broadly in Asia, a homegrown approach to finance would probably take some time to crystallize, and its success would depend on the severity of a Chinese credit crunch. A third reason to involve China in a debt conference is geostrategic. China may wish to participate in a debt conference as a means of further opening itself up to international markets and of influencing debt restructuring in other economies across Asia. Equally, mindful of how the Washington Consensus (a liberal, promarket policy approach to countries that is associated with the IMF of the 1990s) has led many economies astray, China may prefer not to have the imprint of Western policy on its economy.

Freedman, The Future of War, 264. 17. R. Dornbusch, “Expectations and Exchange Rate Dynamics,” Journal of Political Economy 84 (1976): 1161–1176; R. Dornbusch, “Exchange Rate Expectations and Monetary Policy,” Journal of International Economics 6 (1976): 231–244. 18. A. Pierce, “The Queen Asks Why No One Saw the Credit Crunch Coming,” Daily Telegraph, November 5, 2008. 19. P. Krugman, “How Did Economists Get It So Wrong?,” New York Times Magazine, September 2, 2009, http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html. 20. P. Romer, “The Trouble with Macroeconomics,” working paper, September 14, 2016, 15, https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf; N.


The Party: The Secret World of China's Communist Rulers by Richard McGregor

activist lawyer, banking crisis, corporate governance, credit crunch, Deng Xiaoping, financial innovation, Gini coefficient, glass ceiling, global reserve currency, Great Leap Forward, haute couture, high-speed rail, hiring and firing, income inequality, invisible hand, kremlinology, land reform, Martin Wolf, megaproject, Mikhail Gorbachev, military-industrial complex, old-boy network, one-China policy, Panopticon Jeremy Bentham, pre–internet, reserve currency, risk/return, Shenzhen special economic zone , South China Sea, sovereign wealth fund, special economic zone, Upton Sinclair

In the last decade, China has managed to gallop or drag itself through multiple calamities: the Asian financial crises in 1997 and 1998; the downturns in the US in the wake of the bursting of the internet bubble and the September 11 terrorist attack; and the homegrown SARS emergency in 2003, which threatened to bring businesses inside the country to a halt. When the credit crunch hit the global economy in 2008, China was better equipped than just about anywhere in the world to handle the sudden downturn. While the Party’s political conclaves operate opaquely, the economy has been nourished by a relatively open debate. All the issues on the table in most developed countries, about the value of open markets, the cost of state ownership, the perils of protectionism and the impact of floating currencies, are up for discussion in China as well.

The political heft behind the Rio-Tinto bid was evident from the way the financing was approved, directly by the State Council, or cabinet, without CDB’s board even discussing the loan. Finally, there was Chinalco’s ability to sustain its bid at a time its international rivals had to retreat because of the global credit crunch. In barely half a year, a once-in-a-generation bull market in commodities had turned sharply sour with the world economic downturn. The giant BHP-Billiton retreated, dropping its takeover offer for Rio-Tinto in late 2008, and momentarily withdrawing from the battlefield to reassess strategy. When it launched its offer to double its shareholding in Rio in February 2009, Chinalco was bleeding as badly as other resources companies around the world.

Chen Liangyu made it clear soon after the announcement that he had no intention of slowing his city down, no matter what Beijing said. Many city leaders around the country probably harboured similarly defiant thoughts. But only Chen dared to say so out aloud. When Wen Jiabao, the Premier, briefed the Politburo on the credit crunch, Chen confronted him, according to officials briefed on the meeting. Chen complained that the policy would hurt Shanghai and other fast-growing coastal centres. If companies went bankrupt and jobless queues lengthened as a result of Wen’s policies, then the Premier ‘would have to bear the political responsibility’ for whatever instability followed.


pages: 477 words: 75,408

The Economic Singularity: Artificial Intelligence and the Death of Capitalism by Calum Chace

"World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, AI winter, Airbnb, AlphaGo, Alvin Toffler, Amazon Robotics, Andy Rubin, artificial general intelligence, augmented reality, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Berlin Wall, Bernie Sanders, bitcoin, blockchain, Boston Dynamics, bread and circuses, call centre, Chris Urmson, congestion charging, credit crunch, David Ricardo: comparative advantage, deep learning, DeepMind, Demis Hassabis, digital divide, Douglas Engelbart, Dr. Strangelove, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Fairchild Semiconductor, Flynn Effect, full employment, future of work, Future Shock, gender pay gap, Geoffrey Hinton, gig economy, Google Glasses, Google X / Alphabet X, Hans Moravec, Herman Kahn, hype cycle, ImageNet competition, income inequality, industrial robot, Internet of things, invention of the telephone, invisible hand, James Watt: steam engine, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kevin Kelly, Kiva Systems, knowledge worker, lifelogging, lump of labour, Lyft, machine translation, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Milgram experiment, Narrative Science, natural language processing, Neil Armstrong, new economy, Nick Bostrom, Occupy movement, Oculus Rift, OpenAI, PageRank, pattern recognition, post scarcity, post-industrial society, post-work, precariat, prediction markets, QWERTY keyboard, railway mania, RAND corporation, Ray Kurzweil, RFID, Rodney Brooks, Sam Altman, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, SoftBank, software is eating the world, speech recognition, Stephen Hawking, Steve Jobs, TaskRabbit, technological singularity, TED Talk, The future is already here, The Future of Employment, Thomas Malthus, transaction costs, Two Sigma, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber for X, uber lyft, universal basic income, Vernor Vinge, warehouse automation, warehouse robotics, working-age population, Y Combinator, young professional

Martin Wolf As the main financial columnist and associate editor at the Financial Times, Martin Wolf is the very epitome of a City establishment figure. He was described by US Treasury Secretary Larry Summers as “probably the most deeply thoughtful and professionally informed economic journalist in the world.”[xlvii] Although the credit crunch and subsequent recession have re-kindled his youthful enthusiasm for Keynesian economics, it is still a surprise to read him advocating income redistribution and universal basic income, as he did in this article from February 2014: “If Mr Frey and Prof Osborne [see below] are right [about automation]… we will need to redistribute income and wealth.

[xxxiv] Brynjolfsson is the director of the MIT Center for Digital Business and McAfee is a principal research scientist there. [xxxv] The word “inequality” crops up 42 times in the book, including in the titles of sources, but the authors never explicitly connect it with “spread”. [xxxvi] The loosely-organised protest organisation that sprang up after the 2008 credit crunch to campaign against inequality. [xxxvii] Chapter 12: Learning to Race with the Machines: Recommendations for Individuals. [xxxviii] Chapter 13: Policy Recommendations. [xxxix] Chapter 14: Long-Term Recommendations. [xl] http://www.susskind.com/ [xli] http://www.scottsantens.com/ [xlii] https://www.reddit.com/r/BasicIncome/ and https://www.reddit.com/r/basicincome/wiki/index [xliii] https://www.youtube.com/watch?


pages: 258 words: 71,880

Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street by Kate Kelly

Alan Greenspan, bank run, Bear Stearns, book value, buy and hold, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, eat what you kill, fixed income, housing crisis, index arbitrage, Long Term Capital Management, margin call, moral hazard, proprietary trading, quantitative hedge fund, Renaissance Technologies, risk-adjusted returns, shareholder value, technology bubble, too big to fail, traveling salesman

“We can’t buy this thing tonight,” Dimon had told Geithner shortly after he’d heard from Schwartz. “Go in and look at the thing, and let’s talk,” Geithner said. Something had to be done. He was eager to know what J.P. Morgan was finding. Steve Black, cohead of J.P. Morgan’s enormous investment bank, had been looking forward to a real vacation. Since the credit crunch had first ballooned the prior spring, Black had had several holidays either canceled or interrupted by business, and this time he was hoping to wind down properly. He was at a restaurant in Anguilla with his wife, Debbie, when a man from the kitchen walked over to the table. “Oh, shit,” Black muttered as he approached.

Probably Not Who You Think,” Wall Street Journal, May 9, 2006. 147 famously told associates: Kelly, “Bear CEO’s Handling of Crisis,” Wall Street Journal, November 1, 2007. 148 when Lewis began loading up on Bear shares: Roddy Boyd, “Lewis Raises Cayne—Helps Bridge Gap,” New York Post, September 12, 2007. 148 forced him to buy: Cassell Bryan-Low and Kate Kelly, “Credit Crunch: Bear Succumbs,” Wall Street Journal, March 17, 2008. 153 accompanied by friends: Kelly, “Bear CEO’s Handling of Crisis,” Wall Street Journal, November 1, 2007. 157 Cayne gave an interview: Landon Thomas, Jr., “Salvaging a Prudent Name,” New York Times, June 29, 2007. 158 Spector had personally authorized: Cohan, “The Rise and Fall,” Fortune, August 18, 2008. 160 “important to be seen”: Kate Kelly and Dana Cimilluca, “Can New CEO Repair Bear?


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

No pesky customers were needed for deposits—you simply bought OPM in the interbank market. The benchmark rate became know as LIBOR—the London Interbank Offered Rate—and remains the most important single interest rate in the financial world. This is why, when LIBOR went through the roof in August 2007, it was the canary in the mineshaft signaling the start of a global credit crunch that morphed into a full-fledged crisis: Interbank lending had seized up because banks The Natural History of Financial Folly wouldn’t trust each other with even short-term placements. This was a shock from which the system only recovered slowly and tentatively. DANGEROUS CUSTOMERS The third source of danger for bankers gone wild was keeping bad company.

Between 1980 and 1992, a total of 1,142 savings and loan associations and 1,395 banks were closed, and many others were forced to merge. States as large as Texas effectively had their entire indigenous banking system fail and fall into out-of-state control. Bailouts cost the Treasury hundreds of billions, and a severe credit crunch and collapse in real estate values helped trigger and extend a recession in 1990 to 1992. CAPITAL MARKETS TAKE OVER The same decade that saw the banking industry enter its perfect storm saw the beginning of the longest bull market in Wall Street history. The 25-year bull market that ended in 2008 coincides with a vast increase in pension fund assets under professional management.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

active measures, affirmative action, An Inconvenient Truth, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, classic study, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, disruptive innovation, Dutch auction, Ford Model T, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, Great Leap Forward, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Jon Ronson, Joseph Schumpeter, knowledge economy, knowledge worker, low skilled workers, manufacturing employment, market bubble, market design, meritocracy, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shared worldview, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, tacit knowledge, tech worker, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, vertical integration, winner-take-all economy, working poor, zero-sum game

The China Development Bank (CDB) and Temesek Holdings from Singapore, both state-owned corporations, bought into Barclays Capital, originally to support its takeover bid for the Dutch investment bank ABN AMRO. Luckily for them, the bid failed and Royal Bank of Scotland struck a deal with ABN AMRO and subsequently lost 96 percent of its share value following the credit crunch. In our interviews with some of the leading players and commentators in this bid, it is clear that the China Development Bank had linked up with Temesek because it had far wider experience in this area and because of the learning and experience that the CDB would acquire with positions on the board of Barclays.

Global sourcing can be used to play off different groups 110 The Global Auction of knowledge professionals scattered around the globe whether within the same or different organizations. Stephen Roach, chief economist at Morgan Stanley, reported that the win-win scenario for globalization was in serious trouble well before the credit crunch. While he believed that some workers in the developing world were benefiting from global trade agreements, this was not the case for many workers in the rich developed world, as most of the benefits had accrued to owners of capital at the expense of labor. He observed a powerful asymmetry in the impact of globalization on the world’s major industrial economies that led to record highs in the returns accruing to capital and record lows in the rewards going to labor.


pages: 280 words: 76,376

How to Write Your Will: The Complete Guide to Structuring Your Will, Inheritance Tax Planning, Probate and Administering an Estate by Marlene Garsia

Asperger Syndrome, Berlin Wall, call centre, clean water, credit crunch, estate planning

Leaving a gift in your will to us would help ensure less people are affected by this terrible disease and what better legacy to leave to your loved ones – a future free from cancer. Your legacy could help stop cancer before it starts. advertisement feature Why Do You Need a Will? ■ 15 The wealth of this nation has dramatically increased over the past 15 years despite the current credit crunch. It is not just the privileged few who have money and assets to leave to their family and friends. The increase in house prices was one of the most significant adjustments to personal wealth in the early to mid 2000s. In addition, increasing numbers of the second generation are inheriting a property or indeed have purchased a second home.

In the case of intestacy, as an administrator you might need a solicitor if complications arise, such as difficulties in tracing missing relatives or living relatives residing overseas. This problem is a fairly common one and solicitors know the many ways to have relatives traced. 136 Time to update your will A knock on effect of the credit crunch is that wills written in healthier economic times are going out of date and thousands could be in urgent need of updating. Making a will is particularly important if you are not married to your partner but are cohabiting. With home values plummeting and other investments struggling, many assets in a person’s will have lost value.


The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number (Bloomberg) by Liam Vaughan, Gavin Finch

Alan Greenspan, asset allocation, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Sanders, Big bang: deregulation of the City of London, buy low sell high, call centre, central bank independence, collapse of Lehman Brothers, corporate governance, credit crunch, Credit Default Swap, eurozone crisis, fear of failure, financial deregulation, financial innovation, fixed income, interest rate derivative, interest rate swap, Kickstarter, light touch regulation, London Interbank Offered Rate, London Whale, low interest rates, mortgage debt, Neil Armstrong, Northern Rock, performance metric, Ponzi scheme, Ronald Reagan, social intelligence, sovereign wealth fund, subprime mortgage crisis, urban sprawl

That afternoon Stephen Green, HSBC’s chairman and an ordained clergyman, presented the paper on the opening day of the BBA’s annual conference to some 350 bankers and finance professionals who had gathered among the marble columns and crystal chandeliers of the 19th-century Gibson Hall. It read: Since its inception in 1985, BBA Libor has enjoyed a reputation for accuracy. However, just as the credit crunch has led to stress in the markets, and the breakdown of longstanding correlations in the pricing of assets, as a barometer of these markets, it has also been stressed. This has led to discussion of some of the BBA Libor currency fixes—particularly the dollar fix—within the financial community. This proper discussion has overflowed into commentary No One’s Clean-Clean 59 in the media, and the BBA believes that it needs to correct a number of misunderstandings and misperceptions.

On a 30-year £1 million mortgage tied to Libor, the two-day increase equated to an extra £146 a month. “Meeting of the Federal Open Market Committee on April 29– 30, 2008”, Federal Reserve, http://www.federalreserve.gov/monetarypolicy/ files/FOMC20080430meeting.pdf. Peter Taylor, “Libor credibility questioned as credit crunch deepens”, Daily Telegraph, April 17, 2008, http://www.telegraph.co.uk/finance/newsbysector/ banksandfinance/2788384/Libor-credibility-questioned-as-credit-crunchdeepens.html. Carrick Mollenkamp, “Libor surges after scrutiny does, too”, The Wall Street Journal, April 18, 2008, http://www.wsj.com/articles/ SB120846842484224287.


pages: 305 words: 75,697

Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle

3D printing, additive manufacturing, Airbnb, Al Roth, Alan Greenspan, algorithmic management, Amazon Web Services, autonomous vehicles, banking crisis, barriers to entry, behavioural economics, Big bang: deregulation of the City of London, biodiversity loss, bitcoin, Black Lives Matter, Boston Dynamics, Bretton Woods, Brexit referendum, business cycle, call centre, Carmen Reinhart, central bank independence, choice architecture, Chuck Templeton: OpenTable:, cloud computing, complexity theory, computer age, conceptual framework, congestion charging, constrained optimization, coronavirus, COVID-19, creative destruction, credit crunch, data science, DeepMind, deglobalization, deindustrialization, Diane Coyle, discounted cash flows, disintermediation, Donald Trump, Edward Glaeser, en.wikipedia.org, endogenous growth, endowment effect, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, Evgeny Morozov, experimental subject, financial deregulation, financial innovation, financial intermediation, Flash crash, framing effect, general purpose technology, George Akerlof, global supply chain, Goodhart's law, Google bus, haute cuisine, High speed trading, hockey-stick growth, Ida Tarbell, information asymmetry, intangible asset, Internet of things, invisible hand, Jaron Lanier, Jean Tirole, job automation, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, knowledge worker, Les Trente Glorieuses, libertarian paternalism, linear programming, lockdown, Long Term Capital Management, loss aversion, low earth orbit, lump of labour, machine readable, market bubble, market design, Menlo Park, millennium bug, Modern Monetary Theory, Mont Pelerin Society, multi-sided market, Myron Scholes, Nash equilibrium, Nate Silver, Network effects, Occupy movement, Pareto efficiency, payday loans, payment for order flow, Phillips curve, post-industrial society, price mechanism, Productivity paradox, quantitative easing, randomized controlled trial, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Robinhood: mobile stock trading app, Ronald Coase, Ronald Reagan, San Francisco homelessness, savings glut, school vouchers, sharing economy, Silicon Valley, software is eating the world, spectrum auction, statistical model, Steven Pinker, tacit knowledge, The Chicago School, The Future of Employment, The Great Moderation, the map is not the territory, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, the strength of weak ties, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Uber for X, urban planning, winner-take-all economy, Winter of Discontent, women in the workforce, Y2K

., 2016, ‘When Britain Went Bust: The 1976 IMF Crisis’, Official Monetary and Financial Institutions Forum (OMFIF), 28 September. Robbins, L., 1932, An Essay on the Nature and Significance of Economic Science, London: Macmillan. Robinson, M., 2012, ‘Culture after the Credit Crunch’, The Guardian, 16 March, https://www.theguardian.com/books/2012/mar/16/culture-credit-crunch-marilynne-robinson. Rodrik, D., 2004, ‘Industrial Policy for the Twenty-First Century’ (November), Discussion Paper No. 4767, Centre for Economic Policy Research, London. Rodrik, D., 2013, ‘What Is Wrong (and Right) in Economics?’, Dani Rodrik’s web blog, 7 May, https://rodrik.typepad.com/dani_rodriks_weblog/2013/05/what-is-wrong-and-right-in-economics.html.


pages: 278 words: 82,069

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

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bretton Woods, business cycle, buy and hold, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, Glass-Steagall Act, green new deal, guns versus butter model, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, It's morning again in America, John Meriwether, junk bonds, kremlinology, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, McMansion, Michael Milken, Minsky moment, money market fund, mortgage debt, Naomi Klein, new economy, Nixon triggered the end of the Bretton Woods system, offshore financial centre, payday loans, pets.com, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, sovereign wealth fund, structural adjustment programs, subprime mortgage crisis, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

County and city governments are having similar problems, and we’re likely to see the largest municipal bankruptcy in American history very soon, in the county in Alabama where Birmingham is, which will I think be about twice the size of the Orange County bankruptcy of about 10 years ago. So this is having real world effects. And when governments can’t borrow they have to cut services and lay people off. So this is very, very real stuff here. Now this is a credit crunch, so it’s not about the price of credit, the interest rate, but the availability of it. I’ve heard several responses to this, and let me just deal with a couple of them. I’ve heard several people say it’s a hoax. No, it’s not: the credit freeze is not like WMDs in Iraq, it’s visible in real stats that are quoted daily, weekly, or even quoted in real time in Bloomberg terminals around the world.

It took nearly two years of discussion before there was sufficient agreement to attempt the 1944 Bretton Woods Conference in New Hampshire that famously established the post-war international financial system and to which the current summit process is being compared. But shared awareness that the system is broken and that the world risks a credit-crunch-induced global depression is concentrating minds wonderfully. Where to start? The architects of Bretton Woods I knew they had to avoid the beggar-my-neighbor policies of the 1930s—economic autarchy and hyper-militarization—and that if the U.S. and Britain could clinch a deal, then everybody else would have to follow.


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Shortchanged: Life and Debt in the Fringe Economy by Howard Karger

Alan Greenspan, big-box store, blue-collar work, book value, corporate social responsibility, credit crunch, delayed gratification, financial deregulation, fixed income, illegal immigration, independent contractor, labor-force participation, late fees, London Interbank Offered Rate, low interest rates, low skilled workers, microcredit, mortgage debt, negative equity, New Journalism, New Urbanism, offshore financial centre, payday loans, predatory finance, race to the bottom, Silicon Valley, Telecommunications Act of 1996, telemarketer, underbanked, working poor

., and CardWeb, 2004, www.cardweb.com. 17 Source: Loonin and Plunkett, Credit Counseling in Crisis. 18 Ibid. 19 Ibid. 20 Credit Report Repair, 2003, www.creditreportrepair.net. 21 National Foundation for Credit Counseling, “Credit 101.” 22 Source: Loonin and Plunkett, Credit Counseling in Crisis. 23 Ibid. 24 Ibid. 25 Internal Revenue Service, “RS, FTC and State Regulators Urge Care When Seeking Help from Credit Counseling Organizations,” IR-2003-120, Oct. 14, 2003, p. 2. 26 Loonin and Plunkett, Credit Counseling in Crisis. 27 Karen Alexander, “Minefields Abound in Attempts to Reduce Debts,” The New York Times, September 22, 2002. 28 The Commonwealth of Massachusetts, Losing Credibility, Senate Committee on Post Audit and Oversight, April 2002. 29 Federal Trade Commission, FTC Files Lawsuit Against AmeriDebt, Washington, DC, November 19, 2003. 30 Caroline Mayer, “Easing the Credit Crunch?” The Washington Post, November 4, 2001; and Jennifer Barrett, “Bad Credit,” Newsweek, October 23, 2003, http://msnbc.msn.com/id/3339644. 31 Mayer, “Easing the CreditCrunch?” 32 Christopher Schmitt with Heather Timmons and John Cady, “A Debt Trap for the Unwary,” BusinessWeek, October 29, 2001; and the Commonwealth of Massachusetts, Losing Credibility. 33 Ibid. 34 The Office of Massachusetts Attorney General Tom Reilly, “Non-Profit Agawam Credit Counseling Agency Funneled Millions of Dollars to Insiders, and Misled Consumers into Paying High Fees,” April 5, 2004, www.ago.state.ma.us/sp.cfm?

32 Christopher Schmitt with Heather Timmons and John Cady, “A Debt Trap for the Unwary,” BusinessWeek, October 29, 2001; and the Commonwealth of Massachusetts, Losing Credibility. 33 Ibid. 34 The Office of Massachusetts Attorney General Tom Reilly, “Non-Profit Agawam Credit Counseling Agency Funneled Millions of Dollars to Insiders, and Misled Consumers into Paying High Fees,” April 5, 2004, www.ago.state.ma.us/sp.cfm?pageid=986&id=1213. 35 Mayer, “Easing the Credit Crunch?” 36 The Office of Massachusetts Attorney General Tom Reilly, “Non-Profit Agawam Credit Counseling Agency Funneled Millions of Dollars to Insiders.”234 37 CuraDebt, 2004, www.curadebt.com; and Aegis Debt Consolidation, 2004, www.aegisdebtconsolidation.com. 38 Springboard, 2003, www.credit.org. 39 Debt-Tips.com, “Here’s How Debt Negotiation Helped Me Get Out of Debt in Less Than 2 Years… and Saved Me $9,937.40!”


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A Little History of Economics by Niall Kishtainy

Alvin Roth, behavioural economics, British Empire, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon tax, central bank independence, clean water, Corn Laws, Cornelius Vanderbilt, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Dr. Strangelove, Eugene Fama: efficient market hypothesis, first-price auction, floating exchange rates, follow your passion, full employment, George Akerlof, Great Leap Forward, greed is good, Hyman Minsky, inflation targeting, invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, loss aversion, low interest rates, market clearing, market design, means of production, Minsky moment, moral hazard, Nash equilibrium, new economy, Occupy movement, Pareto efficiency, Paul Samuelson, Phillips curve, prisoner's dilemma, RAND corporation, rent-seeking, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, Ronald Reagan, sealed-bid auction, second-price auction, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, Vickrey auction, Vilfredo Pareto, washing machines reduced drudgery, wealth creators, Winter of Discontent

Three people died when some of the protestors set fire to a bank. These events, thousands of miles apart, were connected by a breakdown in the world’s financial system, which after 2007 made the entire global economy tumble over. The collapse was given gloomy-sounding names: the Global Financial Crisis, the Credit Crunch, the Great Recession. Today we’re still recovering and still arguing about how to fix things. The crisis was a complete shock – even to economists. During the 1990s they’d hailed the Great Moderation, an era of steady economic growth with low inflation. Now it looked as if they’d been much too cheerful.

absolute poverty (i) acid rain (i) adaptive expectations (i) adverse selection (i) advertising (i) agriculture (i), (ii), (iii) aid (i) Akerlof, George (i) alienation (i) Ambrose, St (i) animal spirits (i), (ii), (iii) antitrust policies (i) Apple (i) Aquinas, St Thomas (i), (ii) Aristotle (i) Arrow, Kenneth (i) ascending auction (i) Asian Tigers (i), (ii) Atkinson, Anthony (i), (ii) auction theory (i) auctions (i) Augustine of Hippo, St (i) austerity (i) balance of trade (i) banks and entrepreneurs (i) and interest rates (i) and loans (i) and monopoly capitalism (i), (ii) and speculation (i) see also Britain, Bank of England; central banks; independent central banks; World Bank battle of the methods (i) Becker, Gary (i) behavioural economics (i) benevolent patriarch (i) Beveridge, William (i) big push (i) Black Wednesday (i) bonds (i) bourgeoisie (i), (ii), (iii) brand image (i) Britain Bank of England (i) inflation (i) pegged currency (i) Second World War (i) war with China (i) war with South Africa (i) bubbles (i), (ii) Buchanan, James (i) budget deficit (i) Burke, Edmund (i) capabilities (i) capital (i) and growth (i) Marx on (i) Capital (Marx) (i) Capital in the Twenty-First Century (Piketty) (i) capitalism (i), (ii), (iii) and entrepreneurs (i) and governments (i) and the Great Depression (i) and the Great Recession (i) historical law of (i) Marx on (i) world (i) see also communism Capitalism and Freedom (Friedman) (i) Capitalism, Socialism and Democracy (Schumpeter) (i) capitalists (i), (ii), (iii), (iv) and imperialism (i), (ii), (iii) Marx on (i), (ii), (iii), (iv), (v) carbon tax (i) carbon trading permits (i) Carlyle, Thomas (i), (ii) Castro, Fidel (i), (ii) central banks (i), (ii), (iii), (iv), (v) central planning (i), (ii) chaebols (i) chain of being (i), (ii) Chamberlin, Edward (i) Chaplin, Charlie (i) Chicago Boys (i) Chicago school (i), (ii), (iii), (iv) China, war with Britain (i) Christianity, views on money (i) Churchill, Winston (i) classical dichotomy (i) classical economics (i), (ii), (iii), (iv), (v) coins (i), (ii) Colbert, Jean-Baptiste (i) colonies/colonialism (i), (ii), (iii), (iv) American (i) Ghana (i), (ii) commerce (i), (ii), (iii), (iv) communism (i) and the Soviet Union (i) Communist Manifesto, The (Engels and Marx) (i), (ii) comparative advantage (i), (ii) competition (i), (ii), (iii), (iv) Condorcet, Marquis de (i) Confessions of an Economic Heretic (Hobson) (i) conspicuous consumption (i) constitution (rules) (i) consumers (i), (ii), (iii), (iv) contagion, economic (i) core (i) Corn Laws (i), (ii) Cortés, Hernan (i) cost (i) creative destruction (i) Credit Crunch (i) crime, economic theory of (i) Cuba (i) currency (i), (ii) see also coins currency markets (i), (ii) currency reserves (i) Debreu, Gérard (i) demand law of (i) see also supply and demand demand curve (i) democracy (i), (ii) Democratic Republic of the Congo (i) dependency theory (i) Depression (Great) (i), (ii), (iii), (iv), (v), (vi), (vii) and economic growth (i) and the US central bank (i) descending auction (i) developing/underdeveloped countries (i), (ii) development economics (i) Development of Underdevelopment, The (Frank) (i) diminishing marginal utility (i), (ii) diminishing return to capital (i) discretion (i) discrimination coefficient (i) distribution of income (i), (ii) diversification (i), (ii) dividends (i) division of labour (i) doomsday machines (i) Drake, Sir Francis (i) Drew, Daniel (i) dual economy (i) economic value (i), (ii), (iii), (iv) economics defined (i) normative (i) Economics of Imperfect Competition (Robinson) (i) economies of scale (i) economists (i), (ii), (iii) efficient markets hypothesis (i), (ii), (iii), (iv) efficient/inefficient economic outcome (i) see also pareto efficiency; pareto improvement Elizabeth I (i) Elizabeth II (i) employment, full (i) Engels, Friedrich (i) England’s Treasure by Forraign Trade (Mun) (i) entitlement (i), (ii) entrepreneurs (i), (ii) equilibrium (i), (ii), (iii), (iv), (v) exchange of goods (i), (ii) exchange rates (i) expectations, adaptive/rational (i), (ii), (iii), (iv) exploitation (i), (ii), (iii), (iv), (v) exports (i) and poor countries (i), (ii), (iii) externalities (i), (ii), (iii), (iv) Extraordinary Popular Delusions and the Madness of Crowds (MacKay) (i) failure, market (i), (ii), (iii), (iv) Fama, Eugene (i) famine (i), (ii), (iii), (iv) feminist economics (i) feudalism (i), (ii), (iii), (iv) financial systems (i), (ii) Finer, Herman (i) first price auction (i), (ii) First Welfare Theorem (i), (ii) First World War (i) fiscal policy (i), (ii) floating exchange rate (i) Florence (i) Folbre, Nancy (i) Fourier, Charles (i) framing (i), (ii) France agriculture (i) economic models (i), (ii) revolution (i), (ii), (iii), (iv) and taxation (i) Frank, Andre Gunder (i) free choice (i), (ii) free-market economics (i), (ii), (iii), (iv) free trade (i), (ii), (iii) Friedman, Milton (i), (ii), (iii) full employment (i) game theory (i), (ii), (iii) general equilibrium (i), (ii), (iii), (iv) General Theory of Employment, Interest and Money, The (Keynes) (i) Germany, infant industries (i) Ghana (i), (ii) Gilded Age (i) Global Financial Crisis (i), (ii) global warming (i) Goethe, Johann Wolfgang (i) gold (i), (ii) Golden Age (i) goods and services (i) government, and economies (i), (ii), (iii), (iv), (v), (vi), (vii) Great Moderation (i), (ii) Great Recession (i) Greece (i), (ii), (iii) gross domestic product (i) growth (i) and dependency theory (i) of government (i) and the Great Moderation (i) and Pakistan (i) and population (i) theory (i) Guevara, Ernesto ‘Che’ (i), (ii) guilds (i) Hamilton, Alexander (i) Hansen, Alvin (i) harmony, system of (i) Hayek, Friedrich (i), (ii) hedge funds (i) herds (i) Hicks, John (i) historical law of capitalism (i) HIV/AIDS (i) Hobson, John (i) Homobonus, St (i) human capital (i) human development (i), (ii) Human Development Index (i) imperfect competition (i), (ii) imperialism (i) Imperialism: The Highest Stage of Capitalism (Lenin) (i) imports (i), (ii), (iii) income (i), (ii) and bank loans (i) and capitalism (i) and communism (i) distribution of (i), (ii) and growth (i), (ii) national (i), (ii), (iii), (iv), (v) income per person (i), (ii) independent central banks (i) Industrial Revolution (i), (ii), (iii), (iv), (v) inequality (i), (ii) infant industries (i) inflation (i), (ii), (iii), (iv), (v) information economics (i), (ii), (iii) injection of spending (i) innovations (i), (ii) insurance (i), (ii) interest rates (i) British (i) and monetary policy (i) and recession (i) and usury (i) International Monetary Fund (i) investment (i) and the big push (i) and recession (i), (ii) invisible hand (i), (ii), (iii), (iv), (v) iron law of wages (i) Irrational Exuberance (Shiller) (i) Jefferson, Thomas (i) Jevons, William (i) just price (i) Kahneman, Daniel (i), (ii) Kennedy, John F.


pages: 297 words: 83,651

The Twittering Machine by Richard Seymour

4chan, anti-communist, augmented reality, behavioural economics, Bernie Sanders, Big Tech, Black Lives Matter, Cal Newport, Californian Ideology, Cass Sunstein, Chelsea Manning, citizen journalism, classic study, colonial rule, Comet Ping Pong, correlation does not imply causation, credit crunch, crisis actor, crowdsourcing, dark triade / dark tetrad, disinformation, don't be evil, Donald Trump, Elon Musk, Erik Brynjolfsson, Evgeny Morozov, fake news, false flag, Filter Bubble, Gabriella Coleman, gamification, Google Chrome, Google Earth, hive mind, informal economy, Internet of things, invention of movable type, invention of writing, James Bridle, Jaron Lanier, Jeremy Corbyn, Jon Ronson, Jony Ive, Kevin Kelly, Kevin Roose, knowledge economy, late capitalism, Lewis Mumford, liberal capitalism, Mark Zuckerberg, Marshall McLuhan, meta-analysis, Mohammed Bouazizi, moral panic, move fast and break things, Network effects, new economy, packet switching, patent troll, Philip Mirowski, post scarcity, post-industrial society, post-truth, RAND corporation, Rat Park, rent-seeking, replication crisis, sentiment analysis, Shoshana Zuboff, Silicon Valley, Silicon Valley ideology, Skinner box, smart cities, Snapchat, Social Justice Warrior, Steve Bannon, Steve Jobs, Stewart Brand, Stuxnet, surveillance capitalism, TaskRabbit, technological determinism, technoutopianism, TED Talk, the scientific method, Tim Cook: Apple, Timothy McVeigh, Twitter Arab Spring, undersea cable, upwardly mobile, white flight, Whole Earth Catalog, WikiLeaks

Remarkably, though, it omitted to control for the impact of Clinton’s policies, statements or campaigning strategies. While establishing a weak correlation between belief in a fake news story and likelihood to defect, it was still unable to say whether this was a cause of defection or an effect of other factors causing defection. These other factors might include the effects of the credit crunch, the record of the Democratic Party in its rust-belt constituencies, and the disintegration of the political legitimacy of the party establishments.19 There is a further difficulty posed by the way in which Clinton was damaged by true claims, which Trump was able to put to work. Among the leaked emails from Hillary Clinton’s campaign, for example, was one discussing Clinton’s speeches to Wall Street, wherein she is supposed to have said ‘you need both a public and a private position’.

Rather than emulate the paranoid style, the displaced centre needs to look deeper, because the collapse in sense that they are just now encountering goes back a long way. V. Expertise, as the ebullient Brexiteer Michael Gove reminded us, has made us sick. The crisis of knowing is, in part, a deep-rooted crisis of political authority: a credibility crunch following the credit crunch. The decline of print giants linked to established parties and ideologies, and the rise of the social industry platforms, has accelerated the crisis. But it has done so largely by sharpening tendencies that were already in play in the old media. The complaints about ‘fake news’ indicate that the embattled political establishment has not yet mastered the new media.


pages: 291 words: 90,771

Upscale: What It Takes to Scale a Startup. By the People Who've Done It. by James Silver

Airbnb, augmented reality, Ben Horowitz, Big Tech, blockchain, business process, call centre, credit crunch, crowdsourcing, data science, DeepMind, DevOps, family office, flag carrier, fulfillment center, future of work, Google Hangouts, growth hacking, high net worth, hiring and firing, imposter syndrome, Jeff Bezos, Kickstarter, Lean Startup, Lyft, Mark Zuckerberg, minimum viable product, Network effects, pattern recognition, reality distortion field, ride hailing / ride sharing, Salesforce, Silicon Valley, Skype, Snapchat, software as a service, Uber and Lyft, uber lyft, WeWork, women in the workforce, Y Combinator

The team tapped into the same subversive strain with another campaign which targeted the banks - who were Enemy No. 1 in some quarters at the time - and their ‘hidden’ fees in particular. Sohoni reflects that it was something of a soft, and therefore low-risk target, given the animosity towards Big Banks in the wake of the credit crunch. ‘So the timing really works there as well. But you’ll hear the founders talk a lot about the way they built TransferWise, and continue to build it today, is always to ask themselves: “What’s the least we can charge and what are the basics we need to do business, and stay in business, while providing a faster, cheaper, better product and service to our customers?”

‘When you go looking across UK universities, there is lots of good talent, and startups don’t just need the pure AI-type talent anyway, they also need web designers, developers, product people, marketers and so on - you need all of those to run a business. So founders should get out there and look.’ Moonfruit grew during the financial crisis Even as the credit crunch bit back in 2007-8, sucking oxygen from the economy, Tan White found, to her initial surprise, that Moonfruit grew. ‘We were a DIY website builder for small businesses, and we actually found when people left jobs in the finance industry or were otherwise impacted by the financial crisis, they used the opportunity to set up their own business.


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

Pettis, Michael. The Great Rebalancing: Trade, Conflict, and the Perilous Road ahead for the World Economy (Princeton and Oxford: Princeton University Press, 2013). Pierce, Andrew. ‘The Queen Asks Why No One Saw the Credit Crunch Coming’, The Daily Telegraph, 5 November 2008. http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html. Piketty, Thomas. Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA, and London: Harvard University Press, 2014). Portes, Jonathan. ‘Recessions and Recoveries: An Historical Perspective’, (updated to 7 August 2012). http://notthetreasuryview.blogspot.it/2012/04/recessions-and-recoveries-historical.html.

Orthodoxy Overthrown 1. ‘Speech by the Chancellor of the Exchequer, the Rt. Hon. Gordon Brown MP, at the Mansion House, London’, 21 June 2006, http://www.ft.com/cms/s/0/00a235ba-015d-11db-af16-0000779e2340.html. 2. http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html. 3. Alan Greenspan, ‘Testimony of Dr Alan Greenspan to the House of Representatives Committee of Government Oversight and Reform’, 23 October 2008, http://www.clipsandcomment.com/2008/10/23/text-alan-greenspan-testimony-congress-october-23. 4. Walter Bagehot, Lombard Street: A Description of the Money Market (London: Henry S.


pages: 767 words: 208,933

Liberalism at Large: The World According to the Economist by Alex Zevin

"there is no alternative" (TINA), activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, carbon tax, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disinformation, disruptive innovation, do well by doing good, Donald Trump, driverless car, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, global supply chain, guns versus butter model, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, It's morning again in America, Jeremy Corbyn, John von Neumann, Joseph Schumpeter, Julian Assange, junk bonds, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, means of production, Michael Milken, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Nixon triggered the end of the Bretton Woods system, no-fly zone, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, post-war consensus, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Seymour Hersh, Snapchat, Socratic dialogue, Steve Bannon, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

‘All the signs are pointing in the same direction, a larger role for the state, and a smaller and more constrained private sector. This newspaper hopes profoundly that this will not happen.’ But, ‘in the longer term a lot depends on how blame for this catastrophe is allocated. This is where an important intellectual battle could and should be won.’103 The Economist suited up for battle. As the credit crunch turned into a global recession, it argued nothing much was wrong with the real economy, still less capitalism; and if the causes of the crisis were technical – ‘dodgy lending’, ‘cheap money from emerging economies, outdated regulation, government distortions and poor supervision’, ‘dangerous incentives and the reckless use of mathematical models’ – so were the solutions: ‘smaller, better regulated, more conservative’ banks, and more oversight.

Seelye, ‘The Economist Names New Editor in Chief’, New York Times, 23 March 2006. 95.Burrell, ‘John Micklethwait’, Independent, 8 January 2007; Burrell, ‘John Micklethwait: “Republicans Had the Advantage, but They Wasted It With Sleaze”’, Independent, 3 November 2008. 96.‘Danger Time for America’, 14 January 2006. Wall Street was still burdened by excessive red tape. ‘What’s Wrong with Wall Street’, 25 November 2006. Late in 2007, it saw a possible credit crunch taking shape. But this was after Britain’s Northern Rock received its first bailout. Even then, the problem was a consumer spending slowdown, not a collapse of the banking sector. ‘Getting Worried Downtown’, 17 November 2007. 97.Mark Blyth, Austerity: The History of a Dangerous Idea, New York 2013, p. 26; John Authers, The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How to Prevent Them in the Future, London 2010, pp. 2–3, 18, 95.

‘Getting Worried Downtown’, 17 November 2007. 97.Mark Blyth, Austerity: The History of a Dangerous Idea, New York 2013, p. 26; John Authers, The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How to Prevent Them in the Future, London 2010, pp. 2–3, 18, 95. For the financial, regulatory and geopolitical dynamics of the 2008 crash, see Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World, New York 2018. 98.‘Capitalism at Bay’, 16 October 2008. 99.‘I Want Your Money’, 27 September 2008; ‘The Credit Crunch: Saving the System’, ‘Rescuing the Banks: We Have a Plan’, ‘Global Finance: Lifelines’, 9 October 2008. 100.‘Hank to the Rescue’, 13 September 2008. Obama would dispel ‘myths’ about the US just by being president: ‘it would be far harder for the spreaders of hate to denounce the Great Satan if it were led by a black man whose middle name is Hussein’; at home, ‘he would salve, if not close, the ugly racial wounds left by America’s history and lessen the tendency of American blacks to blame all their problems on racism’: ‘It’s Time’, 1 November 2008. 101.New Labour had many faults after thirteen years, but the financial crisis was not one of them.


Undoing the Demos: Neoliberalism's Stealth Revolution by Wendy Brown

Affordable Care Act / Obamacare, bitcoin, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, corporate governance, credit crunch, crowdsourcing, David Brooks, Food sovereignty, haute couture, Herbert Marcuse, immigration reform, income inequality, invisible hand, labor-force participation, late capitalism, means of production, new economy, obamacare, occupational segregation, Philip Mirowski, public intellectual, Ronald Reagan, sexual politics, shareholder value, sharing economy, subprime mortgage crisis, TED Talk, The Chicago School, the long tail, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trickle-down economics, Washington Consensus, Wolfgang Streeck, young professional, zero-sum game

In fact, as I will suggest below, neoliberalism may require sacrifice as a supplement, something outside of its terms, yet essential to its operation.20 While, in the transition from liberal to neoliberal democracy, citizen virtue is reworked as responsibilized entrepreneurialism and self-investment, it is also reworked in the austerity era as the “shared sacrifice” routinely solicited by heads of state and heads of businesses. 21 Such sacrifice may entail sudden job losses, furloughs, or cuts in pay, benefits, and pensions, or it may involve suffering the more sustained effects of stagf lation, currency def lation, credit crunches, liquidity 210 u n d o in g t h e d e m o s crises, foreclosure crises, and more.22 “Shared sacrifice” may refer to the effects of curtailed state investment in education, infrastructure, public transportation, public parks, or public services, or it may simply be a way of introducing job “sharing,” that is, reduced hours and pay.

In all cases, however, its consummate sign is the willingness to risk life, which is why soldiers in battle remain its enduring icon and why Socrates rendered acceptance of his death sentence as ultimate proof of his loyalty to Athens and compared himself to a soldier when doing so.41 Today, as economic metrics have saturated the state and the national purpose, the neoliberal citizen need not stoically risk death on the battlefield, only bear up uncomplainingly in the face of unemployment, underemployment, or employment unto death. The properly interpellated neoliberal citizen makes no claims for protection against capitalism’s suddenly burst bubbles, job-shedding recessions, credit crunches, and housing market collapses, its appetites for outsourcing or the discovery of pleasure and profit in betting against itself or betting on catastrophe. This citizen also accepts 218 u n d o in g t h e d e m o s neoliberalism’s intensification of inequalities as basic to capitalism’s health — comprising the subpoverty wages of the many and the bloated compensation of bankers, CEOs, and even managers of public institutions and comprising as well reduced access of the poor and middle class to formerly public goods, now privatized.


pages: 346 words: 90,371

Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, book value, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, foreign exchange controls, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land bank, land reform, land tenure, land value tax, Landlord’s Game, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, Minsky moment, Money creation, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, Post-Keynesian economics, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Robert Solow, Second Machine Age, secular stagnation, shareholder value, subprime mortgage crisis, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

Policy responses to the mounting affordability pressure therefore focused on helping first-time buyers over the deposit barrier through a series of low-cost homeownership initiatives, while the market response was to offer mortgages on ever higher loan-to-value rates – peaking at over 100% in some cases. The credit crunch and subsequent monetary easing reinforced this picture of high house prices and low mortgage rates, while the withdrawal of high loan-to-value mortgages raised the deposit barrier ever higher. As affordability pressures worsened and first-time buyer rates plummeted government resorted to ever more generous subsidies for marginal homeowners (Wilson and Blow, 2013).

Of the top ten mortgage lenders in 2007 (which represented 78% of the market), those with the highest reliance on RMBS (and representing a third of the market) had all been bankrupted, nationalised or taken over by autumn 2008 (Ball, 2009, p. 128). This was seen spectacularly in the announcement of the sale of Halifax Bank of Scotland (HBOS) – by far the country’s largest mortgage lender with a fifth of the market prior to the credit crunch – to Lloyds TSB in September 2008. Around the same time, the Bradford and Bingley was broken up between Banco Santander of Spain and the UK government. Santander also took over Alliance and Leicester, while over the course of the previous year several specialist lenders had ceased to provide new mortgages (Ball, 2009, p. 121).


pages: 372 words: 92,477

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait, Adrian Wooldridge

"World Economic Forum" Davos, Admiral Zheng, affirmative action, Affordable Care Act / Obamacare, Asian financial crisis, assortative mating, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bernie Madoff, bike sharing, Boris Johnson, Bretton Woods, British Empire, cashless society, central bank independence, Chelsea Manning, circulation of elites, classic study, Clayton Christensen, Corn Laws, corporate governance, credit crunch, crony capitalism, Deng Xiaoping, Detroit bankruptcy, disintermediation, Disneyland with the Death Penalty, driverless car, Edward Snowden, Etonian, failed state, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, income inequality, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Khan Academy, Kickstarter, knowledge economy, Kodak vs Instagram, labor-force participation, laissez-faire capitalism, land reform, Les Trente Glorieuses, liberal capitalism, Martin Wolf, means of production, Michael Milken, minimum wage unemployment, mittelstand, mobile money, Mont Pelerin Society, Nelson Mandela, night-watchman state, Norman Macrae, obamacare, oil shale / tar sands, old age dependency ratio, open economy, Parag Khanna, Peace of Westphalia, pension reform, pensions crisis, personalized medicine, Peter Thiel, plutocrats, popular capitalism, profit maximization, public intellectual, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, Shenzhen special economic zone , Silicon Valley, Skype, special economic zone, TED Talk, the long tail, three-martini lunch, too big to fail, total factor productivity, vertical integration, War on Poverty, Washington Consensus, Winter of Discontent, working-age population, zero-sum game

In Indonesia the Suhartos, who had governed the country autocratically for thirty years, lost power. South Korea loosened up. Today the picture looks very different. So far the twenty-first century has been a rotten one for the Western model. First America’s war on terror, particularly its invasion of Iraq, did immense damage to democracy’s image, then the credit crunch savaged the idea that liberal capitalism was the only answer, and finally the euro crisis and the shutdown of Washington in 2013 confirmed Asian suspicions that Western government is dysfunctional. To a growing number of people Lee’s ideas provided precisely what Fukuyama had thought was ­impossible—“a viable systematic alternative.”18 Western intellectuals engaged in an agonized reconsideration of both democracy and capitalism.

By 2030 Asia, excluding Japan, will account for over half of the world’s elderly and about half of the global burden of noncommunicable diseases, like cancer and diabetes. And as they get richer, Asians are showing disturbingly Western signs of wanting a more ­generous safety net. Across much of Asia, welfare promises win votes, and temporary programs, like Thailand’s scheme in 2009 to help poorer workers deal with the credit crunch, have tended to become permanent. As one of our colleagues has noted: Asia’s “tigerish economies are turning marsupial, carrying their dependents along with them as they prowl.”64 The chances are that many Asian countries will thus become more Western. Lee Kuan Yew’s vision of small-state authoritarianism will become less clearly defined.


pages: 324 words: 90,253

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

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

Gallup, for example, has asked Americans on a regular basis since the end of the 1970s about their confidence in banks.2 The percentage of respondents answering positively – ranging between ‘quite a lot’ and ‘a great deal’ – stood at 60 per cent in 1979 and fell to a low of 30 per cent in the early 1990s during the first (and, it now seems, minor) credit crunch before rebounding to 53 per cent in 2004. At its nadir in late 2010, however, only 18 per cent responded positively. Meanwhile, although generally sceptical about the legislative programme in Congress, American citizens have been unusually supportive of one particular area of legislation, namely ‘increased government regulation of banks and major financial institutions’.

Those creditors wary of getting their money back will be tempted to keep their savings at home. Money that might otherwise have gone into growth-enhancing foreign ventures may, instead, be kept under the proverbial mattress: safety will trump risk. Global imbalances will narrow, but only because foreign investors will no longer be prepared to fund the borrowing of others: the credit crunch will thus become a cross-border event. Those who want to borrow will increasingly have to go in search of funds generated domestically. In the event of a funding shortage, financial institutions will be increasingly compromised: unable to raise funds internationally on the scale seen pre-financial crisis, they will nevertheless be under pressure to lend domestically and, often, to projects that may seem to be politically expedient if not economically or financially worthwhile.


pages: 293 words: 88,490

The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction by Richard Bookstaber

asset allocation, bank run, Bear Stearns, behavioural economics, bitcoin, business cycle, butterfly effect, buy and hold, capital asset pricing model, cellular automata, collateralized debt obligation, conceptual framework, constrained optimization, Craig Reynolds: boids flock, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, data science, disintermediation, Edward Lorenz: Chaos theory, epigenetics, feminist movement, financial engineering, financial innovation, fixed income, Flash crash, geopolitical risk, Henri Poincaré, impact investing, information asymmetry, invisible hand, Isaac Newton, John Conway, John Meriwether, John von Neumann, Joseph Schumpeter, Long Term Capital Management, margin call, market clearing, market microstructure, money market fund, Paul Samuelson, Pierre-Simon Laplace, Piper Alpha, Ponzi scheme, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, Richard Feynman, risk/return, Robert Solow, Saturday Night Live, self-driving car, seminal paper, sovereign wealth fund, the map is not the territory, The Predators' Ball, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, tulip mania, Turing machine, Turing test, yield curve

Amsterdam: North-Holland. http://arxiv.org/pdf/0809.0822.pdf. Bousquet, Antoine. 2009. The Scientific Way of Warfare: Order and Chaos on the Battlefields of Modernity. New York: Columbia University Press. Brunnermeier, Markus K. 2009. “Deciphering the Liquidity and Credit Crunch 2007–2008.” Journal of Economic Perspectives 23, no. 1: 77–100. https://www.princeton.edu/~markus/research/papers/liquidity_credit_crunch.pdf. Brunnermeier, Markus, and Lasse Heje Pedersen. 2009. “Market Liquidity and Funding Liquidity.” Review of Financial Studies 22, no. 6: 2201–38. doi: 10.1093/rfs/hhn098. Buldyrev, Sergey, Roni Parshani, Gerald Paul, H. Eugene Stanley, and Shlomo Havlin. 2010.


pages: 586 words: 160,321

The Euro and the Battle of Ideas by Markus K. Brunnermeier, Harold James, Jean-Pierre Landau

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, battle of ideas, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, Brexit referendum, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, cross-border payments, currency peg, currency risk, debt deflation, Deng Xiaoping, different worldview, diversification, Donald Trump, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, financial deregulation, financial repression, fixed income, Flash crash, floating exchange rates, full employment, Future Shock, German hyperinflation, global reserve currency, income inequality, inflation targeting, information asymmetry, Irish property bubble, Jean Tirole, Kenneth Rogoff, Les Trente Glorieuses, low interest rates, Martin Wolf, mittelstand, Money creation, money market fund, Mont Pelerin Society, moral hazard, negative equity, Neil Kinnock, new economy, Northern Rock, obamacare, offshore financial centre, open economy, paradox of thrift, pension reform, Phillips curve, Post-Keynesian economics, price stability, principal–agent problem, quantitative easing, race to the bottom, random walk, regulatory arbitrage, rent-seeking, reserve currency, risk free rate, road to serfdom, secular stagnation, short selling, Silicon Valley, South China Sea, special drawing rights, tail risk, the payments system, too big to fail, Tyler Cowen, union organizing, unorthodox policies, Washington Consensus, WikiLeaks, yield curve

This tight nexus between solvency fears for governments and solvency fears for banks is empirically most clearly documented in figure 10.3. Countries for which it is more expensive to insure their default risk, that is, for which the CDS spread on their debt is higher, also exhibit higher average CDS spreads in their banking sector.7 FIGURE 10.2. The Banking-Sovereign Diabolic Loops: Bailout and Credit Crunch FIGURE 10.3. Change of CDS Spreads of Sovereign and Average Banks between January 2010 and July 2012 (Source: Bloomberg) The diabolic loop also lies at the heart of the controversy about bail-in versus bailout. The French tradition, very much aware of the feedback loops we just discussed, calls for bank bailouts to stabilize the economy and so ultimately the sovereign.

This bank, however, was declared insolvent by its auditors (and not by the supervisors, who had continued to apply regulatory forbearance) and hence required a further government bailout in 2012.9 Fundamentally solvent, but undercapitalized banks, on the other hand, would lend to the right projects but—because their leverage ratios are uncomfortably high—instead decide to scale back their operations. That is how Italian banks largely responded to the debt crisis, pushing for higher levels of collateral as a way of restricting their lending. As already discussed above, their timid behavior in extending new loans leads to a credit crunch among the productive sectors in the real economy. One (politically infeasible) way to undo their undercapitalization and so encourage new lending is through a direct “gift” of outside money. With such a gift, banks now suddenly have more assets, and so—because liabilities are unchanged—equity will rise.

Ultimately, if these feedback effects are sufficiently strong, the indirect costs of the recapitalization could outweigh the benefits. Overall, then, the monopoly strategy crucially hinges on all other sectors of the economy not being balance sheet impaired. If they are, the economy will suffer from a serious credit crunch and dive into a long-lasting recession. This is precisely what happened in Japan’s lost decade. INVITE NEW RISK-BEARING CAPITAL An alternative strategy, or, better said, the opposite strategy, is to invite new risk-bearing capital and open up new funding channels. Taking again the example of the financial sector, the inflow of additional risk-bearing capital enhances competition and restores credit.


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

The Cuban-born de Molina, who was respected in the financial community, rubbed Alphin the wrong way from the start by referring to his HR shadow as a member of the “Gestapo” or “Stasi.” De Molina refused to read the talking points handed to him by HR for his meetings and goaded Alphin into doing something about it. But de Molina had a fiery temper, and after a blowup with Alphin, he lost support among his colleagues on the management committee. In December 2006, just as the credit crunch was about to begin, he quit. During 2007, Taylor continued to excel as Mr. Outside at BofA’s investment bank in New York, but without any Mr. Inside managing the firm’s risk, or monitoring its trading positions, BofA Securities made some bad bets, including buying into a pair of Bear Stearns hedge funds constructed around CDOs.

The only question is whether an investor thinks the value of a security has hit bottom, and is about to turn upwards, or whether the asset is still overpriced. In the 1990s, gutsy investors who purchased the remains of failed savings and loans reaped financial windfalls when the U.S. banking industry bounced back to robust health. That lesson was not lost on the market in 2008. It was just that the severity of the credit crunch and the collapse of Bear Stearns suggested that this downdraft might be more severe than others in recent memory. Traders and investors are always on the lookout for bargains in the financial markets. They’re also wary of trying to “catch a falling knife” and miscalculating on when a stock or other type of asset will turn around.

It was the same seat O’Neal had taken the previous October, when he issued his ultimatum to the directors, that if they didn’t trust his judgment on pursuing a deal with Wachovia, he didn’t want the job anymore. Having finished the previous item of business, Thain moved on to the seventh item on the board’s agenda that day, saying that Wetzel, head of strategy, would provide the board with an overview of the investment banking landscape, particularly in light of the credit crunch. Thain then directed the board members to look at the blue spiral books that had been handed to them, so they could follow Wetzel’s presentation more closely. The forty-eight-year-old executive, a native of Buffalo, began talking about how the banking world had changed in the past twelve months.


pages: 597 words: 172,130

The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, break the buck, Bretton Woods, business climate, business cycle, capital controls, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency peg, eurozone crisis, financial engineering, financial innovation, Flash crash, foreign exchange controls, George Akerlof, German hyperinflation, Google Earth, hiring and firing, inflation targeting, Isaac Newton, Julian Assange, low cost airline, low interest rates, market bubble, market design, middle-income trap, Money creation, money market fund, moral hazard, mortgage debt, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, price stability, public intellectual, quantitative easing, rent control, reserve currency, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, Socratic dialogue, sovereign wealth fund, The Great Moderation, too big to fail, union organizing, WikiLeaks, yield curve, Yom Kippur War

“I said he would remember the press conference”: Joseph R. Coyne, “Reflection on the FOMC Meeting of October 6, 1979,” Federal Reserve Bank of St. Louis Review 87, no. 2 (March/April 2005): 313. “Burns smoked a pipe”: Peter T. Kilborn, “Already a New Look at a Legend,” New York Times, January 24, 1988. “The Credit Crunch Is On”: David Pauly et al., “The Credit Crunch Is On,” Newsweek, March 31, 1980, 52. In 1981, one man who said he was upset: Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend (Hoboken, NJ: John Wiley & Sons, 2000), 6. “premeditated and cold-blooded murder”: Ibid. CHAPTER 6: SPINNING THE ROULETTE WHEEL IN MAASTRICHT “probably one of the world’s most unsuccessful diplomatic missions”: Gilbert Kaplan, “Mad about Music,” June 6, 2004, radio broadcast, transcript, http://www.wqxr.org/#!

When asked whether the action would cause an economic downturn, he said, “Well, you get varying opinions about that.” As Yale economist James Tobin put it later, “Burns smoked a pipe. Volcker smoked a cigar. Both produced smokescreens.” Volcker would soon become one of the most unpopular people in the country as the Fed raised rates to try to get the money supply in line with its new target. “The Credit Crunch Is On,” blared Newsweek in March 1980, noting that Sears Roebuck was demanding higher payments from its credit customers and that Chase Manhattan Bank had stopped making unsecured personal loans. With interest rates topping 20 percent, few could afford a home mortgage. Construction activity practically came to a halt.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

Alan Greenspan, balance sheet recession, banking crisis, basic income, Bear Stearns, Bernie Sanders, Bretton Woods, business climate, business cycle, carbon tax, Carmen Reinhart, central bank independence, circular economy, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, degrowth, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, Ford Model T, forward guidance, full employment, G4S, general purpose technology, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low interest rates, low skilled workers, Martin Wolf, mass incarceration, military-industrial complex, Modern Monetary Theory, Money creation, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, ocean acidification, paradox of thrift, Paul Samuelson, planned obsolescence, Post-Keynesian economics, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Solyndra, Steve Jobs, stock buybacks, systems thinking, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, Tragedy of the Commons, transaction costs, trickle-down economics, universal basic income, vertical integration, very high income

A more innovative, sustainable and inclusive economic system is possible. But it will require fundamental changes in our understanding of how capitalism works, and how public policy can help create and shape a different economic future. Notes 1 http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html (accessed 12 April 2016). 2 Following the Queen’s question, the British Academy held a seminar to enquire into how it should be answered, and subsequently wrote to the sovereign to explain their conclusions. See http://www.britac.ac.uk/news/newsrelease-economy.cfm (accessed 12 April 2016). 3 S.

It is interesting to note that practically all the macroeconomic tools and concepts that are being used today—from GDP to the natural rate of growth—were developed during the 1930s and 1940s in the context of mass production, the war effort and the development of the national welfare state. According to the dogmas of the current orthodoxy, the credit crunch should not have happened, quantitative easing should have led to inflation and increasingly unfettered markets (without any ‘crowding out’ from the government) should have already achieved strong growth. Their recommended austerity policies have now gone on for eight years with feeble to appalling results; any CEO of a serious corporation with an equivalent failure rate would have been replaced years ago.


pages: 325 words: 99,983

Globish: How the English Language Became the World's Language by Robert McCrum

Alistair Cooke, anti-communist, AOL-Time Warner, Berlin Wall, Bletchley Park, British Empire, call centre, Charles Lindbergh, classic study, colonial rule, credit crunch, cuban missile crisis, Deng Xiaoping, Etonian, export processing zone, failed state, Fall of the Berlin Wall, Ford Model T, Francis Fukuyama: the end of history, invention of movable type, invention of writing, invisible hand, Isaac Newton, jimmy wales, knowledge economy, Livingstone, I presume, Martin Wolf, Naomi Klein, Norman Mailer, Parag Khanna, Ralph Waldo Emerson, Republic of Letters, Ronald Reagan, sceptred isle, Scramble for Africa, Silicon Valley, Steven Pinker, the new new thing, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade route, transatlantic slave trade, transcontinental railway, upwardly mobile

But the process is not as bizarre as one might think and the way that the English language has travelled and changed through time and space throws up many examples of contemporary craziness. ‘Globalization’ is a word that first slipped into its current usage during the 1960s; and the globalization of English, and English literature, law, money and values, is the cultural revolution of my generation, before and after the ‘credit crunch’. Combined with the biggest IT innovations since Gutenberg, it continues to inspire the most comprehensive transformation of our society in five hundred, even a thousand years. This is a story I have followed, and contributed to, in a modest way, ever since I wrote the BBC and PBS television series The Story of English, with William Cran and Robert MacNeil, in the early 1980s.

As we enter the second decade of the new century, we are witnessing, in Globish, a contemporary phenomenon of extraordinary range and complexity, expressing a new world of global interconnections. When I was completing the first draft of this book in October 2008 I would break off from the day’s work to watch the television news. These were momentous hours, as the ‘credit crunch’ swiftly became the ‘global financial crisis’. Hour after hour, there were reports of falling markets in Japan, Hong Kong, Singapore, Frankfurt, Paris, Milan, London and New York. Across a dozen different time zones, financial journalists in each of these cities filed reports for their national desks, but the language of the crisis was unvaryingly Globish.


pages: 411 words: 95,852

Britain Etc by Mark Easton

agricultural Revolution, Albert Einstein, Boris Johnson, British Empire, credit crunch, digital divide, digital rights, drug harm reduction, financial independence, garden city movement, global village, Howard Rheingold, income inequality, intangible asset, James Watt: steam engine, John Perry Barlow, knowledge economy, knowledge worker, low skilled workers, mass immigration, moral panic, Neil Armstrong, Ronald Reagan, science of happiness, sexual politics, Silicon Valley, Simon Kuznets, Slavoj Žižek, social software, traumatic brain injury

With low-skilled jobs disappearing and knowledge jobs expanding, it is obvious that the UK needs to invest in knowledge, to educate and train its workforce. Britain has a higher proportion of NEETs – young people not in education, employment or training – than any other OECD country except Greece, Italy, Mexico and Turkey. The credit crunch only served to magnify the point. Unemployment figures in the depths of the recession showed that among those working in the knowledge economy – financial consultants, business managers, lawyers – the proportion claiming jobseeker’s allowance was 1 per cent. Among those who usually worked in unskilled admin jobs, the figure was 37 per cent.

Patrick, ref1 coronations, ref1 quasi-religious rituals and, ref1 superstition and religion attached to, ref1, ref2 televised, ref1, ref2 corporate modernity, ref1 Costa, Antonio Maria, ref1 Costeker, Mr, ref1 CountyWatch, ref1 Cranks, ref1 Crapper, Thomas, ref1 ‘crazy Brits’, ref1 credit crunch, see global financial crisis Creme Egg, ref1 Cricket St Thomas, ref1 crime: antisocial behaviour, ref1, ref2, ref3, ref4, ref5, ref6 and ASBOs, ref1 burglary, ref1 and children, ref1, ref2 daily murder rates, ref1 demand for state to ‘do something’ about, ref1 and demonisation of young people, ref1 drug-related, see drugs, recreational by drunk people, ref1; see also alcohol and electronic tagging, ref1 falling rates of, ref1 and Finnish ‘reform schools’, ref1 gun, ref1 knife, see knife crime lawful industrial gleaning becomes, ref1 low risk of being victim of, ref1 media thrive on stories about, ref1 media’s reporting of, change in, ref1 and mental health, ref1 and ‘penal populism’, ref1 and police, see police social capital decline linked to, ref1 statistics, ref1 stories about, leading to fear of, ref1 ‘tough on’, New Labour’s rhetoric concerning, ref1 and UK penal code, ref1 victims of, ref1 violent, as proportion of all crime news reported, ref1 youth, ref1 see also individual victims; justice; Soham Crime and Disorder Act (1998), ref1 criminal responsibility, age of, ref1 Cromwell, Oliver, ref1, ref2 Crudgington, ref1, ref2 Crystal Palace, ref1 Cub Scouts, ref1 Cuba, drinking culture in, ref1 Cunningham, John ‘Cats Eyes’, ref1 currency, decimalisation of, ref1 A Cursory History of Swearing (Sharman), ref1 cyber-evangelists, ref1 cyberspace, ref1 cyber-street, see Internet Street’ Czech Republic, ref1 Daily Express, ref1, ref2 Daily Mail ref1, ref2 Daily Mirror, ref1, ref2 Daily Record, ref1 Daily Star, ref1 Daily Telegraph, ref1 Dalrymple, Theodore, ref1 Dando, Jill, ref1 Dangerous Dogs Act (1991), ref1 Darwin, Charles, ref1 Davies, Margaret, ref1 Davy, Humphry, ref1 De Civilitate Morum Puerilium (Erasmus), ref1 Decency League, ref1 decimalisation, ref1 Deedes, Bill, ref1, ref2 Defence of the Realm Act (1916), ref1 Deiner, Ed, ref1 ‘Delete Expletives’ (2000), ref1 della Casa, Giovanni, ref1 Denissen, Jaap, ref1 Denmark, ref1 drinking culture in, ref1 Department of the Environment, Transport and the Regions (DETR), ref1 Department of Health, ref1 deprivation, see poverty Derby Arboretum, ref1 despondency, twenty-first-century, ref1 devolution, ref1, ref2 Churchill considers, ref1 Devonshire, Duke of, ref1 Dexter, Colin, ref1 Diana, Princess of Wales, ref1 Dickens, Charles, ref1 diet, ref1 and class, ref1, ref2, ref3 ‘five-a-day’, ref1 and health, ref1, ref2 as lifestyle choice, ref1 and NHS, ref1 by postcode, ref1 and soup kitchens, ref1, ref2 vegetarian/whole-food, ref1 and vitamins, ref1 see also nutrition discriminatory language, ref1 see also bad language Disney, Walt, ref1 Disraeli, Benjamin, ref1 divorce, ref1, ref2 Divorce Reform Act (1969), ref1 Dixon, George (character), ref1, ref2 see also police Doctor Who, ref1 ‘Does Living in California Make People Happy?’


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Madoff, book value, British Empire, buy and hold, central bank independence, collective bargaining, commodity trading advisor, compensation consultant, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, land bank, law of one price, light touch regulation, Long Term Capital Management, low interest rates, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, military-industrial complex, minimum wage unemployment, Money creation, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, Robert Solow, rolodex, Savings and loan crisis, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey

He wrote that in hard times, banks become creditors of the government and exert an “unhealthy influence” on politics. Reclaiming their superiority in issuing money would somewhat shield governments from this, he argued. In a similar way, banks’ power over other companies would be reduced if creditdriven booms and busts were mitigated. During credit crunches and because of the threat of credit crunches, banks can demand a lot of influence over companies in exchange for helping them to survive (Fisher 1996/2009). Chances are slim that contemporary students of economics will think about any of that. The leading textbooks in economics, for instance Mankiw and Taylor (2006), restrict the discussion of the monetary system to explaining the process of private money creation in a rather roundabout way, and as if it was a law of nature.


pages: 414 words: 101,285

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It by Ian Goldin, Mike Mariathasan

air freight, air traffic controllers' union, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Bretton Woods, BRICs, business cycle, butterfly effect, carbon tax, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, digital divide, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, Eyjafjallajökull, failed state, Fairchild Semiconductor, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, Glass-Steagall Act, global pandemic, global supply chain, global value chain, global village, high-speed rail, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, precautionary principle, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, risk free rate, Robert Solow, scientific management, Silicon Valley, six sigma, social contagion, social distancing, Stuxnet, supply-chain management, systems thinking, tail risk, TED Talk, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, Tragedy of the Commons, transaction costs, uranium enrichment, vertical integration

Gorton and Andrew Metrick, 2010b, “Securitized Banking and the Run on Repo,” NBER Working Paper 15223, National Bureau of Economic Research, Cambridge, MA. 24. A tail risk is the risk that a relatively large loss will emerge toward the end of a transaction, when relatively few loans remain in the securitization pool. 25. Markus K. Brunnermeier, 2008, “Deciphering the Liquidity and Credit Crunch, 2007–08,” NBER Working Paper 14612, National Bureau of Economic Research, Cambridge, MA, accessed 21 January 2013, http://www.nber.org/papers/w14612. 26. Nicola Gennaioli, Andrei Shleifer, and Robert W. Vishny, 2012, “Neglected Risks, Financial Innovation, and Financial Fragility,” Journal of Financial Economics 104 (3): 452–468. 27.

Brogger, Tasneem, and Helga Kristin Einarsdottir. 2008. “Iceland Gets $4.6 Billion Bailout from IMF, Nordics (Update3).” Bloomberg website, 20 November. Accessed 5 February 2013. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3Zf1f9IBUWg&refer=europe. Brunnermeier, Markus K. 2008. “Deciphering the Liquidity and Credit Crunch, 2007–08.” NBER Working Paper 14612. National Bureau of Economic Research, Cambridge, MA. Accessed 21 January 2013. http://www.nber.org/papers/w14612. Butler, Paul. 2010. “Visualising Friendships.” Facebook, 13 December. Accessed 27 January 2013. http://www.facebook.com/notes/facebook-engineering/visualizing-friendships/469716398919.


pages: 97 words: 31,550

Money: Vintage Minis by Yuval Noah Harari

23andMe, agricultural Revolution, algorithmic trading, AlphaGo, Anne Wojcicki, autonomous vehicles, British Empire, call centre, credit crunch, DeepMind, European colonialism, Flash crash, Ford Model T, greed is good, job automation, joint-stock company, joint-stock limited liability company, lifelogging, low interest rates, Nick Bostrom, pattern recognition, peak-end rule, Ponzi scheme, self-driving car, Suez canal 1869, telemarketer, The future is already here, The Future of Employment, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, Watson beat the top human players on Jeopardy!, zero-sum game

It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession. The Capitalist Hell THERE IS AN even more fundamental reason why it’s dangerous to give markets a completely free rein. Adam Smith taught that the shoemaker would use his surplus to employ more assistants. This implies that egoistic greed is beneficial for all, since profits are utilised to expand production and hire more employees.


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

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

With little freedom to use interest rates to counteract such trends, the Chinese authorities have to use blunt tools: for example, when credit starts growing strongly, the word goes out from the Chinese bank regulator that the banks should cut back on issuing credit. Typically, private firms without strong connections bear the brunt of these credit crunches. Chinese industry goes from credit feast to credit famine, which disrupts long-range planning. The low interest rate has other adverse effects: it reduces household income and, somewhat perversely, may force households to save more in order to build a sufficient nest egg for retirement.11 It thus depresses household consumption and makes China yet more dependent on foreign final demand.

Rajan Was Unpopular (but Prescient) at Greenspan Party,” Wall Street Journal, January 2, 2009. 3 See C. Reinhart and K. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009) for an excellent study delineating the commonalities between crises through history. 4 For surveys, see M. Brunnermeier, “Deciphering the Liquidity and Credit Crunch, 2007–2008,” Journal of Economic Perspectives 23, no. 1 (Winter 2009): 77–100; G. Gorton, “Information, Liquidity, and the (Ongoing) Panic of 2007,” NBER Working Paper 14649, National Bureau of Economic Research, Cambridge, MA, 2009; D. Diamond and R. Rajan, “The Credit Crisis: Conjectures about Causes and Remedies,” American Economic Review 99 (2009): 606–10.


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Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, Airbnb, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, behavioural economics, benefit corporation, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, income inequality, independent contractor, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low interest rates, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, Paris climate accords, patent troll, pension reform, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, vertical integration, zero-sum game

Because of this relationship, the bankruptcies in the nontraded sector weakened the financial system and had knock-on effects on the availability of credit in the traded sector. There is one more reason that internal devaluation and austerity had such disastrous and unanticipated effects: it amplified the credit crunch, with impacts on both demand (investment) and supply (firms without access to working capital had to contract). When the crisis hit, as we have noted, money fled the weak countries for the strong ones. Among the reasons for this migration was a lack of investor confidence that the banks within debtor countries could stay afloat or be successfully bailed out by their governments in the event of failure, an issue we address in Chapter 5.

Because investment in these areas has lengthy payback periods and low financial returns, especially in underpopulated areas, public investment is necessary.6 However, the extent to which more risky and innovative projects in new sectors such as electric cars have been funded is less clear. Limitations Perhaps the most important limitation of the EFSI is its inadequate size, especially in countries such as Greece, where a continuing credit crunch means additional lending is needed, particularly for smaller firms. Even if the goal of stimulating €500 billion in additional investment over five years is attained, and even if this growth in investment is additional to what would otherwise have occurred, it would only increase the investment-to-GDP ratio by less than 1 percentage point.


pages: 341 words: 107,933

The Dealmaker: Lessons From a Life in Private Equity by Guy Hands

Airbus A320, banking crisis, Bear Stearns, British Empire, Bullingdon Club, corporate governance, COVID-19, credit crunch, data science, deal flow, Etonian, family office, financial engineering, fixed income, flag carrier, high net worth, junk bonds, lockdown, Long Term Capital Management, low cost airline, Nelson Mandela, North Sea oil, old-boy network, Paul Samuelson, plutocrats, proprietary trading, Silicon Valley, South Sea Bubble, sovereign wealth fund, subprime mortgage crisis, traveling salesman

It would ensure that some of the money Citigroup had lent to Terra Firma to buy EMI would be repaid. It would also ensure that Terra Firma could continue to own the publishing part of EMI. Unfortunately, the relationship between the two firms was coming under huge strain as Citigroup – one of the biggest subprime lenders in the US – started to suffer from the developing credit crunch. The news coming out of the financial markets was grim. Mortgage-related issues were threatening funds at Bear Stearns, the German bank WestLB, BNP Paribas and even Goldman’s Global Equity Opportunities Fund. It was starting to look less and less likely that we would be able to securitise the reliable future earnings that came from the publishing arm.

CHAPTER 10 Going Down with the Ship When I was young I never needed anyone And making love was just for fun Those days are gone ERIC CARMEN, ‘All By Myself’ Warren Buffett’s famous advice to investors during the crash was to ‘be fearful when others are greedy, and greedy when others are fearful’. As the credit crunch hit, most private equity companies were fearful, withdrawing into storm shelters and weathering the chaos as best they could. Regardless, all private equity companies suffered. Blackstone Group – the largest fund in the world now – had a successful IPO a few months ahead of the crash, suffered a $502 million loss in its third quarter in 2008, wrote down about a third of its portfolio companies and for a while focused on consultancy and took the opportunity to profit by buying up distressed mortgages.


pages: 662 words: 180,546

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

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, democratizing finance, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

You should view the segment for yourself to gain an impression of the smug demeanor of someone who has drunk the Kool-Aid a little too avidly. I had to check my browser to make sure I wasn’t watching a clip from The Colbert Report. Perhaps Cochrane and I had been living in parallel universes over the previous two years. Just one representative quote: “The economy can recover very quickly from a credit crunch if left on its own.” Maybe in the Chicago Wormhole Universe.30 But then again, maybe not. The New Statesman had the brilliant idea of reconnecting with the twenty U.K. economists who had signed an open letter in February 14, 2010, supporting Chancellor George Osborne’s strategy of producing growth through fiscal austerity and budget cuts.31 Since then, Britain had promptly entered further contraction, and the Treasury ended up far exceeding its borrowing limits: so much for deficit reduction.

Governmentality: Current Issues and Future Challenges (London: Routledge, 2011). Brown, Wendy. “American Nightmare: Neoliberalism, Neoconservatism, and De-democratization,” Political Theory 34 (2006): 690–714. Brown, Wendy. Edgework (Princeton: Princeton University Press, 2005). Brunnermeier, Markus. “Deciphering the Liquidity and Credit Crunch 2007–8,” Journal of Economic Literature 23 (2009): 77–100. Brunnermeier, Markus, Thomas Eisenbach, and Yuliy Sannikov. “Macroeconomics with Financial Frictions: A Survey,” paper presented to 22nd Jerusalem Summer School in Economic Theory, 2011. Brush, Silla, and Clea Benson. “Forged Comment Letters Sent to U.S.

(This generalization would also have to take into account the subsequent popularity of a few serial Cassandras such as Nouriel Roubini and Marxists such as David Harvey and Robert Brenner: they exist outside the ambit of this book, dealing as it does with the orthodox neoclassical profession.) 36 Buiter, “The Unfortunate Uselessness of Most State of the Art Academic Monetary Economics.” Buiter then wrote: “The Bank of England in 2007 faced the onset of the credit crunch with too much Robert Lucas, Michael Woodford and Robert Merton in its intellectual cupboard. A drastic but chaotic re-education took place and is continuing.” Chapter 5 reveals that, in this instance, another economist’s prediction has since bitten the dust. 37 Ibanez, The Current State of Macroeconomics, p. 180. 38 Blanchard, “The State of Macro.” 39 They are available online at www.newyorker.com/online/blogs/johncassidy/chicago-interviews.


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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

Amateur Hour A leaked internal memo written by Carlyle’s William Conway dated January 31, 2007 showed that that the boom was almost over: “most investors in most assets classes are not being paid for the risks being taken...the longer it lasts the worst it will be when it ends...if the excess liquidity ended tomorrow I would want as much flexibility as possible.”14 Shortly after the Blackstone IPO, U.S. subprime problems overflowed into a general credit crunch, and the debt markets ground to a halt. As the global recession affected earnings and cash flows, companies that had been leveraged up in buyouts found it difficult to meet debt repayments. Drops in stock prices reduced values, making it difficult to offload businesses. By July 2007, EMI was in difficulties.

The problem is that a large part of the profits are not actually cash, but unrealized paper gains based on sometimes dubious market values for illiquid instruments and even more dubious models. The deadly pathology of finance—the gaming of bonus systems, manipulation of valuations, and accounting tricks—continues. As one observer notes: “It is simply amazing to me how much money you can make by shuffling papers. We have come a long way from our industrial giants.”25 In New York, credit-crunch tours take in the original Lehman Brothers building and New York’s Federal Reserve. In Bowling Green Park, downtown Manhattan, visitors still pose to have their photos taken near Arturo di Modica’s statue of a charging bull. Guides show tourists a real toxic asset—a thick prospectus for a 2006 $1.5-billion subprime CDO that was rated AAA where investors lost almost all their investment.

Karen Ho (2009) Liquidated: An Ethnography of Wall Street, Duke University Press, Durham and London. Marina Hyde (2009) Celebrity: How Entertainers Took Over the World and Why We Need an Exit Strategy, Harvill Secker, London. William Isaac (2010) Senseless Panic: How Washington Failed America, John Wiley, New Jersey. Tetsuya Ishikawa (2009) How I Caused the Credit Crunch: An Insider’s Story of the Financial Meltdown, Icon Books, London. Michael Jensen (1976) The Financiers: The World of the Great Wall Street Investment Banking House, Weyright and Talley, New York. Simon Johnson and James Kwak (2010) 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, Pantheon Books, New York.


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The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

In an article published in 1983 he claimed to have rescued the Fisher debt-deflation hypothesis by adding the idea of the credit crunch.17 This would be the missing link between deflation and dramatic declines in nominal incomes. As prices fall, the real debt burden of debtors rises; but, far from benefiting, it actually hurts creditors because falling asset prices, rising loan impairments and bankruptcies lead to a fall in the value of assets on bank balance sheets. These collateral effects lessen the incentive for creditors to lend, resulting in a credit crunch, which then hits aggregate demand in the economy through a fall in consumption and investment.


pages: 366 words: 117,875

Arrival City by Doug Saunders

agricultural Revolution, Ayatollah Khomeini, Berlin Wall, Boeing 747, Branko Milanovic, call centre, credit crunch, Deng Xiaoping, desegregation, foreign exchange controls, gentrification, ghettoisation, Gini coefficient, guest worker program, Hernando de Soto, Honoré de Balzac, illegal immigration, immigration reform, income inequality, informal economy, Jane Jacobs, Kibera, land reform, land tenure, low skilled workers, mass immigration, megacity, microcredit, new economy, Pearl River Delta, pensions crisis, place-making, price mechanism, rent control, Silicon Valley, special economic zone, the built environment, The Chicago School, The Death and Life of Great American Cities, upwardly mobile, urban planning, urban sprawl, white flight, working poor, working-age population

This itself is an expensive problem, which is most easily solved by bringing in new working-age immigrants whose taxes can cover spiraling state expenses. Alternatively, governments can raise taxes, cut services, or raise retirement ages, but, without immigration, the standards of living will decrease and governments will be unable to afford crucial services and policies.† As it is, the fiscal cost of paying for the credit-crunch bailouts of 2008 and 2009 is expected to consume between 2 and 4 percent of the GDP in Britain and the United States for more than a decade. So, while immigration is not a mandatory solution to labor shortages, the combination of cash-starved governments and higher demographic costs will make it the least painful and most voter-friendly solution.

This has given considerable economic and social power to women in many otherwise traditional communities; it has also, in turn, made child-care services a desperately important commodity in the arrival city. Even with all those income sources, it was not a simple matter of buying a house. The Parabs were not eligible for any kind of actual mortgage. India’s banks are extremely conservative in their lending practices, a fact that saved the country’s economy from ruin in the credit-crunch crisis of 2008 but that also has frozen millions of people out of the housing market. Instead, as millions of other families in the developing world do, they took out a consumer-purchase loan, ostensibly for buying appliances and at a far higher interest rate than most mortgages. Even that was not quite enough: As is customary in Mumbai, off the books they had to pay several thousand dollars in “black money” cash payments directly to the sellers, above and beyond the official purchase price.


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Digital Wars: Apple, Google, Microsoft and the Battle for the Internet by Charles Arthur

activist fund / activist shareholder / activist investor, AltaVista, Andy Rubin, Build a better mousetrap, Burning Man, cloud computing, commoditize, credit crunch, crowdsourcing, disintermediation, don't be evil, en.wikipedia.org, Firefox, gravity well, Jeff Bezos, John Gruber, Mark Zuckerberg, Menlo Park, Network effects, PageRank, PalmPilot, pre–internet, Robert X Cringely, Silicon Valley, Silicon Valley startup, skunkworks, Skype, slashdot, Snapchat, software patent, speech recognition, stealth mode startup, Steve Ballmer, Steve Jobs, Susan Wojcicki, the long tail, the new new thing, the scientific method, Tim Cook: Apple, Tony Fadell, turn-by-turn navigation, upwardly mobile, vertical integration

The forecasts were wildly wrong, predicated on levels of advertising growth that required the future to be just like the previous six years – only more so. Yahoo’s executives, led by Jerry Yang, made the wrong call once again. This time, Yahoo failed to perceive that it was at the tail end of an enormous financial bubble, and repeatedly rejected Ballmer. When the credit crunch hit in the summer, big advertisers drastically cut back their marketing budgets, and Yahoo was suddenly left scrabbling for revenue. The bid collapsed, Yang was forced out, and in January 2009 Carol Bartz, a tough-talking Silicon Valley veteran, was offered the helm of Yahoo. She was more receptive to a simpler offer from Microsoft: that it would power Yahoo search and help serve advertisements.

The aim – to capture market share – worked: from July 2008 to June 2009 – the period covering the arrival of the 3GS and apps on the iTunes App Store – iPhone sales quadrupled to 20.25 million compared to the same 2007/08 period, while the smartphone market grew by less than 20 per cent (and, amid the credit crunch, the overall mobile market actually shrank). By July 2009, the 65,000 apps had had 1.5 billion downloads. The investment in building the iTunes Music Store all those years ago was clearly paying off; apps downloads were running at the same rate as song downloads and, while there were many more sources to deal with, as well as the extra work for Apple of approving apps to be published (a non-trivial task for which it employed around 40 people working full time), they brought clear benefits.


pages: 479 words: 113,510

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, business cycle, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, junk bonds, liquidity trap, London Whale, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, Navinder Sarao, negative equity, new economy, Northern Rock, obamacare, Phillips curve, price stability, proprietary trading, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, stock buybacks, tail risk, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

But there was still no stampede to the discount window. Buyers of securities had disappeared; the great derivatives locomotive had slammed on the brakes, causing the train cars behind to slam into one another, derail, and slide off the mountain. In mid-April 2008, the IMF warned that potential losses from the credit crunch foreshadowed by Bear’s fall could surpass $1 trillion. As if on cue, Swiss bank UBS reported an $11.5 billion loss and announced that it would cut 5,500 jobs by the middle of 2009. The bond issuers were the next to get hit. On May 13, MBIA, the world’s largest bond insurer, reported $2.4 billion in losses due to write-downs of CDSs.

See also District Banks; Federal Open Market Committee (FOMC) auditing of, calls for, 253–54 author’s hiring by and early experience at, 30–42, 46 DiMartino Booth’s recommendations for, 263–66 chairman of, 42–43 (See also specific Chairman) creation of, 2 economists of, 46–50, 62–64 financial crisis of 2008 and (See financial crisis of 2008) hubris and myopia of, 46–50, 236 Keynesian wealth effect model of, 6–7 lack of diversity at, 63–64 liquidity trap created by, 209–11 organization of, 42–45 politics and, 42–44 potential consequences of policies of, 252–53 profits and expenses of, 35–36 purpose of, 2, 41–42 shadow banking system and, 167–69 stress tests and, 170–71 fed funds interest rate, 3, 42, 212 September 2007 rate cut, 91 2008 decisions regarding, 102–3, 118, 119, 154–55, 157–63 Yellen raises, December 2015, 262 zero-interest-rate policy, 3, 8, 159–63, 175, 176, 218–21 Feldstein, Martin, 82 Ferguson, Niall, 56, 198 financial crisis of 2008, 2–10 AIG bailout and, 138–39 Bear Stearns’ collapse and, 105–16 Bear Stearns hedge fund bankruptcies and, 89–90 discount window opened to bond dealers in, 118 fed funds rate decisions in response to, 102–3, 118, 119, 154–55, 157–63 FOMC meetings during, 152–63 housing bubble and (See housing bubble) Lehman Brothers collapse and, 130–37, 145–47 losses from credit crunch reported during, 120–21 money market fund’s breaking the buck and, 140–42 PWG recommendations, 104–5 quantitative easing, adoption of, 160 Rajan’s paper warning of banking risks and, 93–96 shadow banking system and, 121–29, 167–69 short selling, temporary ban on, 143 TARP and, 142–43 Washington Mutual sale to JP Morgan & Chase, 143 yen carry trade, unwinding of, 90–91 zero-interest-rate policy, adoption of, 159–63 Financial Times, 108–9, 121 Fischer, Stanley, 234, 246–47 Fisher, Leslie, 67–68 Fisher, Richard, 19–20, 23–24, 61–62, 67–73, 76–77, 90, 147, 173, 212–13, 228–30, 234, 248–49, 254, 260 DiMartino Booth’s daily briefings for, 100–101 calls for end to QE2, 214–15 campaigns to dismantle too-big-to-fail banks, 186–87 defends Fed lending facilities, 169 education of, 68–69 extension of ZIRP to 2013, dissent to, 219–21 Fed bull market, consequences of, 238–39 at FOMC meetings, 76–78, 81–84 housing bubble and, 89 Operation Twist, dissent to, 224 opposition to QE and ZIRP of, 169, 175, 179–81 pre-briefings for, 164–67 QE2 and, 195, 197 on Texas economy’s outperformance, 226–27 2008 fed funds rate decisions and, 103, 118, 119, 154–55, 157–60, 161–63 Fitch Ratings, 27 flash crash, 189–90 Foreign Exchange (FX), 168 Foroohar, Rana, 7 Fortune, 112 forward guidance, 81 Frank, Barney, 120, 139, 220 Freddie Mac, 22, 120 Free to Choose (Friedman & Friedman), 59 Free to Choose (TV series), 59 Friedman, Milton, 48, 59–60, 87, 101 Friedman, Rose, 59 Friedman, Stephen, 148 Fuld, Dick, 29, 131–37, 146–47 Fundamental REO, 232 Galbraith, John Kenneth, 46 Geithner, Timothy, 51–55, 89–90, 113, 143–44, 147, 200 AIG bailout and, 138–39 appointed Treasury Secretary, 170 Bear Stearns rescue and, 109–12, 114 failure to see housing bubble, 55 Lehman collapse and, 135–36 money market fund’s breaking the buck and, 140–42 General Electric, 47, 169 General Motors, 46 Gingrich, Newt, 223 Globalization and Monetary Policy Institute, 82 Glucksman, Lew, 132 GMAC, 169 Goldman Sachs, 14, 115, 133, 143–45, 147–48, 168, 232, 257–60 Goldsborough, Alan, 119 Goncalves, George, 31 González, Henry B., 36 Gorton, Gary, 125–27, 128 government shutdown, 234 Grant, James, 198 Great Depression, 177 Great Moderation, 65, 87 Greece, bailout of, 188–89 Greenburg, Alan, 105 Greenspan, Alan, 6, 13, 16–17, 19, 26, 47, 60, 77, 78, 91, 153, 220 Black Friday and, 64–65 education of, 48–49 financial crisis and, 167 housing bubble and, 8, 20–21, 23, 27, 50 inflation targeting and, 195–96 irrational exuberance comment of, 11, 12 Long-Term Capital Management crisis and, 14, 15 on too-big-to-fail banks, 187 Greenspan Put, 64–65 Gregory, Joe, 131 groupthink, 9, 50, 166, 197 Gunther, Jeffrey, 207, 208 Hackett, Jim, 71 Haines, Mark, 216 Harker, Patrick, 259 Hartnett, Michael, 1 Hatzius, Jan, 29 Hayes, Samuel L., 144 Hayman Capital Management, 115 high-frequency trading, 190 Hilsenrath, Jon, 80, 195, 223, 228, 233, 237, 245, 260, 262 Hoenig, Thomas, 181, 197, 210, 213 household formation, 211 housing bubble, 6, 20–29 adjustable rate mortgages (ARMs) and, 22 author’s warnings regarding, 23–26 Bernanke and, 23, 74 Fisher on, 89 FOMC conclusions regarding lack of, 78–79 Geithner’s failure to anticipate, 55 Greenspan and, 8, 20–21, 23, 27, 50 lowered mortgage standards and, 21–22 reinflating of, in 2012, 232 subprime mortgages and, 21, 22, 27, 28, 74–75 systemic risk and, 26, 28 Yellen’s failure to see, 86–87, 88–89 housing market, 4–5, 215.


pages: 144 words: 43,356

Surviving AI: The Promise and Peril of Artificial Intelligence by Calum Chace

3D printing, Ada Lovelace, AI winter, Airbnb, Alvin Toffler, artificial general intelligence, augmented reality, barriers to entry, basic income, bitcoin, Bletchley Park, blockchain, brain emulation, Buckminster Fuller, Charles Babbage, cloud computing, computer age, computer vision, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, deep learning, DeepMind, dematerialisation, Demis Hassabis, discovery of the americas, disintermediation, don't be evil, driverless car, Elon Musk, en.wikipedia.org, epigenetics, Erik Brynjolfsson, everywhere but in the productivity statistics, Flash crash, friendly AI, Geoffrey Hinton, Google Glasses, hedonic treadmill, hype cycle, industrial robot, Internet of things, invention of agriculture, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, Kevin Kelly, life extension, low skilled workers, machine translation, Mahatma Gandhi, means of production, mutually assured destruction, Neil Armstrong, Nicholas Carr, Nick Bostrom, paperclip maximiser, pattern recognition, peer-to-peer, peer-to-peer model, Peter Thiel, radical life extension, Ray Kurzweil, Robert Solow, Rodney Brooks, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley ideology, Skype, South Sea Bubble, speech recognition, Stanislav Petrov, Stephen Hawking, Steve Jobs, strong AI, technological singularity, TED Talk, The future is already here, The Future of Employment, theory of mind, Turing machine, Turing test, universal basic income, Vernor Vinge, wage slave, Wall-E, zero-sum game

The financial markets make extensive use of AI. High-frequency trading, where computers trade with each other at speeds no human can even follow – never mind participate in – took off in the early 21st century, although it has reportedly fallen back from around two-thirds of all US equity trades at the start of the 2008 credit crunch to around 50% in 2012. (8) There is still confusion about the impact of this on the financial markets. The “flash crash” of 2010, in which the Dow Jones lost almost 10% of its value in a few minutes was initially blamed on high-frequency trading, but later reports claimed that the AIs had actually mitigated the fall.


pages: 141 words: 40,979

The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey

Airbus A320, barriers to entry, book value, business process, call centre, carbon tax, creative destruction, credit crunch, discounted cash flows, intangible asset, John Bogle, knowledge worker, late fees, low cost airline, Network effects, pets.com, price anchoring, risk tolerance, risk/return, rolodex, search costs, shareholder value, Stewart Brand

Of course, taxes come into play here, and you may need a larger difference in potential upside to justify a sale in a taxable account than in a tax-qualified one, but it is nonetheless something to keep in mind. I wouldn’t recommend constant portfolio tweaking to move from stocks with 20 percent upside to stocks with 30 percent upside, but when a great opportunity comes along, sometimes you need to sell an existing stock to fund the idea. For example, when the market sold off during the credit crunch in late summer of 2007, financial services stocks were absolutely crushed. Some were deservedly so, but as is usually the case, Wall Street threw a lot of babies out with the bathwater, and many stocks were whacked down to ridiculously cheap levels. Now, I normally keep at least 5 to 10 percent of my personal account in cash so that I have dry powder for occasions just like this one—you never know when the market will lose its mind—but for a number of reasons, I was caught with very little spare cash during this particular sell-off.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

While these times are scary and strange for many Americans, a number of people in other countries feel a sense of déjà vu. Asia went through a similar crisis in the late 1990s, and various other countries (including Argentina, Turkey, Mexico, Norway, Sweden, Indonesia, and South Korea) have suffered through banking crises, stock market collapses, and credit crunches. Capitalism may be the best economic system that man has come up with, but no one ever said it would create stability. In fact, over the past 30 years, market economies have faced more than 100 crises. That is why I and many other economists believe that government regulation and oversight are an essential part of a functioning market economy.

Because of accelerating productivity, output was increasing faster than demand, and prices fell sharply. It was this, more than anything else, that led to rapidly declining incomes. Farmers then (like workers now) borrowed heavily to sustain living standards and production. Because neither the farmers nor their bankers anticipated the steepness of the price declines, a credit crunch quickly ensued. Farmers simply couldn’t pay back what they owed. The financial sector was swept into the vortex of declining farm incomes. The cities weren’t spared—far from it. As rural incomes fell, farmers had less and less money to buy goods produced in factories. Manufacturers had to lay off workers, which further diminished demand for agricultural produce, driving down prices even more.


pages: 654 words: 120,154

The Firm by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset light, Bear Stearns, benefit corporation, book value, borderless world, collective bargaining, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, family office, financial independence, Frederick Winslow Taylor, Glass-Steagall Act, income inequality, invisible hand, Jeff Bezos, Joseph Schumpeter, Ken Thompson, Kickstarter, laissez-faire capitalism, Mahatma Gandhi, Nelson Mandela, new economy, pets.com, Ponzi scheme, Ralph Nader, risk tolerance, risk-adjusted returns, Robert Solow, scientific management, shareholder value, Sheryl Sandberg, Silicon Valley, Steve Jobs, supply-chain management, The Nature of the Firm, vertical integration, young professional

“What you get from Harvard Business School is a wonderful network of people who were there with you and a set of tools that you can then bamboozle people with for the rest of your life,” Radio 4 business reporter Peter Day told London’s Sunday Times in 2009. “It is a habit of thought—conventional responses to conventional situations. Harvard teaches on a case-study basis, so it is always telling people how to respond to things that happened in the past. No wonder that when something like the credit crunch comes along, huge numbers of highly skilled people in compartmentalized worlds are unable to respond to it.”30 What’s more, McKinsey and others wholly endorsed bankers’ move farther out on the risk curve in search of higher returns. Specifically, they were pushing the concept of risk-adjusted return on capital, or RAROC, as well as a notion called “shareholder value added,” or SVA.

You don’t need to create selling documents or work documents. Just fill in the frameworks with the client’s data and do the same thing you’ve done before, thereby reaping the benefits of the simplest of equations: Low Cost = High Margins. In 2009 the consultants began urging governments to tackle “whole-government transformation”38 to deal with the credit crunch, with the consultants as trail guides on that journey. Oliver Jenkyn, who headed McKinsey’s retail banking practice during the moment of the industry’s worst excesses—in both mortgage and credit card lending—was hired by Visa in August 2009 as its head of strategy and corporate development. Failure to advise properly once again proved no impediment to further engagement.


pages: 394 words: 124,743

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry by Steven Rattner

activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, bank run, banking crisis, Bear Stearns, business cycle, Carl Icahn, centre right, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, creative destruction, credit crunch, David Brooks, David Ricardo: comparative advantage, declining real wages, Ford Model T, friendly fire, hiring and firing, income inequality, Joseph Schumpeter, low skilled workers, McMansion, Mikhail Gorbachev, moral hazard, Ronald Reagan, Saturday Night Live, shareholder value, subprime mortgage crisis, supply-chain management, too big to fail

Finance companies have no such depositors unless they happen to own a bank; instead they must depend on large borrowings from banks and investors for the cash that they lend to car buyers (known as the retail trade) and auto dealers (known as wholesale or floor-plan borrowers). I began to understand how the collapse of the financial markets had created havoc for automakers. As a result of the credit crunch, both GMAC and Chrysler Financial had seen their ability to borrow from banks severely curtailed. To raise added funds in recent years, the fincos had also made heavy use of securitizations, in which their loans to consumers and dealers were bundled, sliced up like a layer cake, and sold off in tranches, typically to investment funds.

The summer that gas prices soared and all-important SUV and pickup-truck sales slid, it belatedly suspended its $1 per share dividend. But it invested in Michigan real estate, laying out $626 million to buy the RenCen, and $200 million more for office buildings in Pontiac. Depressed by Rust Belt malaise and the growing credit crunch, the prices must have seemed like bargains. It didn't take long for Harry and Fritz Henderson to collide. The day after President Obama told the nation that GM would be on a sixty-day deadline to reinvent itself, the new CEO called to assure Harry that GM was reworking its turnaround plan and would have something for him by the end of the weekend—five days hence.


pages: 433 words: 124,454

The Burning Answer: The Solar Revolution: A Quest for Sustainable Power by Keith Barnham

Albert Einstein, An Inconvenient Truth, Arthur Eddington, carbon footprint, credit crunch, decarbonisation, distributed generation, electricity market, en.wikipedia.org, energy security, Ernest Rutherford, Higgs boson, hydraulic fracturing, hydrogen economy, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, James Watt: steam engine, Kickstarter, Michael Shellenberger, Naomi Klein, off grid, oil shale / tar sands, Richard Feynman, Schrödinger's Cat, Silicon Valley, Stephen Hawking, Ted Nordhaus, the scientific method, uranium enrichment, wikimedia commons

While it did, it was fun to use commercial jargon to describe the USP (unique selling point) of the company as the UPS (uninterruptable power supply). Ironically, it was the financial crisis of 2008, for which the banks and financial institutions were partly responsible, that finished Solarstructure. When the credit crunch hit, the two multinational engineering companies with which we were collaborating stopped all research and development, including smart windows. Solar-powered greenhouses Many sun-rich countries have large amounts of desert and have problems feeding their population. This is even the case in oil-rich states like Saudi Arabia.

Information about the DESERTEC project can be found on their website [2]. Massimo Mazzer, Barry Clive and I reported the rise in air conditioning demand in the EU in an article in Nature Materials in 2006 [3]. Air conditioning demand has continued to rise in the EU despite a hiatus around the time of the 2008 credit crunch [4]. A typical electricity demand for California shows no daytime peak but an overall rise to a peak around 6.00 p.m. [5]. The afternoon demand in Germany and the UK is much lower, particularly in summer, as discussed in Chapter 7. This suggests air conditioning is a major component of demand in places like California.


pages: 481 words: 120,693

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, Bullingdon Club, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial engineering, financial innovation, Flash crash, Ford Model T, Frank Gehry, Gini coefficient, Glass-Steagall Act, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Max Levchin, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, seminal paper, Sheryl Sandberg, short selling, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, starchitect, stem cell, Steve Jobs, TED Talk, the long tail, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

CHAPTER 4: RESPONDING TO REVOLUTION “A lesson from the technology industry” Reid Hoffman and Ben Casnocha, The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career (Crown Business, 2012), p. 71. Eight days later, George Soros hosted twenty Chrystia Freeland, “The Credit Crunch According to Soros,” Financial Times, January 30, 2009. Unless otherwise specified, all quotes in this section originally appeared in this piece. an average of 31 percent Charles Morris. The Sages. p. 3. According to a study by LCH Investments Rick Sopher, “Great Money Managers,” self-published by LCH Investments, November 2011.

the ability to “pivot” Caroline O’Connor and Perry Klebahn, “The Strategic Pivot: Rules for Entrepreneurs and Other Innovators,” Harvard Business Review blog network, February 28, 2011. Flickr’s genesis was in 2002 See Jessica Livingston, Founders at Work: Stories of Startups’ Early Days (Apress, 2007), pp. 257–264. “One thing that I’ve both wrestled with” Chrystia Freeland, “The Credit Crunch According to Soros,” Financial Times, January 30, 2009. “My conceptual framework, which basically emphasizes” CF interview with George Soros, December 16, 2008. “It’s an almost aggressive pessimism about his own ideas” CF interview with Jonathan Soros, July 14, 2009. “The businesses and institutions underpinning” Jennings, “Opportunities of a Lifetime.”


pages: 193 words: 46,052

Modern China: A Very Short Introduction by Rana Mitter

banking crisis, British Empire, corporate social responsibility, credit crunch, Deng Xiaoping, global reserve currency, Great Leap Forward, invention of gunpowder, land reform, Mahatma Gandhi, Mikhail Gorbachev, Nelson Mandela, new economy, purchasing power parity, reserve currency, South China Sea, special economic zone, stem cell, urban planning

By the mid-2010s, the concern was that China was once again suffering from overcapacity, and that a turn to domestic consumption, rather than more building, was needed to keep growth rates up, along with a clampdown on irresponsible lending that came from the sudden influx of money into the economy. Yet there was no doubt that the overall success of China in avoiding the ‘credit crunch’ and banking crisis that damaged the West gave it new credibility in the eyes of many countries in the global south. It was clear that the model of neoliberal economic modernity which had shaped most Western economies until 2008 was not the only one on offer: instead, a strong state sector and a controlled currency might have their advantages, at least in the short term.


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

Abraham Maslow, airport security, Alvin Toffler, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, Dunbar number, experimental economics, Fall of the Berlin Wall, financial deregulation, Future Shock, Garrett Hardin, George Akerlof, hydraulic fracturing, impulse control, income inequality, information security, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Bogle, John Nash: game theory, joint-stock company, Julian Assange, language acquisition, longitudinal study, mass incarceration, meta-analysis, microcredit, mirror neurons, moral hazard, Multics, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, off-the-grid, offshore financial centre, Oklahoma City bombing, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, Recombinant DNA, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Timothy McVeigh, too big to fail, traffic fines, Tragedy of the Commons, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, Yochai Benkler, zero-sum game

Stevenson (28 Feb 1995), “The Collapse of Barings: The Overview: Young Trader's $29 Billion Bet Brings down a Venerable Firm,” New York Times. Erik Ipsen (19 Jul 1995), “Bank of England Cites Fraud in Barings Collapse,” New York Times. Peter Culshaw (8 Jan 2009), “Nick Leeson: How the Original Rogue Trader at Barings Bank Is Thriving in the Credit Crunch,” The Telegraph. Kweku Adoboli Victoria Howley and Emma Thomasson (16 Sep 2011), “UBS $2 Billion Rogue Trade Suspect Held in London,” Reuters. Haig Simonian (24 Sep 2011), “UBS Chief Resigns Over Rogue Trade Affair,” Financial Times. Different countries John M. Connor and Darren Bush (2008), “How to Block Cartel Formation and Price Fixing: Using Extraterritorial Application of the Antitrust Laws as a Deterrence Mechanism,” Penn State Law Review, 112:813–57.

Woodward (1998), “Regulatory Capture at the Securities and Exchange Commission,” prepared for the Milken Institute Conference on Capital Markets, March 16, 1998, Santa Monica, California. Mark Quintyn and Michael W. Taylor (2002), “Regulatory and Supervisory Independence and Financial Stability,” International Monetary Fund Working Paper 02–46. Nicholas Dorn (2010), “The Governance of Securities: Ponzi Finance, Regulatory Convergence, Credit Crunch,” British Journal of Criminology, 50:23–45. illegally spying James Risen and Eric Lichtblau (16 Dec 2005), “Bush Lets U.S. Spy on Callers without Courts,” New York Times. American Civil Liberties Union et al. v. National Security Agency et al. (18 Aug 2006), Order, United States District Court for the Eastern District of Michigan, Case No. 06-CV-10204.


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar

Sooner or later, in virtually every case, the word “bullshit” appears. Witnesses for the Prosecution The most uncompromising case against management theory is that its devotees are nothing more than economic vandals—and jargon-spewing ones at that. Look at the greatest economic disasters of the twenty-first century, from the implosion of Enron to the global credit crunch, and you will find products of the management theory industry not just at the scene of the crime but with their fingerprints all over the evidence. At Enron Jeff Skilling, the company’s CEO when it went up in flames, was a product of the two greatest engines of the management theory industry, Harvard Business School and McKinsey.

These days alliterative formulas are so rampant that a reader does not know whether the “three Cs” refers to commitment, creativity, and competition, as Kenichi Ohmae preaches, or competence, connections, and concepts, as Rosabeth Moss Kanter would have it. When these snake charmers are not soothing managers’ fears, they are firing their ambitions. They are past masters at turning bad news into good. A posse of management writers presented the 2008 credit crunch as a blessing in disguise: see, for example, The Upside of Turbulence (by Donald Sull) and The Silver Lining: An Innovation Playbook for Uncertain Times (by Scott B. Anthony). They are also purveyors of privilege. They not only promise to teach managers the secret language that is spoken by the powerful; they hold out invitations to secret conclaves such as meetings in Davos.


pages: 518 words: 143,914

God Is Back: How the Global Revival of Faith Is Changing the World by John Micklethwait, Adrian Wooldridge

affirmative action, anti-communist, Ayatollah Khomeini, barriers to entry, battle of ideas, Bonfire of the Vanities, Boris Johnson, correlation does not imply causation, credit crunch, David Brooks, Dr. Strangelove, Francis Fukuyama: the end of history, full employment, ghettoisation, global supply chain, God and Mammon, Great Leap Forward, hiring and firing, industrial cluster, intangible asset, invisible hand, Iridium satellite, Jane Jacobs, joint-stock company, knowledge economy, liberation theology, low skilled workers, mass immigration, McMansion, megacity, Mikhail Gorbachev, Nelson Mandela, new economy, oil shock, Peace of Westphalia, public intellectual, Robert Bork, rolodex, Ronald Reagan, Scientific racism, Silicon Valley, stem cell, supply-chain management, The Wealth of Nations by Adam Smith, Thomas Malthus, upwardly mobile, W. E. B. Du Bois, Washington Consensus

The American war machine rules the seas and the skies, and stations troops in 150 different countries. The concerted opposition of much of the world did nothing to prevent America from invading Iraq in 2003. America wields a huge influence over the Washington-based World Bank and International Monetary Fund. Even after the credit crunch, supporters of globalization tout what used to be called “the Washington consensus.” Antiglobalization protesters make little distinction between globalization and Americanization. If America is thus the symbol of all that is good and ill about today’s global capitalism, it is also the headquarters of the most advanced sort of capitalism—a capitalism that is less about tangible things than it is about intangibles such as images and information.

Liberal British clerics regularly inform their congregations that Jesus was a critic of avarice and greed. The Church of England produced some of the most stinging criticisms of Thatcherism in its 1985 report on “Faith in the Cities,” prompting Norman Tebbit to label the church’s leaders a bunch of Marxists. (True to that caricature, in 2008 Archbishop Rowan Williams duly announced that the credit crunch proved that Marx was right.) Prince Charles, with his eccentric combination of nostalgia for the organic social order and enthusiasm for organic foods, has sided with Islamic criticisms of capitalism: “This crucial sense of oneness and trusteeship of the vital sacramental and spiritual character of the world is surely something important we can learn from Islam.”5 Still, root-and-branch opposition to capitalism is becoming rarer.


pages: 421 words: 128,094

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, asset allocation, banking crisis, Bear Stearns, Bonfire of the Vanities, business cycle, Carl Icahn, carried interest, collateralized debt obligation, corporate governance, corporate raider, credit crunch, deal flow, diversification, diversified portfolio, financial engineering, fixed income, Future Shock, Gordon Gekko, independent contractor, junk bonds, low interest rates, margin call, Menlo Park, Michael Milken, mortgage debt, new economy, Northern Rock, risk tolerance, Rod Stewart played at Stephen Schwarzman birthday party, Sand Hill Road, Savings and loan crisis, sealed-bid auction, Silicon Valley, sovereign wealth fund, Teledyne, The Predators' Ball, éminence grise

As its “auto czar,” the Obama administration picked Steven Rattner, the founder of the private equity firm Quadrangle Group, and to help oversee the turnaround of General Motors Corporation, it named David Bonderman, the founder of Texas Pacific Group, and Daniel Akerson, a top executive of Carlyle Group, to the carmaker’s board of directors. The crisis of 2007 to 2009 wasn’t the first for private equity. The buyout industry suffered a near-death experience in a similar credit crunch at the end of the 1980s and was wounded again when the technology and telecommunications bubble burst in the early 2000s. Each time, however, it rebounded and the surviving firms emerged larger, taking in more money and targeting new kinds of investments. Coming out of the 2008–9 crisis, the groundwork was in place for another revival.

By mid-August, the spread was nearly 4.6 points, as demand for CLOs evaporated and investors balked at buying debt of highly leveraged companies, particularly when there were few covenants on the loans and bonds and the borrowers could opt to pay interest on bonds by issuing more paper. It was eerily familiar to veterans of the buyout world who had lived through 1989. Risk, which had been virtually banished from the financial lexicon, had returned to the discussion, and now the term “credit crunch” was being bandied about. There was no single event that triggered the shift, as there had been in 1989, when the collapse of the financing for the employee buyout of United Airlines sent the debt markets tumbling, but the pivot in 2007 was nearly as swift, and just as disastrous for private equity’s investment banks as it had been in 1989.


pages: 466 words: 127,728

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

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Dr. Strangelove, Edward Snowden, eurozone crisis, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global macro, global reserve currency, global supply chain, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Herman Kahn, high-speed rail, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, junk bonds, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, megaproject, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, operational security, plutocrats, Ponzi scheme, power law, price stability, public intellectual, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, Solyndra, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

Since banks cannot earn a market return on such interbank lending, they don’t participate in that market. As a result, liquidity in the interbank lending market is low, and banks can no longer be confident that they can obtain funds when needed. Banks are therefore reluctant to expand their SME loan portfolios because of uncertain funding. The resulting credit crunch for SMEs is one reason unemployment remains stubbornly high. Big businesses such as Apple and IBM do not need banks to fund growth; they have no problem funding activities from internal cash resources or the bond markets. But big business does not create new jobs; the job creation comes largely from small business.

The Federal Reserve vaults hold approximately 6,400 tonnes . . . : See Scott Mayerowitz, “Welcome to the World’s Largest Gold Vault,” ABC News, September 19, 2009, http://abcnews.go.com/Business/story?id=5835433&page=1; and Mike Hanlon, “The Big Picture: This Vast Vault of Gold Under the Bank of England Should Weather Credit Crunch,” Daily Mail, October 22, 2008, http://forums.canadiancontent.net/news/78369-vast-vault-gold-under-bank.html. Since the Daily Mail report, which cites a figure of 4,600 tonnes, approximately 100 tonnes have been repatriated to Venezuela. an eight-year plan to repatriate all the gold . . . : “Deutsche Bundesbank’s New Storage Plan for Germany’s Gold Reserves,” Deutsche Bundesbank, press notice, January 16, 2013, http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2013/2013_01_16_storage_plan_gold_reserve.htm.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

Because of the risk of default, yields on corporate bonds are higher than those of government bonds. For example, Figure 3.9 shows the yield spread of corporate bonds against U.S. Treasuries. Notice that the spreads widen as safety falls off. Notice also how spreads vary over time. They widened dramatically, for example, during the credit crunch of 2007 to 2009.16 FIGURE 3.9 Yield spreads between corporate and 10-year Treasury bonds. Sovereign Bonds and Default Risk BEYOND THE PAGE ● ● ● ● ● Some sovereign defaults brealey.mhhe.com/c03 When investors buy corporate bonds or a bank lends to a company, they worry about the possibility of default and spend considerable time and effort assessing differences in credit risk.

BEYOND THE PAGE ● ● ● ● ● An uncertainty index brealey.mhhe.com/c21 You may be interested to compare the current implied volatility that we calculated earlier with Figure 21.6, which shows past measures of implied volatility for the Standard and Poor’s index and for the Nasdaq index (VXN). Notice the sharp increase in investor uncertainty at the height of the credit crunch in 2008. This uncertainty showed up in the price that investors were prepared to pay for options. FIGURE 21.6 Standard deviations of market returns implied by prices of options on stock indexes. Source: Chicago Board Options Exchange, www.cboe.com. FINANCE IN PRACTICE ● ● ● ● ● The Chinese Warrants Bubble Most warrants give the holder the option to buy stock in the company.

For this reason the debt has been termed “economic catastrophe debt.”14 Economic catastrophe struck in the summer of 2007, when the investment bank Bear Stearns revealed that two of its hedge funds had invested heavily in nearly worthless CDOs. Bear Stearns was rescued with help from the Federal Reserve, but it signaled the start of the credit crunch and the collapse of the CDO market. By 2009 issues of CDOs had effectively disappeared.15 Did this collapse reflect a fundamental flaw in the practice of securitization? A bank that packages and resells its mortgage loans spreads the risk of those loans. However, when a bank can earn juicy fees from securitization, it might not worry so much if the loans in the package are junk.16 Sinking Funds Back to our J.C.


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

Good decision making is oblique because it is iterative and experimental: It constantly adapts as new information, of many kinds, becomes available. Much of that information comes from the process of decision making itself. Only an arrogant man would believe he could plan a city; only an unimaginative man would want to. The men who launched the Iraq war, the bankers responsible for the credit crunch, were both arrogant and unimaginative. Clever, and more imaginative, people—like Brunelleschi when he discovered perspective and constructed the dome of Santa Maria del Fiore or Wiles when he solved Fermat’s last theorem—sometimes find direct solutions, but that is because they understand clearly the problems to which direct solutions may apply.


The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

Even though we lowered the fed funds rate no fewer than twentythree times in the three-year period between July 1989 and July 1992, the recovery was one of the most sluggish on record. "The U.S. economy is best described as moving forward, but in the teeth of a fifty-mile-an-hour headwind" was how I explained the situation to an audience of worried New England businessmen in October 1991.1 couldn't be very encouraging, because I didn't know when the credit crunch would end. I would see President Bush every six or seven weeks, usually in the con- text of a meeting with others but sometimes one-on-one. We had known each other since the Ford years. He'd even had me over to Langley for lunch when he was director of Central Intelligence in 1976. During the early months of the 1980 campaign, he often called me on economic policy issues.

The national debt held by the public had risen to $3 trillion, causing interest payments to become the third-largest federal expense after Social Security and defense. So when Clinton asked for my economic assessment, I was ready with a pitch. Short-term interest rates were rock-bottom low—we'd cut them to 3 percent—and the economy was gradually shaking off the effects of the credit crunch and growing at a fairly reasonable pace, I told him. More than a million net new jobs had been created since the beginning of 1991. But long-term interest rates were still stubbornly high. They were acting as a brake on economic activity by driving up the costs of home mortgages and 143 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

By the end of 1993, not only had real GDP grown 8.5 percent since the 1991 recession, but it was expanding at a 5.5 percent annual rate. All of which led the Fed to decide that it was time to tighten. On February 4, 1994, the FOMC voted to hike the fed funds interest rate by onequarter of a percentage point, to 3.25 percent. This was the first rate hike in five years, and we imposed it for two reasons. First, the post-1980s credit crunch had finally ended—consumers were getting the mortgages they needed and businesses were getting loans. For many months, while credit was tight, we'd kept the fed funds rate exceptionally low, at 3 percent. (In fact, if you allowed for inflation, which was also nearly at a 3 percent annual rate, the rate on fed funds was next to nothing in real terms.)


pages: 309 words: 54,839

Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts by David Gerard

altcoin, Amazon Web Services, augmented reality, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, Bretton Woods, Californian Ideology, clean water, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, Dogecoin, Dr. Strangelove, drug harm reduction, Dunning–Kruger effect, Ethereum, ethereum blockchain, Extropian, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, functional programming, index fund, information security, initial coin offering, Internet Archive, Internet of things, Kickstarter, litecoin, M-Pesa, margin call, Neal Stephenson, Network effects, operational security, peer-to-peer, Peter Thiel, pets.com, Ponzi scheme, Potemkin village, prediction markets, quantitative easing, RAND corporation, ransomware, Ray Kurzweil, Ross Ulbricht, Ruby on Rails, Satoshi Nakamoto, short selling, Silicon Valley, Silicon Valley ideology, Singularitarianism, slashdot, smart contracts, South Sea Bubble, tulip mania, Turing complete, Turing machine, Vitalik Buterin, WikiLeaks

(Mullins was also famous for his anti-Semitism; every time Mullins said “banker” he meant “Jew,” but this mostly isn’t consciously the case amongst Bitcoiners, who only occasionally rant about Zionists.) These ideas had also been propagated in the mainstream by Ron Paul in the wake of the 2008 credit crunch and the quantitative easing (just printing money, to kick-start the economy) that followed. Though Paul isn’t a fan of Bitcoin – he wants a return to actual gold after he abolishes the Fed.19 Old ideologies come back when they fill a present desire and there’s an opening for them. So these claims, somewhere between incorrect and nonsensical, showed up full-blown in Bitcoin discussion, proponents straight-facedly repeating earlier conspiracy theories as if this was all actually proper economics.


pages: 184 words: 53,625

Future Perfect: The Case for Progress in a Networked Age by Steven Johnson

Airbus A320, airport security, algorithmic trading, banking crisis, barriers to entry, Bernie Sanders, call centre, Captain Sullenberger Hudson, Cass Sunstein, Charles Lindbergh, classic study, cognitive dissonance, credit crunch, crowdsourcing, dark matter, Dava Sobel, David Brooks, Donald Davies, Evgeny Morozov, Fairchild Semiconductor, future of journalism, Great Leap Forward, high-speed rail, hive mind, Howard Rheingold, HyperCard, Jane Jacobs, John Gruber, John Harrison: Longitude, Joi Ito, Kevin Kelly, Kickstarter, lone genius, Mark Zuckerberg, mega-rich, meta-analysis, Naomi Klein, Nate Silver, Occupy movement, packet switching, peer-to-peer, Peter Thiel, planetary scale, pre–internet, private spaceflight, radical decentralization, RAND corporation, risk tolerance, seminal paper, shareholder value, Silicon Valley, Silicon Valley startup, social graph, SpaceShipOne, Steve Jobs, Steven Pinker, Stewart Brand, systems thinking, techno-determinism, The Death and Life of Great American Cities, the long tail, Tim Cook: Apple, urban planning, US Airways Flight 1549, WikiLeaks, William Langewiesche, working poor, X Prize, Yochai Benkler, your tax dollars at work

Wealth inequality has returned to levels last seen in the Roaring Twenties. As I write these words in early 2012, the U.S. unemployment rate is still more than 8 percent, higher than its average over the past two decades. Household debt has soared over the past twenty years, though it has dipped slightly, thanks to the credit crunch of the last few years. While most Americans are significantly healthier than they were a generation ago, childhood obesity has emerged as a meaningful problem, particularly in lower-income communities. An interesting divide separates these two macro-trends. On the one hand, there is a series of societal trends that are heavily dependent on non-market forces.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, Anthropocene, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, biodiversity loss, bond market vigilante , Boris Johnson, Bretton Woods, British Empire, Bullingdon Club, business cycle, call centre, capital controls, carbon footprint, carbon tax, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, degrowth, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, green new deal, high net worth, high-speed rail, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Dyson, job automation, Julian Assange, junk bonds, Kickstarter, labour market flexibility, laissez-faire capitalism, land bank, land value tax, long term incentive plan, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, popular capitalism, predatory finance, price stability, proprietary trading, pushing on a string, quantitative easing, race to the bottom, rent-seeking, retail therapy, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, tacit knowledge, TED Talk, The Nature of the Firm, 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, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

There has been a small avalanche of books on the financial crisis of 2007, some of them illuminating, many merely providing superficial narratives of successive financial disasters and the key players in them, served up with journalistic brio. Some critiques have targeted the hubris of the financial sector, identifying mismanagement, poor judgement and questionable legality. But some have seen the credit crunch and recession as evidence of something more basic – capitalism’s crisis-prone nature. Why We Can’t Afford the Rich isn’t just about the financial crisis, dire though it is. It’s about what underpins and generates such crises – the very architecture of our economy. It treats the economy not merely as a machine that sometimes breaks down, but as a complex set of relationships between people, increasingly stretched around the world, in which they act as producers of goods and services, investors, recipients of various kinds of income and as taxpayers and consumers.

Countries that become dependent on borrowing on the bond markets – mostly from large domestic and foreign banks, pension funds and insurance companies – can find themselves in a vulnerable position if they do not meet bondholders’ preferences regarding economic management, let alone if they are at risk of defaulting. For example, in 1993 in the US when the Clinton administration introduced new legislation to greatly expand healthcare without properly funding it (‘HillaryCare’), long-term interest rates began to rise. The 10-year rate on US Treasury bonds touched 8% in 1994. The consequent threat of a credit crunch in the business sector, and higher mortgage rates for prospective home buyers, generated enough political opposition to stop it going through Congress.65 Bondholders – sometimes dramatised as ‘bond market vigilantes’ – can simply bid up interest rates or refuse to lend anew. As James Carville, lead strategist for US President Bill Clinton famously commented, ‘I used to think that if there was reincarnation, I wanted to come back as the President or the Pope.


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, false flag, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, general purpose technology, Glass-Steagall Act, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low interest rates, low skilled workers, M-Pesa, market bubble, means of production, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, post-Fordism, Post-Keynesian economics, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Solow, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

The response of economists following the burst of the bubble was similarly weak, typically offering bland technical advice, such as improving information flows and extending regulation across financial institutions; for instance, see Randall Dodd, ‘Subprime: Tentacles of a Crisis’, Finance and Development, December 2007. Immediately after the financial meltdown, heterodox economics had its moment in the sun as several economists and others claimed that the crisis was a ‘Minsky moment’; see Charles Whalen, ‘The U.S. Credit Crunch of 2007: A Minsky Moment’, Levy Economics Institute Public Policy Brief No. 92, 2007; L. Randall Wray, ‘Lessons from the Subprime Meltdown’, Levy Economics InstituteWorking Paper No. 552, 2007; Wray, ‘Financial Markets Meltdown: What Can We Learn from Minsky?’, Levy Economics Institute Public Policy Brief No. 94, April 2008.

Guenther Roth and Claus Wittich, New York: Bedminster Press, 1968. Weeks, John, ‘Surfing the Troubled Waters of ‘Global Turbulence’: A Comment’, Historical Materialism 5, Winter 1999, pp. 211–30. Weiss, Linda, ‘Globalization and the Myth of the Powerless State’, New Left Review 225, 1997, pp. 3–27. Whalen, Charles, ‘The U.S. Credit Crunch of 2007: A Minsky Moment’, Public Policy Brief No. 92, Annandale-on-Hudson, NY: Levy Economics Institute, 2007. White, William R., ‘Is Price Stability Enough?’, Working Paper No. 205, Bank for International Settlements, 2006. White, William R., ‘Procyclicality in the Financial System: Do We Need a New Macro-financial Stabilisation Framework?’


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Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

affirmative action, AOL-Time Warner, barriers to entry, Bear Stearns, Bonfire of the Vanities, book value, borderless world, business process, Carl Icahn, Charles Lindbergh, classic study, company town, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, Fairchild Semiconductor, financial engineering, Great Leap Forward, hiring and firing, Ida Tarbell, industrial cluster, invisible hand, James Watt: steam engine, John Perry Barlow, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, Michael Milken, military-industrial complex, mittelstand, new economy, North Sea oil, pneumatic tube, race to the bottom, railway mania, Ronald Coase, scientific management, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, Triangle Shirtwaist Factory, tulip mania, wage slave, William Shockley: the traitorous eight

This made it extremely difficult to set up a new joint-stock company, thus reducing the number of enterprises that would compete with the South Sea Company for capital. The act, which was not repealed for a century, was a disaster for the evolution of the Company. It was also pointless, since the collapse of the South Sea Company later that summer punctured the market anyway. By August, a desperate credit crunch hit London. By October, the Company’s share price was back to £170. Eventually, the government effectively nationalized the Company, leaving the investors with large losses, but saving most of the financial system.24 All the same, the Chancellor of the Exchequer and several directors of the Company were consigned to the Tower of London.


pages: 1,590 words: 353,834

God's Bankers: A History of Money and Power at the Vatican by Gerald Posner

Albert Einstein, anti-communist, Ayatollah Khomeini, bank run, banking crisis, book value, Bretton Woods, central bank independence, centralized clearinghouse, centre right, credit crunch, disinformation, dividend-yielding stocks, European colonialism, forensic accounting, God and Mammon, Index librorum prohibitorum, Kevin Roose, Kickstarter, liberation theology, low interest rates, medical malpractice, Murano, Venice glass, offshore financial centre, oil shock, operation paperclip, power law, rent control, Ronald Reagan, Silicon Valley, WikiLeaks, Yom Kippur War

But to restore the pomp that predecessors had eliminated was expensive.7 And since he relied on the mediocre advice of a few handpicked cardinals who had little better business sense than he, the Vatican had trouble figuring out how to stem the hemorrhaging.8 Compounding the problem was that the church’s fixed costs had soared as the buying power of the lira had nose-dived due to hyperinflation.9 Only a year after becoming Pope, Benedict had trouble paying even the salaries of his court.10 Unaware of the church’s own dismal finances, when the Bank of Rome got squeezed in a credit crunch, its chairman, Count Carlo Santucci, a devout Black Noble, beseeched Benedict for a bailout. Santucci was the Pope’s own pick to replace Pacelli as the bank’s chief. He convinced the cash-strapped Benedict that the best way to protect the church’s stake in the bank was to invest more money. The Vatican scrounged up 9 million lire, with which it could ill afford to part.11 But the infusion was not enough.

Caloia, who believed the crisis was largely the result of greed, also took a swipe at those international banks that were in distress, saying that their “behavior [was] improper to the point of fraud” and that it was little wonder that “today, in world finance, no one trusts anyone else.”9 Privately, and away from earshot of any reporter, Caloia said he thought that some top American clerics were “too enamored with Wall Street.”10 The philosophy of white finance was the backbone of a major policy paper Benedict issued that December about the meltdown. In direct language, he castigated Western countries for not responding more forcefully and faster to cope with the crisis, especially since the credit crunch disproportionally hammered the world’s poorest.11 In calling for reform, Benedict urged that a “necessary first step” was closing all international tax havens, which he said had “given support to imprudent economic and financial practices and have also played a significant role in the imbalances of development, allowing a gigantic flight of capital linked to tax evasion.

A comprehensive synopsis of the IOR’s strength during the economic crisis, as well as that of other financial departments such as APSA and the Governorate, is by Sandro Magister, “For Peter’s Cash, a Calm Amid the Storm,” L’Espresso, January 30, 2009, including five years of balance sheets for APSA, the Governorate, Peter’s Pence, as well as the published consolidated financial statements of the Holy See. See online at http://chiesa.espresso.repubblica.it/articolo/1337147?eng=y. 10 Galli, Finanza bianca, 172. 11 Nick Mathiason, “Pope Attacks Tax Havens for Robbing Poor: Vatican Condemns Roots of Credit Crunch, but Critics Say Its Own Bank Hoards Gold, Art and Cash,” The Observer, December 7, 2008, 7. 12 Benedict quoted in Ibid. 13 Nicole Winfield, “Pope Proposes New Financial Order Guided by Ethics,” Associated Press Online, Business News, Vatican City, July 7, 2009; see Caritas in Veritate online at http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html. 14 Adding to Dardozzi’s unhappiness at the IOR, he was convinced the bank had cheated him out of a large commission he was due for arranging the sale of a prime Florentine church property.


pages: 225 words: 61,388

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

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

The narrower spread means a country issuing debt now saves an average of about US$90 million a year in interest for every US$1 billion compared to debt issued in 2002. Why have the costs of borrowing come down? Two reasons: first, notable improvements in different countries’ macroeconomic and political environments. Second, improved liquidity (save perhaps the mid-2008 credit crunch); that is, more cash chasing developing-country assets. The net result is that developing countries’ assets become more attractive, and the increase in demand helps lower costs. Some emerging economies have improved so much, and have risen up the credit league tables so dramatically, that they have shed the tag of emerging markets (which bears relatively higher borrowing costs) and joined the ranks of the highest-rated countries.


Global Financial Crisis by Noah Berlatsky

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Glass-Steagall Act, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, low interest rates, market bubble, market fundamentalism, mass immigration, Money creation, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, social contagion, South China Sea, structural adjustment programs, subprime mortgage crisis, too big to fail, trade liberalization, transfer pricing, working poor

Essentially, a kind of insurance for investors. For instance, an investor in a mortgage might purchase a CDS from a seller. As long as the mortgage is returning money, the investor would make regular payments to the seller. If the mortgage defaults, however, the seller has to pay the investor a large sum. credit crunch. see “liquidity crisis.” credit rating. An estimate of the ability of a person, a company, or a country to pay back a loan. Credit ratings are generally assigned by credit rating agencies. The best credit rating is usually AAA. current account balance. A technical measure of trade balance. Though it includes some other factors, it is based on exports minus imports of goods and services. derivatives.


pages: 261 words: 10,785

The Lights in the Tunnel by Martin Ford

Alan Greenspan, Albert Einstein, Bear Stearns, Bill Joy: nanobots, Black-Scholes formula, business cycle, call centre, carbon tax, cloud computing, collateralized debt obligation, commoditize, Computing Machinery and Intelligence, creative destruction, credit crunch, double helix, en.wikipedia.org, factory automation, full employment, income inequality, index card, industrial robot, inventory management, invisible hand, Isaac Newton, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, knowledge worker, low skilled workers, mass immigration, Mitch Kapor, moral hazard, pattern recognition, prediction markets, Productivity paradox, Ray Kurzweil, Robert Solow, Search for Extraterrestrial Intelligence, Silicon Valley, Stephen Hawking, strong AI, technological singularity, the long tail, Thomas L Friedman, Turing test, Vernor Vinge, War on Poverty, warehouse automation, warehouse robotics

Nonetheless, I think we can expect that, long before we reach such an extreme point, the economy will begin to display evidence of the overall impact of automation. Is it possible that, at least to some extent, this has been a factor in the current crisis? As we all know, the 2008-9 recession began with the 2007 subprime meltdown that then evolved into the credit crunch and global financial crisis. As I pointed out in Chapter 2, advancing computer technology certainly played an enabling role in the severity and global nature of the current situation. Beyond this, there are a number of other factors that should concern us as we look forward to recovery from the current recession.


pages: 195 words: 63,455

Damsel in Distressed: My Life in the Golden Age of Hedge Funds by Dominique Mielle

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", activist fund / activist shareholder / activist investor, airline deregulation, Alan Greenspan, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, blood diamond, Boris Johnson, British Empire, call centre, capital asset pricing model, Carl Icahn, centre right, collateralized debt obligation, Cornelius Vanderbilt, coronavirus, COVID-19, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, family office, fear of failure, financial innovation, fixed income, full employment, glass ceiling, high net worth, hockey-stick growth, index fund, intangible asset, interest rate swap, John Meriwether, junk bonds, Larry Ellison, lateral thinking, Long Term Capital Management, low interest rates, managed futures, mega-rich, merger arbitrage, Michael Milken, Myron Scholes, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, offshore financial centre, Paul Samuelson, profit maximization, Reminiscences of a Stock Operator, risk free rate, risk tolerance, risk-adjusted returns, satellite internet, Savings and loan crisis, Sharpe ratio, Sheryl Sandberg, SoftBank, survivorship bias, Tesla Model S, too big to fail, tulip mania, union organizing

Once it hit, it prompted a domino effect, destroying mortgage securitization bonds, which had been sold to investors around the world, and engulfing the investment banks that had issued them and that still held a generous pile. Reeling from their mounting losses, the banks stopped providing funding and liquidity to each other and their financial counterparties, including hedge funds. A massive, global, endemic credit crunch ensued, which, combined with plummeting asset values, led to worldwide economic activity slowing to a grind. A September to Remember So we found ourselves way out on a limb in underestimating and underpricing risk, and happily going about our business until such time as it could no longer be ignored.


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

Only ConocoPhillips invested heavily in buying companies to replenish its reserves in compensation for poor discoveries, making itself vulnerable to a takeover if oil prices fell, a scenario Mulva dismissed. The end of 2007 was a brief calm before the storm. During the last months of the year, banks in New York, London, Zürich and Frankfurt were reporting difficulties. Terms like “sub-prime” and “credit crunch” were entering the popular lexicon. Most assumed that after the boom, minor banking problems would restrict economic growth, but daily events suggested something worse. Increasing fuel prices, the national producers were warned by the governments in Washington and London, could tip the world into a recession.

“If the fundamentals suck, it’s no use being ‘long.’” The time had come to part with the herd. “There’s no point in standing in front of an oncoming train.” Over just two days Phibro anonymously offloaded contracts worth more than $1 billion. Hall’s personal profit was at least $125 million, but the credit crunch, triggered in part by oil speculation, would sting Phibro. Citibank would need government funds to survive, and in summer 2009 Hall’s $100-million pay supplement would be frozen as a result of Washington’s edict banning bank employees from receiving bonuses. Blissfully unaware of the position to come, in summer 2008 Hall noted, “In liquid markets, it’s easy to sell off.”


pages: 235 words: 62,862

Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-Hour Workweek by Rutger Bregman

"World Economic Forum" Davos, Alan Greenspan, autonomous vehicles, banking crisis, Bartolomé de las Casas, basic income, Berlin Wall, Bertrand Russell: In Praise of Idleness, Branko Milanovic, cognitive dissonance, computer age, conceptual framework, credit crunch, David Graeber, Diane Coyle, driverless car, Erik Brynjolfsson, everywhere but in the productivity statistics, Fall of the Berlin Wall, Ford Model T, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Gilder, George Santayana, happiness index / gross national happiness, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, income inequality, invention of gunpowder, James Watt: steam engine, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, Kodak vs Instagram, low skilled workers, means of production, megacity, meta-analysis, microcredit, minimum wage unemployment, Mont Pelerin Society, Nathan Meyer Rothschild: antibiotics, Occupy movement, offshore financial centre, Paul Samuelson, Peter Thiel, post-industrial society, precariat, public intellectual, radical decentralization, RAND corporation, randomized controlled trial, Ray Kurzweil, Ronald Reagan, Rutger Bregman, Second Machine Age, Silicon Valley, Simon Kuznets, Skype, stem cell, Steven Pinker, TED Talk, telemarketer, The future is already here, The Future of Employment, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, wage slave, War on Poverty, We wanted flying cars, instead we got 140 characters, wikimedia commons, women in the workforce, working poor, World Values Survey

Today, the richest 8% earn half of all the world’s income,25 and the richest 1% own more than half of all wealth.26 The poorest billion people account for just 1% of all consumption; the richest billion, 72%.27 From an international perspective, the inhabitants of the Land of Plenty aren’t merely rich, but filthy rich. A person living at the poverty line in the U.S. belongs to the richest 14% of the world population; someone earning a median wage belongs to the richest 4%.28 At the very top, the comparisons get even more skewed. In 2009, as the credit crunch was gathering momentum, the employee bonuses paid out by investment bank Goldman Sachs were equal to the combined earnings of the world’s 224 million poorest people.29 And just 62 people – the richest people on Earth – own more than the poorest half of the whole world.30 That’s right, a mere 62 people are richer than 3.5 billion put together.


pages: 219 words: 65,532

The Numbers Game: The Commonsense Guide to Understanding Numbers in the News,in Politics, and inLife by Michael Blastland, Andrew Dilnot

Atul Gawande, business climate, confounding variable, correlation does not imply causation, credit crunch, happiness index / gross national happiness, Intergovernmental Panel on Climate Change (IPCC), moral panic, pension reform, pensions crisis, randomized controlled trial, school choice, very high income

Debt is a corrosive problem for those who cannot afford it, and there do genuinely seem to be more people in that position, but this has precious little to do with the trillion pounds, most of which is a sign not of penury, but wealth. While it is true that debts at the extreme can become a serious problem for governments, companies, or individuals, it is also true that they can be a sign of robust economic good health. Some might think it madness to make this argument after the “credit crunch” of 2007-2008. But that episode was a result of bad lending and borrowing decisions and, in the United States in particular, money lent to people who were unlikely to be able to repay. Such foolishness on the part of large financial institutions is remarkable, and damaging, but is not evidence that borrowing is inherently bad, rather that irresponsible lending is bad.


pages: 266 words: 67,272

Fun Inc. by Tom Chatfield

Adrian Hon, Alexey Pajitnov wrote Tetris, An Inconvenient Truth, Any sufficiently advanced technology is indistinguishable from magic, behavioural economics, Boris Johnson, cloud computing, cognitive dissonance, computer age, credit crunch, game design, invention of writing, longitudinal study, moral panic, publication bias, Silicon Valley, Skype, stem cell, upwardly mobile

In I Dig It, which costs just a couple of dollars, you play a farmer who’s obliged to burrow away through the earth underneath his farmhouse in a specially adapted digger in order to uncover rare metals, minerals and so on. He has to do this, you’re told, in order to pay the mortgage on the farm: a pleasingly unlikely combination of credit crunch concerns and science fiction solutions. With beautifully hand-drawn graphics and an intuitive touch-screen control method, it’s cheap, quirky fun of the kind that’s increasingly dominating the free time of much of the Western world. With 45 million iPhones sold already, it’s conceivable that the iPhone could, on its own, become the world’s most important gaming platform within a few years.


pages: 274 words: 66,721

Double Entry: How the Merchants of Venice Shaped the Modern World - and How Their Invention Could Make or Break the Planet by Jane Gleeson-White

Affordable Care Act / Obamacare, Alan Greenspan, Bernie Madoff, Black Swan, British Empire, business cycle, carbon footprint, corporate governance, credit crunch, double entry bookkeeping, full employment, Gordon Gekko, income inequality, invention of movable type, invention of writing, Islamic Golden Age, Johann Wolfgang von Goethe, Johannes Kepler, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Mahbub ul Haq, means of production, Naomi Klein, Nelson Mandela, Ponzi scheme, shareholder value, Silicon Valley, Simon Kuznets, source of truth, spice trade, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, traveling salesman, upwardly mobile

In 2008, the Living Planet Survey initiated by the World Wildlife Fund found that we are running up a planet-wide ‘ecological debt’ of US$4 trillion to US$4.5 trillion every year. These figures happen to be twice—two times!—the amount of the estimated losses suffered by the world’s financial institutions from the 2008 global financial crisis. The authors of the report said ‘the possibility of financial recession pales in comparison to the looming ecological credit crunch’—and called for politicians to respond to the environmental crisis with the same urgency and magnitude as their multi-billion-dollar rescue plan for the failed financial system. Perhaps their call did not fall on deaf ears. Recently the GDP as traditionally measured has been actively challenged by several world leaders and international bodies like the OECD.


pages: 317 words: 71,776

Inequality and the 1% by Danny Dorling

Affordable Care Act / Obamacare, banking crisis, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Branko Milanovic, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, collective bargaining, conceptual framework, corporate governance, credit crunch, David Attenborough, David Graeber, delayed gratification, Dominic Cummings, double helix, Downton Abbey, en.wikipedia.org, Etonian, family office, financial deregulation, full employment, gentrification, Gini coefficient, high net worth, housing crisis, income inequality, land value tax, Leo Hollis, Londongrad, longitudinal study, low skilled workers, lump of labour, mega-rich, Monkeys Reject Unequal Pay, Mont Pelerin Society, mortgage debt, negative equity, Neil Kinnock, Occupy movement, offshore financial centre, plutocrats, precariat, quantitative easing, race to the bottom, Robert Shiller, Russell Brand, TaskRabbit, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, trickle-down economics, unpaid internship, very high income, We are the 99%, wealth creators, working poor

Worldwide, there were estimated to be 12 million such people in 2012, with a mean ‘investable’ wealth of $3.85 million each. It is worth looking at where the world’s richest live, what they have, and the huge inequalities even within this tiny group. Most of the world’s 12 million superrich possess ‘only’ a little over $1 million in disposable wealth. In the two years after the 2008 credit crunch their numbers and mean wealth fell slightly, but by 2012 both were again rising. The majority of the world’s HNWIs live in the US, Japan or Germany. London is preferred as a second home, so many are not officially resident in the UK. Around 465,000 HNWIs live in the UK,4 making up about 1 per cent of all British adults and accounting for just under 4 per cent of the world’s superrich.


pages: 210 words: 65,833

This Is Not Normal: The Collapse of Liberal Britain by William Davies

Airbnb, basic income, Bernie Sanders, Big bang: deregulation of the City of London, Black Lives Matter, Boris Johnson, Cambridge Analytica, central bank independence, centre right, Chelsea Manning, coronavirus, corporate governance, COVID-19, credit crunch, data science, deindustrialization, disinformation, Dominic Cummings, Donald Trump, double entry bookkeeping, Edward Snowden, fake news, family office, Filter Bubble, Francis Fukuyama: the end of history, ghettoisation, gig economy, global pandemic, global village, illegal immigration, Internet of things, Jeremy Corbyn, late capitalism, Leo Hollis, liberal capitalism, loadsamoney, London Interbank Offered Rate, mass immigration, moral hazard, Neil Kinnock, Northern Rock, old-boy network, post-truth, postnationalism / post nation state, precariat, prediction markets, quantitative easing, recommendation engine, Robert Mercer, Ronald Reagan, sentiment analysis, sharing economy, Silicon Valley, Slavoj Žižek, statistical model, Steve Bannon, Steven Pinker, surveillance capitalism, technoutopianism, The Chicago School, Thorstein Veblen, transaction costs, universal basic income, W. E. B. Du Bois, web of trust, WikiLeaks, Yochai Benkler

Crucially, platforms have achieved a public status that is closer to telecom companies than to publishers, meaning that they hold minimal responsibility for how their technology is used. The chaos unleashed by these inventions is legion, and central to the story recounted in this book. The securitisation of US mortgages, plus a lucrative underestimation of the risks attached to them, triggered the ‘credit crunch’ of summer 2007, leading up to the crisis of 2008, bank bailouts and nationalisations, then a decade of exceptional monetary policies, austerity and wage stagnation. In the UK, the national debt doubled as a result of the bailouts and economic shock. The political response, following the election of the Coalition Government in May 2010, was to pursue aggressive cuts to welfare, local government and higher education spending.


Day One Trader: A Liffe Story by John Sussex

algorithmic trading, Boris Johnson, credit crunch, fixed income, John Meriwether, Long Term Capital Management, Neil Kinnock, Nick Leeson, offshore financial centre, proprietary trading, Reminiscences of a Stock Operator, statistical arbitrage

What is certain is that financial markets will become increasingly dependent on computers to execute trading strategies while the number of professional traders dwindles. Meanwhile, the great financial crisis of 2008 shows how technology is increasingly linking financial markets together in a way which can leave investment banks toppling like domino pieces when the complex financial instruments being traded blow up. But it is important to understand that the credit crunch was caused by bespoke over-the-counter (OTC) derivatives products which were packaged by greedy bankers. These products were tied to sub prime mortgages, often taken out by overindebted borrowers in the US who were turned away from the high street banks when applying for a loan. When these borrowers started defaulting on their home loans the 172 | JOHN SUSSEX WITH JOE MORGAN value of the OTC products held on the books of investment banks plummeted as well.


pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Alvin Toffler, An Inconvenient Truth, Asian financial crisis, back-to-the-land, barriers to entry, Bear Stearns, Berlin Wall, big-box store, blood diamond, Boeing 747, book value, borderless world, Boris Johnson, British Empire, business cycle, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, Charles Lindbergh, Clayton Christensen, clean tech, cognitive dissonance, commoditize, company town, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, digital map, disruptive innovation, Dr. Strangelove, Dutch auction, Easter island, edge city, Edward Glaeser, Eyjafjallajökull, failed state, financial engineering, flag carrier, flying shuttle, food miles, Ford Model T, Ford paid five dollars a day, Frank Gehry, fudge factor, fulfillment center, full employment, future of work, Future Shock, General Motors Futurama, gentleman farmer, gentrification, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Great Leap Forward, Haber-Bosch Process, Hernando de Soto, high-speed rail, hive mind, if you build it, they will come, illegal immigration, inflight wifi, intangible asset, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Jevons paradox, Joan Didion, Kangaroo Route, Kickstarter, Kiva Systems, knowledge worker, kremlinology, land bank, Lewis Mumford, low cost airline, Marchetti’s constant, Marshall McLuhan, Masdar, mass immigration, McMansion, megacity, megaproject, Menlo Park, microcredit, military-industrial complex, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, One Laptop per Child (OLPC), peak oil, Pearl River Delta, Peter Calthorpe, Peter Thiel, pets.com, pink-collar, planned obsolescence, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, Rubik’s Cube, savings glut, Seaside, Florida, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, SimCity, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, starchitect, stem cell, Steve Jobs, Suez canal 1869, sunk-cost fallacy, supply-chain management, sustainable-tourism, tech worker, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, the long tail, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, vertical integration, Virgin Galactic, walkable city, warehouse robotics, white flight, white picket fence, Yogi Berra, zero-sum game

The cranes moved down the coast to oil-and-gas-rich Doha and Abu Dhabi, which could afford to keep writing blank checks. Not so in Dubai’s case, having borrowed $80 billion (or more) to pay for islands literally and financially underwater. The emirate threatened to unravel during 2009, as the credit crunch caused a vicious cycle of insolvency, distress selling, layoffs, and a mini-exodus of expatriates forced to leave upon losing their jobs. The simmering crisis came a boil that November with the bombshell that Dubai Inc. was asking creditors for a standstill on its debts, admitting it was unwilling or unable to pay.

That’s not worth worrying about, however, if oil production peaks and there’s no Virgin Fuel on the shelves to replace it. “The next five years will see us face another crunch—the oil crunch,” Branson warned U.K. ministers last year. “This time, we do have the chance to prepare. The challenge is to use that time well. Don’t let the oil crunch catch us out in the way that the credit crunch did.” The race to build the perfect biofuel is being run by small teams of biochemists and molecular engineers lured from their ivory towers by the promise of saving the world and owning the basic patents. There are as many approaches to cracking the nut as there are companies, although so-called first-generation fuels like corn ethanol or biodiesel are already considered a bust—the farmland required is needed more for food than for fuel.


pages: 593 words: 189,857

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, David Brooks, Doomsday Book, eurozone crisis, fear index, financial engineering, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, Greenspan put, housing crisis, Hyman Minsky, illegal immigration, implied volatility, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, proprietary trading, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, Savings and loan crisis, savings glut, selection bias, Sheryl Sandberg, short selling, sovereign wealth fund, stock buybacks, tail risk, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

But I think we need to avoid the urge to play Mr. Fix It.” I don’t think I’m hawkish or dovish by nature. I’ve always been pretty pragmatic, suspicious of ideology in any form, and I took both halves of the Fed’s dual mandate seriously. But I found the more hawkish obsessions with moral hazard and inflation during a credit crunch bizarre and frustrating. Recession seemed like a more plausible threat than inflation. The notion that a slight tweak in the discount rate was too aggressive during an incipient panic just baffled me; in fact, it ended up being largely ineffectual at overcoming the stigma of the window, since only a handful of banks actually came and borrowed.

In four months, Citi lost half its market capitalization. And plenty of institutions were in worse shape than Citi. BY DECEMBER 2007, market conditions were deteriorating again. Credit spreads were widening, and liquidity was draining away. Real estate was still in a tailspin, with foreclosures nearly double from the previous year. The credit crunch and the housing mess were also leaking into the larger economy, with unemployment rising to 5 percent; the National Bureau of Economic Research would later peg the start of the Great Recession to that month. Ben, Don, and I decided to move on two fronts: another interest rate reduction and a new liquidity program.


Money and Government: The Past and Future of Economics by Robert Skidelsky

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, fake news, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, Kondratiev cycle, labour market flexibility, labour mobility, land bank, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, long and variable lags, low interest rates, market clearing, market friction, Martin Wolf, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mobile money, Modern Monetary Theory, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, nudge theory, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, placebo effect, post-war consensus, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, technological determinism, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

The problem with stress tests is not so much that banks will find ways to evade them, but that they rely on the same risk-assessment techniques that failed to spot the risks banks were running before 2007. A more radical-sounding route to ‘resilience’ is to raise banks’ reserve or liquidity requirements. Cash reserves against deposits were run down to almost nothing pre-crash. This caused a credit-crunch when banks stopped lending to each other. Basel III seeks to ensure that at all times banks have enough sufficiently liquid assets to meet all payments due in thirty days. Since 2009, UK-based banks have been required to hold a buffer of central bank reserves or gilts, the amounts to be determined by ‘stress tests’.

Washington, DC: IMF. 16th Jacques Polak Annual Research Conference, 5 November. Available at: https://www.imf.org/external/np/res/ seminars/2015/arc/pdf/adair.pdf [Accessed 15 December 2017]. Turner, A. (2016), Between Debt and the Devil: Money, Credit, and Fixing Global Finance. Princeton, NJ and Oxford: Princeton University Press. Turner, G. (2008), The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis. London: Pluto. 457 Bi bl io g r a p h y UK Public Revenue (2018), Total Direct Revenue: Fiscal Years 1900–2020. Available at: https://www.ukpublicrevenue.co.uk/revenue_chart_1900_ 2020UKp_XXc1li111tcn_F0t#copypaste [Accessed 8 February 2018].


pages: 1,073 words: 302,361

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

"Friedman doctrine" OR "shareholder theory", "RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Alan Greenspan, asset-backed security, Bear Stearns, Bernie Madoff, Bob Litterman, book value, business cycle, buttonwood tree, buy and hold, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, diversified portfolio, do well by doing good, fear of failure, financial engineering, financial innovation, fixed income, Ford paid five dollars a day, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, high net worth, hiring and firing, hive mind, Hyman Minsky, interest rate swap, John Meriwether, junk bonds, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, managed futures, margin call, market bubble, mega-rich, merger arbitrage, Michael Milken, moral hazard, mortgage debt, Myron Scholes, paper trading, passive investing, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, risk tolerance, Ronald Reagan, Saturday Night Live, short squeeze, South Sea Bubble, tail risk, time value of money, too big to fail, traveling salesman, two and twenty, value at risk, work culture , yield curve, Yogi Berra, zero-sum game

., a New York book publisher, and Official Airline Guide, using billions of dollars in debt to do so. By the beginning of the 1990s, Maxwell was still short of his goal—his revenue was just shy of $1 billion—but he had divested his printing business as well as Pergamon, his original business, for $446 million. As a credit crunch took hold worldwide in the early 1990s, the prices Maxwell had paid for many of his assets—especially Macmillan—looked excessive and the debt burden loomed heavily. “When most of my colleagues looked at Maxwell Communications [in 1991], we felt that the profits were overstated, the debt burden was quite likely to lead to downfall, and we’d become increasingly concerned by the way in which it seemed the share price was rigged,” John Kenny, an analyst at Barclays de Zoete Wedd, told the Times.

Peters raises the topic of Goldman’s ‘IPO potential,’ ” the Journal reported, “then coyly says he won’t comment. But in the next breath, Mr. Peters blurts out: ‘Heck, I see an opportunity.’ ” —— A COMBINATION OF a general improvement in market conditions in the middle of the decade—coming out of the credit crunch of the late 1980s and early 1990s—plus the power of Corzine’s positive thinking began to have its intended effect on the type A personalities at Goldman Sachs. “He had enormous energy, unbounded energy,” one partner said, “and he was, in that sense, an energizing element in the firm. From where I sat in 1995, he looked like a good thing.”

Some years the bankers would be the Kings of Wall Street, garnering the highest compensation, the most prestige, and the magazine covers; other years, the traders would be the Big Swinging Dicks, as they were known, and bring home the fattest paychecks. But Birnbaum had no such conflicts about whether he wanted to be a banker or a trader. “Trading appealed to me always just because it was more mathematics,” he said. “I was always a math guy.” During the summer of 1992, as Wall Street was slowly emerging from a deep credit crunch brought on by the aftermath of the crash of 1987, investment banks were competing fiercely to underwrite CMOs, even though there was not a lot of money in doing so. Mortara and Goldman were busy fighting it out with Kidder, Peabody, and its star trader, Michael Vranos. In 1993, Kidder paid Vranos $15 million—a huge amount at the time (and still, frankly)—and he was often referred to as “the most powerful man on Wall Street,” since Kidder underwrote twice the volume of CMOs as its nearest competitor.


pages: 243 words: 77,516

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

airport security, Bear Stearns, blood diamond, buy and hold, colonial rule, credit crunch, fixed income, Goldman Sachs: Vampire Squid, high net worth, income inequality, jitney, junk bonds, lateral thinking, market clearing, Occupy movement, Sloane Ranger, the market place

I actually ran into him on the street one time. I pulled up next to him; I was in a taxi and he was in his Ferrari F430. I assumed he must have just taken delivery of it because it still had the plastic wrapping around the passenger seat. I rolled down my window and got his attention. “Hey, Lari. Nice ride. I thought there was a credit crunch?” He gave me this shit-eating grin that with his overbite made him look like a rat. “Not here there isn’t.” And then when the light changed, he sped off. I later found out that he kept the plastic cover on the passenger seat for months, just so people would know that he received one of the first ones brand new, as opposed to having to pay above retail for a barely used model from someone who had been on the wait list and flipped it for a quick buck.


pages: 263 words: 75,455

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, book value, business cycle, butter production in bangladesh, buy and hold, capital asset pricing model, Checklist Manifesto, cognitive bias, compound rate of return, corporate governance, correlation coefficient, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, Edward Thorp, Eugene Fama: efficient market hypothesis, financial engineering, forensic accounting, Henry Singleton, hindsight bias, intangible asset, Jim Simons, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk free rate, risk-adjusted returns, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, stock buybacks, survivorship bias, systematic trading, Teledyne, The Myth of the Rational Market, time value of money, transaction costs

This analysis examines how a strategy tends to perform through extraordinary short-term market events. FIGURE 12.4 Short-Term Event Stress Tests for Quantitative Value (1974 to 2011) There is no evidence that the model underperforms the benchmarks during stress events. The Quantitative Value strategy substantially outperformed over the Asian crisis, the Nasdaq meltdown, and the credit crunch during the 2008 financial crisis, suggesting the strategy is relatively resilient to market chaos. Figure 12.5 shows the performance during down months of the Quantitative Value strategy, the Magic Formula, the S&P 500 TR, and the MW Index over the entire period. Like the stress event analysis, this test looks at performance when the broader market is falling.


Global Governance and Financial Crises by Meghnad Desai, Yahia Said

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

International capital markets fed the world with a fast-increasing amount of reserves, but they proved unable to regulate the distribution of borrowed reserves among countries. Sovereign indebtedness was not properly assessed, entailing abrupt disruptions between excessive tolerance to borrowing and acute credit crunches. Besides, equilibrium exchange rates were elusive. Huge gyrations of floating exchange rates and foreign exchange crises, which devastated pegged regimes, convinced most governments that exchange rates were too important to be left to the markets. But individual governments were powerless against speculative attacks while reduced to their own means.


pages: 246 words: 74,341

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, business cycle, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, Greenspan put, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, National Debt Clock, new economy, Northern Rock, Own Your Own Home, precautionary principle, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

The problem with the present form of crisis management is that politicians, who have a short-term interest in maximizing votes, strive to make business as short-termist as they are. Country after country now chooses to cling to old solutions and to pump capital into companies that have their future behind them, such as certain carmakers. These companies are not to blame for all their problems. In a credit crunch, everybody finds it hard to borrow money and consumers stay home. But those problems affect everybody, and when the government singles out a few companies or industries for support, that is not free. The subsidies must be paid for by other companies through higher taxes or through government borrowing, which will lead to higher interest rates for everybody.


pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 13, Bear Stearns, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, Cornelius Vanderbilt, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, do what you love, extreme commuting, Exxon Valdez, full employment, Glass-Steagall Act, greed is good, Greenspan put, guns versus butter model, high-speed rail, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, low interest rates, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, military-industrial complex, Neil Armstrong, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, proprietary trading, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, Savings and loan crisis, single-payer health, smart grid, The Wealth of Nations by Adam Smith, Timothy McVeigh, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Podesta and Karen Kornbluh, “The Green Bank: Financing the Transition to a Low-Carbon Economy Requires Targeted Financing to Encourage Private-Sector Participation,” 21 May 2009, www.americanprogress.org. 35 Reed Hundt, the Federal Communications Commission chair: Reed Hundt, in conversation with the author, 20 Mar. 2010. 36 According to Hundt, a green bank would create: Reed Hundt, www.coalitionforgreencapital.com. 37 According to a May 2010 report by the Congressional Oversight Panel: Congressional Oversight Panel, “May Oversight Report: The Small Business Credit Crunch and the Impact of the TARP,” 13 May 2010, www.cop.senate.gov. 38 Even more important than helping small businesses: Barbara Kiviat, “The Workforce: Where Will the New Jobs Come From?” 19 Mar. 2010, www.time.com. 39 Right now, the United States has an immigration limit: Jonathan Ortmans, “In the National Interest: High-Skill Immigration Reform,” 31 Aug. 2009, www.entrepreneurship.org. 40 The people behind StartupVisa.com: Douglas MacMillan, “Visas for Foreign Entrepreneurs,” 11 Mar. 2010, www.businessweek.com. 41 Our current law allows foreign investors to get a visa: Brad Feld, “StartUp Visa Act Introduced by Senators Kerry and Lugar,” 24 Feb. 2010, www.businessinsider.com. 42 The proposal, the StartUp Visa Act of 2010: John Kerry and Dick Lugar, “Visa for Start-ups Will Keep Innovation and Jobs in the U.S,” 18 Mar. 2010, www.mercurynews.com. 43 As Kerry put it, “This bill is a small …”: Douglas MacMillan, “Visas for Foreign Entrepreneurs,” 11 Mar. 2010, www.businessweek.com. 44 But they never seem to have the same reaction: Office of Management and Budget, Updated Summary Tables, Budget of the U.S.


pages: 306 words: 78,893

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

"World Economic Forum" Davos, accounting loophole / creative accounting, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, barriers to entry, Benchmark Capital, book value, borderless world, Branko Milanovic, Bretton Woods, business cycle, California energy crisis, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, digital divide, electricity market, emotional labour, ending welfare as we know it, feminist movement, fulfillment center, full employment, gender pay gap, George Gilder, glass ceiling, Glass-Steagall Act, Gordon Gekko, government statistician, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, Larry Ellison, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, manufacturing employment, Mary Meeker, means of production, Michael Milken, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, PalmPilot, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rewilding, Robert Gordon, Robert Shiller, Robert Solow, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, stock buybacks, structural adjustment programs, tech worker, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, warehouse automation, women in the workforce, working poor, zero-sum game

"^ Unfortunately, productivity gains topped out just six months after those words were published, slid into the early 1970s, recovered a bit, then lapsed into the much-lamented productivity slowdown that would extend into the mid-1990s. Inflation bottomed out at year-end, and the great and troublesome inflation of the late 1960s and 1970s was almost upon the land. The next year brought the first post-World War II financial panic, the credit crunch of 1966, and the beginning of the slide in corporate profit rates that lasted into the early 1980s. CEOs and journalists should note the bibUcal correlation of pride and imminent falls. The Gildered Age Speaking of scripture, you can actually push the birth of the most recent New Era back a little farther than ShiUer did.


pages: 280 words: 73,420

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

Alan Greenspan, algorithmic trading, automated trading system, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Bretton Woods, buttonwood tree, buy and hold, computerized trading, corporate raider, creative destruction, credit crunch, Credit Default Swap, financial innovation, fixed income, Flash crash, High speed trading, housing crisis, index arbitrage, junk bonds, locking in a profit, Long Term Capital Management, machine readable, margin call, market bubble, market fragmentation, market fundamentalism, Myron Scholes, naked short selling, Nixon triggered the end of the Bretton Woods system, pattern recognition, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, uptick rule, Vanguard fund, Y2K

At the same time, the average trade size shrank, from 724 to 268. Discussions on possible upgrades in the aged braking system had been underway at both the SEC and beginning in January 2010, albeit at a measured pace. There was no alarm among the regulators because the market decline had been orderly during the credit crunch of 2007 to 2008.7 It had survived a real-world stress test. In the regulators’ minds, then, the circuit-breaker discussion was about addressing potential problems, not a looming crisis. Kaufman and others had expressed a sense of urgency. This was wasted on SEC, a guarded, plodding agency that was aware that the unintended consequences of its actions could disrupt the economy.


pages: 275 words: 77,017

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

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

That won’t change a thing. The Liberty Dollar reveals the lie about government money.” ONE EVENING IN HONOLULU, after another seminar on von NotHau-sian economics, von NotHaus and I decided to walk from the offices of the mint down Seaside Avenue to the hotels and shops of Waikiki. The global credit crunch, recession, and lumbering recovery have been tough on Hawaii. When money is tight, vacations are one of the first things people decide to go without. Yet the scene this evening in October 2010 is hardly so bleak. Droves of tourists stroll past restaurants browsing menus, posing for photographs next to illuminated palm trees, and spending their hard-earned dollars (read: yen exchanged for dollars) at Armani, Fossil, and Louis Vuitton.


pages: 256 words: 79,075

Hired: Six Months Undercover in Low-Wage Britain by James Bloodworth

Airbnb, algorithmic management, Berlin Wall, call centre, clockwatching, collective bargaining, congestion charging, credit crunch, deindustrialization, Fall of the Berlin Wall, fulfillment center, gentrification, gig economy, Greyball, independent contractor, Jeff Bezos, low skilled workers, Network effects, new economy, North Sea oil, Panopticon Jeremy Bentham, payday loans, post-truth, post-work, profit motive, race to the bottom, reshoring, scientific management, Silicon Valley, Travis Kalanick, Uber for X, working poor, working-age population

The rapid growth of B&M was described by some retail pundits as the ‘second coming’ of the now-defunct brand Woolworths, at one time one of the best-known high-street names in Britain. When the last Woolworths store closed in 2009, 27,000 jobs were axed, marking the end of its ninety-nine-year presence on the high street. What did for Woolworths was the 2008 credit crunch and the shop’s inability to compete with supermarkets and a new generation of discount stores. The void on Britain’s high streets was quickly filled by pound stores and discount retailers. A year after the closure of the last of the famous stores, almost 40 per cent of Woolworths’ former premises that were being let or were under offer had gone to discount stores.38 The biggest takers of the old stores were, respectively, Iceland, B&M, 99p Stores and Poundland.


pages: 251 words: 76,128

Borrow: The American Way of Debt by Louis Hyman

Alan Greenspan, asset-backed security, barriers to entry, big-box store, business cycle, cashless society, collateralized debt obligation, credit crunch, deindustrialization, deskilling, diversified portfolio, financial engineering, financial innovation, Ford Model T, Ford paid five dollars a day, Home mortgage interest deduction, housing crisis, income inequality, low interest rates, market bubble, McMansion, mortgage debt, mortgage tax deduction, Network effects, new economy, Paul Samuelson, plutocrats, price stability, Ronald Reagan, Savings and loan crisis, statistical model, Tax Reform Act of 1986, technology bubble, transaction costs, vertical integration, women in the workforce

Despite the low numbers, something seemed different about credit cards, not the least of which was how quickly they had penetrated the American marketplace. By 1970, around 40 million Americans had credit cards, nearly all of which were either Master Charge or BankAmericard. While credit card lending grew, other forms of borrowing proved more difficult, particularly after the credit crunch of 1966 nearly choked off American mortgage lending. A letter to the editors of Life magazine in 1970 from an Angeleno named C. C. Copley described the situation facing the United States far better than nearly any scholarly or journalistic analysis of the looming credit crisis facing the country.


pages: 267 words: 78,857

Discardia: More Life, Less Stuff by Dinah Sanders

A. Roger Ekirch, Atul Gawande, big-box store, Boris Johnson, carbon footprint, clean water, clockwatching, cognitive bias, collaborative consumption, credit crunch, do what you love, endowment effect, Firefox, game design, Inbox Zero, income per capita, index card, indoor plumbing, Internet Archive, Kevin Kelly, late fees, Marshall McLuhan, McMansion, Merlin Mann, Open Library, post-work, side project, Silicon Valley, Stewart Brand

If the other thing on the wish list is an exercise bike, knocking off the croissants will not only help save up for that but will also make it less necessary. When you need to conquer debt as well as save up for new expenses, try taking your charge cards out of your wallet and securing them at home. Wait 24 or more hours before making nonessential purchases. Start paying more than the minimum due on the bill and get yourself out of living in a credit crunch. Mediocre mochas may be a bad way to spend your money, but they guarantee more enjoyment than bank finance charges. Knock out the needless expenses first, and then improve your imperfect ones. Beware of false savings In my time, I've had memberships to huge warehouse stores. Costco is the archetype for this, but other similar places offer “great deals” when buying in larger quantities.


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

First, there is limited demand for borrowing in the real economy, the actual exchange of goods and services, which remains in shock from the destruction of wealth caused by the collapse of asset prices (over $13 trillion was wiped off the balance sheet of the US household sector during 2008–2009). Anybody who 7 8 Chapter 1 | The Rise and Fall of the Finance-Driven Economy actually needs money faces a credit crunch caused by the restoration of ­prudent (or hyper-prudent) lending standards. Banks are terrified of lending into a falling economy. Scene Eight Regulation is greatly expanded and tightened, setting off more adverse consequences on credit availability. Banks become political and legal targets of opportunity.


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

The code also governed relations between debtors and creditors, setting limits on the interest rate that lenders could charge farmers for advancing them equipment, land, and seed and specifying the types of collateral that could be used to secure loans.4 In the aftermath of a massive debt bubble, it may seem odd to celebrate the innovation of debt. But it truly is a wonderful invention. Like other forms of finance, debt enables capital to flow from savers to investors (we may not like debt crises, but we also don’t much like credit crunches). Lenders are incentivized by the promise of a payback to give money to borrowers; in return, they take on the risk of default. Borrowers give up their claim to some of their future income in return for the capital they need now. Debt’s special magic is what economists like to call “intertemporal exchange.”


pages: 286 words: 79,305

99%: Mass Impoverishment and How We Can End It by Mark Thomas

"there is no alternative" (TINA), "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, additive manufacturing, Alan Greenspan, Albert Einstein, anti-communist, autonomous vehicles, bank run, banks create money, behavioural economics, bitcoin, business cycle, call centre, Cambridge Analytica, central bank independence, circular economy, complexity theory, conceptual framework, creative destruction, credit crunch, CRISPR, declining real wages, distributed ledger, Donald Trump, driverless car, Erik Brynjolfsson, eurozone crisis, fake news, fiat currency, Filter Bubble, full employment, future of work, Gini coefficient, gravity well, income inequality, inflation targeting, Internet of things, invisible hand, ITER tokamak, Jeff Bezos, jimmy wales, job automation, Kickstarter, labour market flexibility, laissez-faire capitalism, Larry Ellison, light touch regulation, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, Modern Monetary Theory, Money creation, money: store of value / unit of account / medium of exchange, Nelson Mandela, Nick Bostrom, North Sea oil, Occupy movement, offshore financial centre, Own Your Own Home, Peter Thiel, Piper Alpha, plutocrats, post-truth, profit maximization, quantitative easing, rent-seeking, Robert Solow, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, smart cities, Steve Jobs, The Great Moderation, The Wealth of Nations by Adam Smith, Tyler Cowen, warehouse automation, wealth creators, working-age population

According to Say’s Law, since it is impossible that the problem lies on the demand side – that it stems from deficient demand – it must lie on the supply side: there must have been a shock to productive capacity. However, in the case of the Global Financial Crisis, there were powerful forces that reduced demand (the ‘credit crunch’ followed by the private sector paying down its debt, rather than consuming) but there are no clear candidates for a supply shock of sufficient magnitude to have produced the global recession. In other words, Say’s Law is incompatible with the kind of economy that can, in practice, produce a Global Financial Crisis.


Where Does Money Come From?: A Guide to the UK Monetary & Banking System by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson

bank run, banking crisis, banks create money, Basel III, Big bang: deregulation of the City of London, book value, Bretton Woods, business cycle, capital controls, cashless society, central bank independence, credit crunch, currency risk, double entry bookkeeping, en.wikipedia.org, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, Goodhart's law, Hyman Minsky, inflation targeting, interest rate derivative, interest rate swap, Joseph Schumpeter, low skilled workers, market clearing, market design, market friction, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Northern Rock, offshore financial centre, Post-Keynesian economics, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, Real Time Gross Settlement, reserve currency, Ronald Reagan, seigniorage, special drawing rights, the payments system, trade route, transaction costs

Along with questions around the crisis itself – Why did it happen? How can we prevent it happening again? – there has been broad basic questioning of the nature of banks and money including: Where did all that money come from? – in reference to the ‘credit bubble’ that led up to the crisis. Where did all that money go? – in reference to the ‘credit crunch’. How can the Bank of England create £375 billion of new money through ‘quantitative easing’? And why has the injection of such a significant sum of money not helped the economy recover more quickly? Surely there are cheaper and more efficient ways to manage a banking crisis than to burden taxpayers and precipitate cutbacks in public expenditure?


pages: 245 words: 75,397

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

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

And now, the tail they sell to be in that business is slapping them in the face. Billions of dollars in losses. The moves in 5s10s30s flys, futures basis and off-the-run Treasuries are unprecedented, ten standard deviation moves. Blackstone is telling its portfolio companies to tap their credit lines, draw down their revolvers. The firm thinks we’re headed to a credit crunch. The credit markets are in full-on capitulation. The high-yield CDX spread is back above 600 bps. High-yield energy bonds are at 1,600 bps. Wednesday Futures were halted again last night. Stocks were limit down and crude is down another 6%. At the market open, stocks hit another circuit breaker.


My Shit Life So Far by Frankie Boyle

airport security, banking crisis, Boris Johnson, British Empire, Brixton riot, credit crunch, dark matter, David Attenborough, Jon Ronson, Live Aid, out of africa, pez dispenser, Russell Brand, Saturday Night Live, sexual politics, traveling salesman, urban planning

People say the royals are inbred and I can see why. Look what happens when they try to widen the gene pool—a couple of deaths, a ginger son and a marriage to a horse. Earlier this year the Queen opted to celebrate her 83rd birthday with a simple meal rather than having a lavish banquet, so that she didn’t appear out of touch during the credit crunch. It’s hardly a show of solidarity with those affected by the recession when she’d be eating while wearing a crown and sitting on a throne inside a palace. Hope she enjoyed her swan-flavoured crispy pancakes. Next, people will be suggesting that her having two birthdays a year makes her elitist.


pages: 439 words: 79,447

The Finance Book: Understand the Numbers Even if You're Not a Finance Professional by Stuart Warner, Si Hussain

AOL-Time Warner, book value, business intelligence, business process, cloud computing, conceptual framework, corporate governance, Costa Concordia, credit crunch, currency risk, discounted cash flows, double entry bookkeeping, forward guidance, intangible asset, Kickstarter, low interest rates, market bubble, Northern Rock, peer-to-peer lending, price discrimination, Ralph Waldo Emerson, shareholder value, supply-chain management, time value of money

Need to know Equity carries no financial risk to a company because equity finance carries no obligation to pay a fixed return or to return capital. However, the key consideration is that the existing owner/entrepreneur must give up some of their ownership rights. Equity investors are shareholders and therefore have a claim on the equity of a business. Equity finance may be the only option for some companies. Since the impact of the credit crunch originating in 2007/2008, companies, in particular smaller entities, have been unable to access debt finance because banks have been unwilling or unable to lend. Why is this important? Deciding how to finance a company is a critical decision for most businesses. This decision should not be underestimated as it can determine a company’s chances of survival or prosperity.


pages: 693 words: 204,042

New York 2140 by Kim Stanley Robinson

Anthropocene, availability heuristic, back-to-the-land, Black-Scholes formula, Burning Man, central bank independence, creative destruction, credit crunch, crowdsourcing, decarbonisation, East Village, full employment, gentrification, happiness index / gross national happiness, hive mind, income inequality, invisible hand, Jane Jacobs, Ken Thompson, Kim Stanley Robinson, liquidity trap, Mason jar, mass immigration, megastructure, microbiome, music of the spheres, New Urbanism, offshore financial centre, Planet Labs, plutocrats, Ponzi scheme, precariat, quantitative easing, Reflections on Trusting Trust, rent-seeking, Social Justice Warrior, the built environment, too big to fail

Franklin’s investment group (which included the Met gold gang) had secured provisional property rights, as good as could be gotten for the intertidal, plus demolition permits, building permits, and the funding to build. The funding was a combination of their monetized gold, federal and nonprofit grants, angel investors, venture capital, and ordinary loans, achieved before the paralysis of the liquidity crisis and credit crunch, which was growing worse by the day. A construction team had been assembled, he said; this was no easy feat, given how busy contractors were now. Workers in the building trades from Boston to Atlanta were streaming in to New York to reconstruct the city, but there still weren’t enough of them, so the main coup for Franklin had been the assembling of the construction team itself.

What makes it grow is its image of itself. —Peter Conrad The place where all the aspirations of the world meet to form one vast master aspiration, as powerful as the suction of a steam dredge. —H. L. Mencken But why say more? —Herman Melville g) the citizen Popped bubble, liquidity freeze, credit crunch, big finance going down like the KT asteroid, making desperate appeals for a government bailout: it was like the revival of some bad old Broadway musical. Book goes like this: finance says to government, Pay us or the economy dies. Congress, assuming its paymasters on Wall Street know what they’re talking about, because it concerns the incomprehensible mysteries of finance, agrees to fork it over.


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

How did shareholder capitalism fare? Reaganomics presumes that the best-governed US firms are those with shareholder-friendly boards: the greater the degree of shareholder control, the more efficiently such firms are assumed to be run. The validity of that notion would have become evident during the credit crunch, with superior performances scored by those financial intermediaries with boards ranked the most shareholder-friendly on corporate governance, according to MSCI’s Risk Metrics. That hypothesis was tested by economists Andrea Beltratti and René M. Stulz in a March 2010 analysis. “To the extent that governance played a role, we would expect banks with better governance to have performed better,” they suggested.

Greenberg, “Why Voters Tune Out Democrats,” New York Times, Aug. 5, 2011. 12 The explanation for this counterfactual Obama record is based on an unbiased evaluation of the fiscal year 2009 budget. The surge in federal spending related to the credit crisis and recession occurred in FY’09. Is that the responsibility of the departing President Bush or Obama? Well, that fiscal year began on October 1, 2008, amid the credit crunch, four months before President Obama took office. Outlays originated by George W. Bush were already one-third spent before Obama arrived, the magnitude of the budget on a trajectory determined by G.W. Bush, including the bank bailout he signed into law. After January 2009, the new President Obama added some new stimulus and child health spending; the Dow Jones & Company analysis reflects that division of responsibility in FY’09 for federal spending between Presidents George W.


pages: 302 words: 83,116

SuperFreakonomics by Steven D. Levitt, Stephen J. Dubner

agricultural Revolution, airport security, An Inconvenient Truth, Andrei Shleifer, Atul Gawande, barriers to entry, behavioural economics, Bernie Madoff, Boris Johnson, call centre, clean water, cognitive bias, collateralized debt obligation, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, deliberate practice, Did the Death of Australian Inheritance Taxes Affect Deaths, disintermediation, endowment effect, experimental economics, food miles, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), John Nash: game theory, Joseph Schumpeter, Joshua Gans and Andrew Leigh, longitudinal study, loss aversion, Louis Pasteur, market design, microcredit, Milgram experiment, Neal Stephenson, ocean acidification, oil shale / tar sands, patent troll, power law, presumed consent, price discrimination, principal–agent problem, profit motive, randomized controlled trial, Richard Feynman, Richard Thaler, selection bias, South China Sea, Stanford prison experiment, Stephen Hawking, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, ultimatum game, urban planning, William Langewiesche, women in the workforce, young professional

If you were a creditor, however, you saw this debt-forgiveness program differently. Why loan money to some sandal maker if he could just tear up the note in Year Seven? So creditors gamed the system by making loans in the years right after a sabbatical and pulling tight the purse strings in Years Five and Six. The result was a cyclical credit crunch that punished the very people the law was intended to help. But in the history of unintended consequences, few match the one uncovered by Ignatz Semmelweis: medical doctors, while in pursuit of lifesaving knowledge, conducted thousands upon thousands of autopsies, which, in turn, led to the loss of thousands upon thousands of lives.


pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch

"World Economic Forum" Davos, agricultural Revolution, Airbnb, Alan Greenspan, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, business cycle, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-border payments, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, disruptive innovation, distributed ledger, Dogecoin, double entry bookkeeping, Ethereum, ethereum blockchain, facts on the ground, fake news, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, land bank, large denomination, low interest rates, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, Money creation, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, Suez canal 1869, technoutopianism, The future is already here, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons

Money eras It is difficult to see the trajectory of money when technologies that were invented in the 1960s (like the magnetic stripe) or indeed the 1860s (like uniformly valued, nationally based paper US dollars) exist alongside technologies that haven’t yet been fully invented (Maurer and Swartz 2014). It seems to me that the credit crunch, the recession, the collapse of 2008 and a variety of debt and currency crises are forcing many people to think about money, banking and the economy in a way that they had not before. This in turn means that people are beginning to think about using the technology of money to create new kinds of money, rather than using it to implement digital versions of the money we have had for a generation.


pages: 258 words: 83,303

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization by Jeff Rubin

addicted to oil, air freight, banking crisis, Bear Stearns, big-box store, BRICs, business cycle, carbon footprint, carbon tax, collateralized debt obligation, collective bargaining, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, energy security, food miles, Ford Model T, hydrogen economy, illegal immigration, immigration reform, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, Jevons paradox, Just-in-time delivery, low interest rates, market clearing, megacity, megaproject, North Sea oil, oil shale / tar sands, oil shock, peak oil, profit maximization, reserve currency, South Sea Bubble, subprime mortgage crisis, the market place, The Wealth of Nations by Adam Smith, trade liberalization, work culture , zero-sum game

And as they did, the financial institutions that held those assets had to write down bigger and bigger losses until some actually went under. The more that wealth vanished from the banks’ books, the less they had available to lend. And so the economy found itself caught in the jaws of a giant credit crunch. Or so the story goes. There’s no question that the financial crisis that has arisen from defaulting subprime mortgages rocked Wall Street to the core. It certainly took a huge chunk out of my bonus. But when we are talking about the economy in recession, let’s not confuse cause and effect. It’s pretty obvious how a poisoned market for financial derivatives blew up a lot of investment bankers, but it’s far from obvious how defaulting mortgages in Cleveland caused much deeper recessions in Europe and Japan—where the bad news started long before the subprime problems lit up the US.


pages: 302 words: 86,614

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bear Stearns, Bernie Madoff, book value, Bretton Woods, business process, call centre, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, financial engineering, fixed income, global macro, high net worth, high-speed rail, impact investing, interest rate derivative, Isaac Newton, Jim Simons, junk bonds, Long Term Capital Management, managed futures, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Michael Milken, Myron Scholes, NetJets, oil shock, pattern recognition, Pershing Square Capital Management, Ponzi scheme, proprietary trading, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Savings and loan crisis, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, stock buybacks, systematic bias, systematic trading, tail risk, two and twenty, zero-sum game

That became too big for our portfolio. We pared that position down to keep the weighting in the portfolio below 8 percent as we don’t want to be too concentrated on one name.” Paulson acquired a second billion-dollar-plus investment in a bank that received government bailout funds during the credit crunch. He had acquired 168 million shares of Charlotte, North Carolina–based Bank of America Corporation in the second quarter of 2009. Paulson and his team then realized they were underweight in other banks with similar strong upsides like Wells Fargo and Capital One. They decided to further scale back on Citigroup and Bank of America, and increase their position in Wells Fargo and Capital One.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

"World Economic Forum" Davos, Abraham Maslow, Airbnb, Apollo 13, barriers to entry, behavioural economics, Bernie Madoff, bike sharing, Buckminster Fuller, business logic, buy and hold, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, Ford Model T, Garrett Hardin, George Akerlof, global village, hedonic treadmill, Hugh Fearnley-Whittingstall, information retrieval, intentional community, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Paradox of Choice, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, planned obsolescence, Ponzi scheme, pre–internet, public intellectual, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, systems thinking, TED Talk, the long tail, The Nature of the Firm, The Spirit Level, the strength of weak ties, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, Tragedy of the Commons, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, work culture , Yochai Benkler, Zipcar

Statistics on online networks taken from “A Day on the Internet,” www.onlineeducation.net/internet. 2. Abha Bhattarai, “Bike-Sharing: Cycling to a City Near You,” Fast Company (June 26, 2009), www.fastcompany.com/blog/abha-bhattarai/abha-bhattarai/bike-sharing-cycling-city-near-you. 3. Statistics on Zilok taken from Reuters release, “Rent Your Way Out of the Credit Crunch Online” (December 5, 2008), http://www.reuters.com/article/idUSTRE4B44DE20081205. 4. Statistics on bartering taken from William Lee Adams, “Bartering: Have Hotel, Need Haircut,” Time (November 2, 2009), http://www.time.com/time/magazine/article/0,9171,1931665,00.html. 5. Statistics on Freecyle taken from Freecycle press release, “Largest Environmental Web Community in the World” (September 9, 2008), www.freecycle.org/pressreleases/08-09-09_Freecycle_press_release.pdf?.


pages: 334 words: 82,041

How Did We Get Into This Mess?: Politics, Equality, Nature by George Monbiot

Affordable Care Act / Obamacare, Alfred Russel Wallace, Anthropocene, bank run, bilateral investment treaty, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, creative destruction, credit crunch, David Attenborough, dematerialisation, demographic transition, drone strike, en.wikipedia.org, first-past-the-post, full employment, Gini coefficient, hedonic treadmill, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, invisible hand, land bank, land reform, land value tax, Leo Hollis, market fundamentalism, meta-analysis, Mont Pelerin Society, moral panic, Naomi Klein, Northern Rock, obamacare, oil shale / tar sands, old-boy network, peak oil, place-making, planned obsolescence, plutocrats, profit motive, rent-seeking, rewilding, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, urban sprawl, We are all Keynesians now, wealth creators, World Values Survey

Its interviews were conducted with like-minded members of the propertied classes, who were helped towards the right replies with leading questions. Anecdote took the place of data. In reality, poverty in the countryside had risen as a result of structural forces over which the poor had no control. After the Napoleonic wars, the price of wheat slumped, triggering the collapse of rural banks and a severe credit crunch. Swayed by the arguments of David Ricardo, the government re-established the gold standard, which locked in austerity and aggravated hardship, much as George Osborne’s legal enforcement of a permanent budget surplus will do.8 Threshing machines reduced the need for labour in the autumn and winter, when employment was most precarious.


pages: 332 words: 81,289

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

Table 7.5 Comparing the Return Engine to Global and UK equities Period: 7/1989 to 12/2012 Return Engine UK equities Global equities Annualised real return % 4.8% 4.9% 2.6% Growth of £100 £297 £306 £182 Risk % 16% 15% 16% Return per unit of risk 0.30 0.33 0.16 Real return – past 10 years (annualised) 7.2% 5.3% 4.0% Real return – past 5 years (annualised) 0.9% –0.7% –0.2% Peak to trough (1/00 to 1/03) –33% –46% –48% Peak to trough (11/07 to 2/09) –40% –42% –34% Worst 1 year –36% –37% –39% Worst 3 years –13% –17% –20% Worst 5 years –3.5% –8.6% –8.4% Worst 10 years 0.7% –3.2% –3.9% Source: Data from Morningstar EnCorr and Dimensional Fund Advisers. All rights reserved. Data used for simulation of the Return Engine is provided in Appendix 3. During two particularly tough periods for investors: 2000–2002 (the Tech Wreck) and 2007–2009 (the Credit Crunch) – as you can see, diversification helped to reduce the cumulative losses incurred over this period. While this illustrates that diversification is an important decision, in periods like the early 1990s, when property fell substantially and global markets fared worse than the UK, it did not pay off; but that does not make it invalid.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, buy and hold, Carl Icahn, centralized clearinghouse, clean water, compensation consultant, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Glass-Steagall Act, income inequality, index fund, information asymmetry, invisible hand, John Bogle, Kenneth Arrow, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, Paul Volcker talking about ATMs, payment for order flow, performance metric, Ponzi scheme, post-work, principal–agent problem, rent-seeking, Ronald Coase, seminal paper, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

For example, during the passage of the Dodd-Frank Act (the keystone regulation passed in the United States to regulate banks following the 2008 crisis), it was reported that six thousand lobbyists were employed to make sure it did not cut off lucrative revenue streams to the finance industry. See http//:thenation.com/article/174113/how-wall-street-defanged-dodd-frank. 48. See Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, 2nd ed. (Random House, 2010), 284. 6 The Queen’s Question 1. “The Queen Asks Why No One Saw the Credit Crunch Coming,” The Telegraph, November 5, 2008. 2. Sky News, December 14, 2012, www.youtube.com/watch?v=wADO zwSTJGQ. 3. See Higher Education Statistics Agency, www.hesa.ac.uk/content/view/1897/239. 4. See Economic Departments, Institutes and Research Centres in the World, Edirc.repec.org. 5. There are some honorable exceptions to this rule.


pages: 212 words: 80,393

Getting By: Estates, Class and Culture in Austerity Britain by Lisa McKenzie

British Empire, call centre, credit crunch, delayed gratification, falling living standards, financial exclusion, full employment, income inequality, low skilled workers, meritocracy, moral panic, Nelson Mandela, New Urbanism, The Bell Curve by Richard Herrnstein and Charles Murray, unpaid internship, urban renewal, working poor

I asked Jerome what he wanted to do when he left school. His answer was simple – ‘entrepreneur’ – he wanted to be “rich like Alan Sugar”. I asked him about politics and what he knew about some of the problems people were experiencing in Britain because of the government’s cuts. Jerome said he had heard about a ‘credit crunch’ and wasn’t sure how it affected his mum; he knew in the last year that they could no longer afford real Coca Cola, and now had to have “the crap stuff”. After speaking to Jerome I went back into the kitchen and sat with Yvonne a bit longer; she had drunk several cans of strong lager and was becoming incoherent.


pages: 321

Finding Alphas: A Quantitative Approach to Building Trading Strategies by Igor Tulchinsky

algorithmic trading, asset allocation, automated trading system, backpropagation, backtesting, barriers to entry, behavioural economics, book value, business cycle, buy and hold, capital asset pricing model, constrained optimization, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, data science, deep learning, discounted cash flows, discrete time, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial engineering, financial intermediation, Flash crash, Geoffrey Hinton, implied volatility, index arbitrage, index fund, intangible asset, iterative process, Long Term Capital Management, loss aversion, low interest rates, machine readable, market design, market microstructure, merger arbitrage, natural language processing, passive investing, pattern recognition, performance metric, Performance of Mutual Funds in the Period, popular capitalism, prediction markets, price discovery process, profit motive, proprietary trading, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, selection bias, sentiment analysis, shareholder value, Sharpe ratio, short selling, Silicon Valley, speech recognition, statistical arbitrage, statistical model, stochastic process, survivorship bias, systematic bias, systematic trading, text mining, transaction costs, Vanguard fund, yield curve

Friendly mergers, where the deal is backed by the target company’s management, have a higher probability of completion than hostile takeovers. Some deals may not get the required approvals because of antitrust concerns or other regulatory issues. A deal also may fail because of overall market conditions. For example, if the plan is to use external financing to pay for the merger and a credit crunch hits the market, the acquirer may not be able to arrange financing. Likewise, if the target company’s stock price falls below the merger offer price because of a market decline, the acquirer may believe it is overpaying for the stock and the deal may not go through at the original price. Merger arbitrage strategies are generally uncorrelated to market movements, but they are not immune to market risk.


pages: 263 words: 80,594

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

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, Robert Solow, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

The combination of these psychological factors, and the ability of modern capitalism to create huge amounts of debt, gives rise to financial systems that are fundamentally unstable. Financial markets tend to be characterised by periodic bubbles and panics, which in turn impact the real economy, causing credit crunches and recessions. Instability results from the psychological factors that drive investment under conditions of uncertainty. Investment decisions are determined by the cost of the investment and the expected returns to be derived from it. Keynes argued that these two variables – costs and expected returns – are governed by different price systems.


pages: 291 words: 80,068

Framers: Human Advantage in an Age of Technology and Turmoil by Kenneth Cukier, Viktor Mayer-Schönberger, Francis de Véricourt

Albert Einstein, Andrew Wiles, Apollo 11, autonomous vehicles, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, Black Lives Matter, blockchain, Blue Ocean Strategy, circular economy, Claude Shannon: information theory, cognitive dissonance, cognitive load, contact tracing, coronavirus, correlation does not imply causation, COVID-19, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, deep learning, DeepMind, defund the police, Demis Hassabis, discovery of DNA, Donald Trump, double helix, Douglas Hofstadter, Elon Musk, en.wikipedia.org, fake news, fiat currency, framing effect, Francis Fukuyama: the end of history, Frank Gehry, game design, George Floyd, George Gilder, global pandemic, global village, Gödel, Escher, Bach, Higgs boson, Ignaz Semmelweis: hand washing, informal economy, Isaac Newton, Jaron Lanier, Jeff Bezos, job-hopping, knowledge economy, Large Hadron Collider, lockdown, Louis Pasteur, Mark Zuckerberg, Mercator projection, meta-analysis, microaggression, Mustafa Suleyman, Neil Armstrong, nudge unit, OpenAI, packet switching, pattern recognition, Peter Thiel, public intellectual, quantitative easing, Ray Kurzweil, Richard Florida, Schrödinger's Cat, scientific management, self-driving car, Silicon Valley, Steve Jobs, Steven Pinker, TED Talk, The Structural Transformation of the Public Sphere, Thomas Kuhn: the structure of scientific revolutions, TikTok, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen

It was already starting to happen. One of America’s biggest McDonald’s franchises didn’t think it could make its monthly payroll because banks weren’t supplying basic credit. There was a serious question whether bank cash machines would dry up. Recalling his research, Helicopter Ben was focused on a system-wide credit crunch, not the failure of individual firms. That frame gave him an idea. He would buy the toxic-sludge assets from the banks, taking them off their balance sheet. Then, the banks could use those fresh, clean dollars to lend—pumping capital into the system. Between 2008 and 2015, the Fed’s balance sheet soared from $900 billion of mostly high-quality Treasury notes to $4.5 trillion of largely risky assets.


pages: 1,009 words: 329,520

The Last Tycoons: The Secret History of Lazard Frères & Co. by William D. Cohan

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", activist fund / activist shareholder / activist investor, Alan Greenspan, AOL-Time Warner, bank run, Bear Stearns, book value, Carl Icahn, carried interest, cognitive dissonance, commoditize, computer age, corporate governance, corporate raider, creative destruction, credit crunch, deal flow, diversification, Donald Trump, East Village, fear of failure, financial engineering, fixed income, G4S, Glass-Steagall Act, hiring and firing, interest rate swap, intermodal, Joseph Schumpeter, junk bonds, land bank, late fees, Long Term Capital Management, Marc Andreessen, market bubble, Michael Milken, offshore financial centre, Ponzi scheme, proprietary trading, Ralph Nader, Ralph Waldo Emerson, rolodex, Ronald Reagan, shareholder value, short squeeze, SoftBank, stock buybacks, The Nature of the Firm, the new new thing, Yogi Berra

So while the larger, multiproduct Wall Street firms, such as Goldman Sachs, Merrill Lynch, Morgan Stanley, and Citigroup, have many ways to derive fees from their clients, especially from raising debt and equity capital for corporations, Lazard had, by design, precious little of that capability. The word around Lazard, repeated like a mantra every January, was, "Now we have to start again from scratch." Somehow, just as Frank Zarb had described, year in, year out, Lazard was able to do just that. In the post-credit-crunch environment of the early 1990s, Steve's ability to generate high-margin M&A fees was, not surprisingly, getting him noticed in the corner offices of Lazard's thirty-second floor, where Felix and Michel held court. Not only did Steve generate large M&A fees; he did so with clients that were not traditional Lazard clients.

"After one year of some involvement on my part in the coordination of our banking business, it might be worthwhile to share observations," he wrote, with some modesty. One of his main points was to confirm that Lazard was doing quite well, especially when compared with the disarray being experienced by the bigger Wall Street firms after the credit crunch. That said, though, he enumerated eleven "observations, more or less obvious," that he believed had the ongoing potential to hinder the firm in the future. These ranged from the usual laments about proper use of scarce professional resources to how to continue to compete effectively against the firm's two largest perceived competitive threats.

Byron's unalloyed conclusion: "A backlash is building against Wall Street's unrestrained decade of dealmaking, and Wasserstein has become a handy lightning rod for public frustrations." Even the reliably fawning M, Inc. trashed Bruce in its September 1990 annual New York power-broker article, claiming that he was "in a slump." (Felix and Michel were listed among the still powerful.) THE ONSET OF the so-called credit crunch, following the collapse of the United Airlines buyout and the Allied-Federated bankruptcy, brought deal-making activity to a near standstill. Restructuring activity took center stage. There was a glimmer of hope for deal makers, though, toward the end of 1990, when the Japanese industrial giant Matsushita bought the Hollywood powerhouse MCA for $6.6 billion.


pages: 354 words: 92,470

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

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

With the 1990 Iraqi invasion of Kuwait, Washington’s focus was now elsewhere, not least because Baker was now George H.W. Bush’s secretary of state. Germany, meanwhile, was devoting its resources to the small matter of reunification. And the Bank of Japan was wondering precisely how to tame what had become a rather unwieldy financial bubble. In the years that followed, the US suffered a mild credit crunch, but thereafter enjoyed a late 1990s technology-led boom. Newly reunified Germany re-established itself as the key power in Europe. Japan, meanwhile, was left to lick its wounds. Its late 1980s financial bubble was ultimately a reflection of its desire to play the role of ‘good global citizen’.


pages: 255 words: 92,719

All Day Long: A Portrait of Britain at Work by Joanna Biggs

Anton Chekhov, bank run, banking crisis, Bullingdon Club, call centre, Chelsea Manning, credit crunch, David Graeber, Desert Island Discs, Downton Abbey, emotional labour, Erik Brynjolfsson, financial independence, future of work, G4S, glass ceiling, industrial robot, job automation, land reform, low skilled workers, mittelstand, Northern Rock, payday loans, Right to Buy, scientific management, Second Machine Age, Sheryl Sandberg, six sigma, Steve Jobs, trickle-down economics, unpaid internship, wages for housework, Wall-E

You could just about survive on the dole in those days as long as you were pretty frugal, so I just did it.’ Once his daughter was born, he worked in sound engineering at the BBC, then on freelance and zero-hours contracts for architecture firms. He signed on between 1991 and 1995 when work was hard to find, and then again in 2008 when new building slowed following the credit crunch. He’s worked off and on since then, always less than the sixteen hours a week allowed under JSA rules, and often for himself. ‘I’m not desperately looking for another job in architecture,’ John said. ‘I don’t like what they do any more. I don’t want to work on the Battersea Power Station: it’s complete madness what they’ve done to it.


pages: 329 words: 95,309

Digital Bank: Strategies for Launching or Becoming a Digital Bank by Chris Skinner

algorithmic trading, AltaVista, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, augmented reality, bank run, Basel III, bitcoin, Bitcoin Ponzi scheme, business cycle, business intelligence, business process, business process outsourcing, buy and hold, call centre, cashless society, clean water, cloud computing, corporate social responsibility, credit crunch, cross-border payments, crowdsourcing, cryptocurrency, demand response, disintermediation, don't be evil, en.wikipedia.org, fault tolerance, fiat currency, financial innovation, gamification, Google Glasses, high net worth, informal economy, information security, Infrastructure as a Service, Internet of things, Jeff Bezos, Kevin Kelly, Kickstarter, M-Pesa, margin call, mass affluent, MITM: man-in-the-middle, mobile money, Mohammed Bouazizi, new economy, Northern Rock, Occupy movement, Pingit, platform as a service, Ponzi scheme, prediction markets, pre–internet, QR code, quantitative easing, ransomware, reserve currency, RFID, Salesforce, Satoshi Nakamoto, Silicon Valley, smart cities, social intelligence, software as a service, Steve Jobs, strong AI, Stuxnet, the long tail, trade route, unbanked and underbanked, underbanked, upwardly mobile, vertical integration, We are the 99%, web application, WikiLeaks, Y2K

Unfortunately, this is being called into question, thanks to the new regulations around best execution and transparency, which implies broker-dealers don’t always act in their client’s best interests (really?!). This trust has also been tested by Enron, Worldcom, Parmalat and such like, and is being tested again in the credit crunch. In fact, the recent admission by the Bank of England that they didn’t understand the financial markets anymore, in light of the Northern Rock collapse, is shocking. When the regulators and co-ordinators of the financial markets lose their understanding, something has to change. Buyology therefore means knowing the why, how, what and when ingredients of buying, and ensuring you position your business to always be there at the right time, with the right words ... there’s a song with that phrase and the next line is “and you’ll be mine”.


pages: 309 words: 95,495

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

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

There were exceptions: government bonds, considered riskless, would require no capital; mortgages, considered safer than business and consumer loans, would require only $4. The increased capital standards survived a hail of opposition by banks and their allies in Congress and were phased in from 1988 to 1992. They were widely blamed for aggravating the recession of 1990–91 and holding back the recovery. “Thank Basel for Credit Crunch” read an op-ed by Richard Breeden and William Isaac, former heads of the SEC and FDIC, in 1992. In the 1980s and 1990s, banks became safer as their equity capital rose, but their importance as a source of credit shrank as other types of lenders took their place. The lower diagram illustrates how less capital makes a bank more vulnerable if loans go bad.


pages: 299 words: 91,839

What Would Google Do? by Jeff Jarvis

"World Economic Forum" Davos, 23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, AOL-Time Warner, barriers to entry, Berlin Wall, bike sharing, business process, call centre, carbon tax, cashless society, citizen journalism, clean water, commoditize, connected car, content marketing, credit crunch, crowdsourcing, death of newspapers, different worldview, disintermediation, diversified portfolio, don't be evil, Dunbar number, fake news, fear of failure, Firefox, future of journalism, G4S, Golden age of television, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, John Perry Barlow, Kevin Kelly, Marc Benioff, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, old-boy network, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, Salesforce, search inside the book, Sheryl Sandberg, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the long tail, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, WikiLeaks, Y Combinator, Zipcar

He said that except for sleep, we spend more time moving around than at home. “Screw Starbucks as the ‘third place.’ The third place today is the automobile.” What is the automobile really about? “Navigation and entertainment,” he said—not necessarily manufacturing. Indeed, Tobaccowala said the most interesting parts of the General Motors business had been OnStar and—credit crunch aside—financing. Manufacturing is expensive, vulnerable to commodity pricing, labor-intensive, weighed down by gigantic benefit costs, and competitive. There’s the tyranny of atoms. What if a car company became the leader in getting people around and used others’ hardware: planes, trains, and automobiles?


pages: 378 words: 94,468

Drugs 2.0: The Web Revolution That's Changing How the World Gets High by Mike Power

air freight, Alexander Shulgin, banking crisis, bitcoin, blockchain, Buckminster Fuller, Burning Man, cloud computing, credit crunch, crowdsourcing, death of newspapers, Donald Davies, double helix, Douglas Engelbart, drug harm reduction, Electric Kool-Aid Acid Test, fiat currency, Firefox, Fractional reserve banking, frictionless, fulfillment center, Haight Ashbury, independent contractor, John Bercow, John Gilmore, John Markoff, Kevin Kelly, Leonard Kleinrock, means of production, Menlo Park, moral panic, Mother of all demos, Network effects, nuclear paranoia, packet switching, pattern recognition, PIHKAL and TIHKAL, pre–internet, QR code, RAND corporation, Satoshi Nakamoto, selective serotonin reuptake inhibitor (SSRI), sexual politics, Skype, Stephen Hawking, Steve Jobs, Stewart Brand, trade route, Whole Earth Catalog, Zimmermann PGP

Those elements combined made the research chemical scene burst on to the high street in 2009, in a drug-starved country reeling a from a banking crisis brought on by a lack of regulation. The cathinones, with their speedy, cocaine-meets-MDMA-like buzz, were the perfect drug for those outlaw times. Mephedrone was credit crunch cocaine, neither one thing nor another, an analogue of an analogue. The Labour government, its drug policy no more radical than the previous Conservative administration’s, swung into action and banned it, driving a coach and horses through both scientific concerns and all political protocol. Mephedrone is harmful if taken to excess, and many users could not control their use, but questions about its relative harmfulness were never properly asked of the scientists who are specifically charged with establishing those harms.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, California gold rush, call centre, carbon footprint, carbon tax, Carmen Reinhart, circular economy, clean tech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, dual-use technology, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Fairchild Semiconductor, Financial Instability Hypothesis, full employment, G4S, general purpose technology, green transition, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, knowledge worker, linear model of innovation, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, Post-Keynesian economics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, Robert Solow, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Solyndra, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tony Fadell, too big to fail, total factor productivity, trickle-down economics, vertical integration, Washington Consensus, William Shockley: the traitorous eight

And yet, the irony of these successes is that as companies such as Apple, Google, GE, Cisco etc. are flourishing financially, their home economy is struggling to find its way out of debilitating economic issues like the growing trade deficit against Asian economies, declining manufacturing activities, increasing unemployment, widening budget deficits, inequality, deteriorating infrastructure etc. The current economic turmoil cannot be explained solely by the banking crisis, the credit crunch or the collapse of the mortgage market. The problems faced today are structurally complex and run much deeper. It is important to assess the effects of innovation, whether they have resulted in an increase in the number of new jobs that pay liveable wages or better, an increase in tax revenues, and/or an increase in the export of high-value goods and services.


Alpha Girls: The Women Upstarts Who Took on Silicon Valley's Male Culture and Made the Deals of a Lifetime by Julian Guthrie

"Susan Fowler" uber, "World Economic Forum" Davos, Airbnb, Alan Greenspan, Andy Rubin, Apollo 11, Apple II, barriers to entry, Bear Stearns, Benchmark Capital, blockchain, Bob Noyce, call centre, cloud computing, credit crunch, deal flow, disruptive innovation, Elon Musk, equal pay for equal work, Fairchild Semiconductor, fear of failure, game design, Gary Kildall, glass ceiling, hiring and firing, information security, Jeff Bezos, Larry Ellison, Louis Pasteur, Lyft, Marc Benioff, Mark Zuckerberg, Menlo Park, Mitch Kapor, new economy, PageRank, peer-to-peer, pets.com, phenotype, place-making, private spaceflight, retail therapy, ROLM, Ronald Reagan, Rosa Parks, Salesforce, Sand Hill Road, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Skype, Snapchat, software as a service, South of Market, San Francisco, stealth mode startup, Steve Jobs, Steve Jurvetson, Steve Wozniak, Susan Wojcicki, TaskRabbit, Teledyne, Tim Cook: Apple, Timothy McVeigh, Travis Kalanick, uber lyft, unpaid internship, upwardly mobile, urban decay, UUNET, web application, William Shockley: the traitorous eight, women in the workforce

As the paperwork commenced, Andy thought about the $12 million check he was holding. It represented people’s livelihoods, mortgages, and health insurance. It was money that Menlo’s limited partners had worked hard to make. And Menlo, he knew, would get paid only if his company became a success. The check represented the long road ahead. With the economic downturn, a credit crunch, 9/11, and the Bush administration’s war on terror, the wind was not at the backs of the economy or the Acme team. One of their investors even took Acme off the website following the telecom sector meltdown. But over time Acme landed one deal after the other. Soon it was routing all of Verizon’s wireless calls.


pages: 335 words: 95,549

Confessions of a Bookseller by Shaun Bythell

Airbnb, British Empire, cashless society, credit crunch, Donald Trump, fulfillment center, mail merge, Neil Armstrong, period drama, Skype, zero day

If my takings are anything to go by, they’ll be lucky to see more than a handful of shivering souls. Till Total £54.49 3 Customers TUESDAY, 3 FEBRUARY Online orders: 8 Orders found: 8 After the storm, a sunny day. Tom turned up at lunchtime to borrow my shop accounts over the past ten years so that he could produce an analysis of how the credit crunch and the growth of Amazon have affected local retail. It’s part of his pitch to raise funds for the Writers’ House project. Sarah from Craigard Gallery (three doors down the street) dropped in two belated Christmas cards, one for Nicky and one for me. Nicky’s says, ‘Queen of Awesomeness’. Mine says, ‘Bah!


pages: 301 words: 90,239

Pivot: A Story of Dropping the Ball, Picking It Up Again, and Turning Things Around. by Laura Lexx

carbon footprint, credit crunch, lock screen, Skype

Annie asked, clearly unable to sit with the silence. ‘Yes, that’s Jay. I’m not sure on the details but the charity she was working for in London downsized and she was the last one in so the first one out and had to move back here and in with her mum. Grim. I think it was the recession or the, oh what was the funkier first recession called? The Credit Crunch. It might have been that one. Or was that too early? Did the second one have a nickname? It makes me glad to be retired and out of it all. I feel sorry for their generation.’ For reasons she wasn’t quite certain about, Jackie found herself in tears. She looked about for a menu to try to flatten out some of this ridiculous emotional rollercoaster she’d accidentally boarded.


pages: 335 words: 89,924

A History of the World in Seven Cheap Things: A Guide to Capitalism, Nature, and the Future of the Planet by Raj Patel, Jason W. Moore

"World Economic Forum" Davos, agricultural Revolution, Anthropocene, Bartolomé de las Casas, biodiversity loss, British Empire, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon footprint, classic study, clean water, collateralized debt obligation, colonial exploitation, colonial rule, company town, complexity theory, creative destruction, credit crunch, Donald Trump, double entry bookkeeping, energy transition, European colonialism, feminist movement, financial engineering, Food sovereignty, Ford Model T, Frederick Winslow Taylor, full employment, future of work, Glass-Steagall Act, global supply chain, Haber-Bosch Process, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, land reform, Lewis Mumford, liberal capitalism, low interest rates, means of production, Medieval Warm Period, megacity, Mercator projection, meta-analysis, microcredit, Naomi Klein, Nixon shock, Occupy movement, peak oil, precariat, scientific management, Scientific racism, seminal paper, sexual politics, sharing economy, source of truth, South Sea Bubble, spinning jenny, strikebreaker, surplus humans, The Theory of the Leisure Class by Thorstein Veblen, too big to fail, trade route, transatlantic slave trade, union organizing, Upton Sinclair, wages for housework, World Values Survey, Yom Kippur War

A group of the commune’s aristocratic creditors started the Casa di San Giorgio (the House—later the Bank—of Saint George) in 1407.43 Within a year, this bank had negotiated control of territory from the commune so that the aristocrats could recoup their debts from the city, principally from its merchant class. The city ceded title of its assets (territories) as interest payments and collateral throughout the fifteenth century: “Lerici in 1479, Corsica in 1482, Sarzana in 1484.”44 In successive credit crunches, the city’s 0.1 percent siphoned resources and islands in the Mediterranean away from its wealthy merchant class, held the revenues in their own bank, and kept their own books.45 This tension, between the banks and the states on which they depend, has yet to subside. Genoese merchants hunted for ways for the municipality to pay off its creditors.


pages: 356 words: 103,944

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

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

Then a bit of bad news, either domestic or external, sets off what Guillermo Calvo, the preeminent analyst of financial crises, has called a “sudden stop.”29 The country’s story in financial markets changes completely: the country has overborrowed, its government is acting irresponsibly, and the economy looks risky. Foreign finance dries up and in short order the economy has to go through painful contortions to adjust. Interest rates shoot up, the currency collapses, firms face a credit crunch, and domestic demand contracts, typically aggravated by tight fiscal policies aimed at restoring “market confidence.” By the time it’s all over, the economy will have forfeited, on average, around 20 percent of its GDP.30 None of this should have come as a real surprise. Whenever capital has been free to move around the world, it has produced what the economic historian Charles Kindleberger has memorably called “manias, panics and crashes.”31 Recent research by Carmen Reinhart and Ken Rogoff has quantified what had long been obvious to economic historians.


pages: 443 words: 98,113

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

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, anti-fragile, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, Big Tech, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, commons-based peer production, credit crunch, crony capitalism, cross-border payments, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, Evgeny Morozov, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, Garrett Hardin, gentrification, gig economy, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, housing crisis, income inequality, independent contractor, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, it's over 9,000, James Watt: steam engine, Jeremy Corbyn, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, low interest rates, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, megaproject, mini-job, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Phillips curve, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, SoftBank, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Tragedy of the Commons, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

An egregious case in Britain was Northern Rock, a lender that borrowed heavily on UK and international capital markets during the pre-2007 housing boom to give mortgage loans of up to 125 per cent of the property value. Like its counterparts in the USA, the firm bundled up these risky mortgages and sold them as income-generating assets to investors, using the proceeds to help pay its debts. When the credit crunch came in 2007, the demand for securitised mortgage assets dried up and Northern Rock was unable to meet debt commitments. There was a run on the bank, the first UK bank run in 150 years, and in 2008 it was taken into state ownership. Billions of pounds of outstanding mortgages remained, many in arrears.


pages: 322 words: 99,066

The End of Secrecy: The Rise and Fall of WikiLeaks by The "Guardian", David Leigh, Luke Harding

"World Economic Forum" Davos, 4chan, air gap, banking crisis, centre right, Chelsea Manning, citizen journalism, Climategate, cloud computing, credit crunch, crowdsourcing, Downton Abbey, drone strike, end-to-end encryption, eurozone crisis, Evgeny Morozov, friendly fire, global village, Hacker Ethic, impulse control, Jacob Appelbaum, Julian Assange, knowledge economy, machine readable, military-industrial complex, Mohammed Bouazizi, Nelson Mandela, offshore financial centre, operational security, post-work, rolodex, Seymour Hersh, Silicon Valley, Skype, Steven Levy, sugar pill, uranium enrichment, WikiLeaks

In the event, Brown’s speech, eloquent as it was in articulating his vision of the party’s purpose, failed to move the audience beyond more than polite applause. Opening with an admission that the last few months had been difficult, Brown talked about the series of challenges his government had faced as soon as it came into office: floods, foot and mouth disease, avian flu, and the global credit crunch. He made no mention of the decision not to go to early elections that precipitated Labour’s plummeting poll numbers (see ref). Instead, Brown talked about the global economy of the future, in which skilled workers and entrepreneurs would reap high-value returns, and declared that higher standards of education would equip Britons to succeed in globalized future economy.


pages: 338 words: 100,477

Split-Second Persuasion: The Ancient Art and New Science of Changing Minds by Kevin Dutton

availability heuristic, Bernie Madoff, call centre, Cass Sunstein, classic study, cognitive bias, cognitive dissonance, cognitive load, credit crunch, different worldview, double helix, Douglas Hofstadter, equity premium, fundamental attribution error, haute couture, job satisfaction, Jon Ronson, loss aversion, Milgram experiment, Philippa Foot, placebo effect, Stephen Fry, Stephen Hawking, Steven Pinker, theory of mind, trolley problem, ultimatum game, upwardly mobile

If, after all, you’ve managed to figure out that it’s in your own best interests to hit the button, what’s to say that one of the others won’t have too? And what’s to say they’re not going to do it now? Test Of Time It was the seventeenth-century British philosopher Thomas Hobbes who coined the phrase ‘a war of all against all’ to describe what life would be like without government. (Though with the credit crunch, Afghanistan and the MPs’ expenses scandal one wonders if it’s not worth a try.) But I prefer the words of former Australian Prime Minister Gough Whitlam: ‘The punters know that the horse named Morality rarely gets past the post, whereas the nag named Self-interest always runs a good race.’ Whitlam, in fact, might well have been speaking literally – if the results of a study at Princeton back in the seventies are anything to go by. 8Psychologists John Darley and Daniel Batson divided students at Princeton Theological Seminary into two groups.


pages: 391 words: 97,018

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy by Daniel Gross

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, Bear Stearns, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, carbon tax, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, congestion pricing, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, financial engineering, Frederick Winslow Taylor, high net worth, high-speed rail, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, index fund, intangible asset, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low interest rates, low skilled workers, man camp, Mark Zuckerberg, Martin Wolf, Mary Meeker, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, scientific management, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, zero-sum game, Zipcar

I’ve spent time with oil CEOs in Houston and solar panel makers in Boulder. I’ve visited a Prius factory in Japan and a bustling Chang’an-Ford auto plant in Chongqing, China, gas turbine factories in South Carolina and a business process outsourcing outpost in Bogotá, Colombia. I’ve chatted about the credit crunch with Warren Buffett and Blackstone Group’s chairman Stephen Schwarzman. I’ve toured thriving fish factories outside Saigon, publishing offices in Istanbul, gas stations in Soweto, and an aluminum smelter on a glacial fjord in eastern Iceland. I’ve interviewed small-town bankers and private equity magnates, American executives at Indian wind-turbine makers and Indian executives at American computer companies; dined at Davos with Nissan CEO Carlos Ghosn; and interviewed managers of 99-cent stores in Upper Manhattan.


pages: 357 words: 99,684

Why It's Still Kicking Off Everywhere: The New Global Revolutions by Paul Mason

anti-globalists, back-to-the-land, balance sheet recession, bank run, banking crisis, Berlin Wall, business cycle, capital controls, capitalist realism, centre right, Chekhov's gun, citizen journalism, collapse of Lehman Brothers, collective bargaining, creative destruction, credit crunch, Credit Default Swap, currency manipulation / currency intervention, currency peg, disinformation, do-ocracy, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, ghettoisation, illegal immigration, informal economy, land tenure, Leo Hollis, low skilled workers, mass immigration, means of production, megacity, Mohammed Bouazizi, Naomi Klein, Network effects, New Journalism, Occupy movement, price stability, quantitative easing, race to the bottom, rising living standards, short selling, Slavoj Žižek, Stewart Brand, strikebreaker, union organizing, We are the 99%, Whole Earth Catalog, WikiLeaks, Winter of Discontent, women in the workforce, working poor, working-age population, young professional

There are only three big buyers, each of them specializing in the hamburger trade: the occasional magnificent bull goes for a decent price, but most of the animals sell for around $52 per 100 pounds, down on last week and just two-thirds of the price they were getting six months before. On top of climate change and the credit crunch, the farmers now face yet another problem. In Washington the newly installed Republican majority in the House of Representatives is blocking the Federal budget. Though everybody is sure that it’s political manoeuvring and that a deal will finally be done, the Republicans’ price for their approval of the budget is a $4 trillion cut in Federal spending.


pages: 349 words: 98,868

Nervous States: Democracy and the Decline of Reason by William Davies

active measures, Affordable Care Act / Obamacare, Amazon Web Services, Anthropocene, bank run, banking crisis, basic income, Black Lives Matter, Brexit referendum, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Climategate, Climatic Research Unit, Colonization of Mars, continuation of politics by other means, creative destruction, credit crunch, data science, decarbonisation, deep learning, DeepMind, deindustrialization, digital divide, discovery of penicillin, Dominic Cummings, Donald Trump, drone strike, Elon Musk, failed state, fake news, Filter Bubble, first-past-the-post, Frank Gehry, gig economy, government statistician, housing crisis, income inequality, Isaac Newton, Jeff Bezos, Jeremy Corbyn, Johannes Kepler, Joseph Schumpeter, knowledge economy, loss aversion, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, mass immigration, meta-analysis, Mont Pelerin Society, mutually assured destruction, Northern Rock, obamacare, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, pattern recognition, Peace of Westphalia, Peter Thiel, Philip Mirowski, planetary scale, post-industrial society, post-truth, quantitative easing, RAND corporation, Ray Kurzweil, Richard Florida, road to serfdom, Robert Mercer, Ronald Reagan, sentiment analysis, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, smart cities, Social Justice Warrior, statistical model, Steve Bannon, Steve Jobs, tacit knowledge, the scientific method, Turing machine, Uber for X, universal basic income, University of East Anglia, Valery Gerasimov, W. E. B. Du Bois, We are the 99%, WikiLeaks, women in the workforce, zero-sum game

Difficult for an auditor to demonstrate scientifically on the basis of public accounts and paper trails, perhaps—but not impossible for anyone who reflected a little bit on the role banks play in sustaining society as we know it. Let’s try to imagine it for a moment. The banking crisis of autumn 2008 came after a year in which banks had been increasingly reluctant to lend to each other, or what was known as the “credit crunch.” If banks were allowed to collapse, confidence in the overall banking system would likely evaporate, producing bank runs, which could only be averted if banks remained closed, withdrawing all credit-making facilities in the process. The sensible thing for customers to do would be to extract as much cash from ATMs as possible until they were empty.


pages: 1,202 words: 424,886

Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi

accounting loophole / creative accounting, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, cross-border payments, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, Dutch auction, financial innovation, financial intermediation, fixed income, flag carrier, foreign exchange controls, full employment, Glass-Steagall Act, Goodhart's law, Greenspan put, guns versus butter model, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, land bank, large denomination, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market bubble, market clearing, market fundamentalism, Money creation, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Phillips curve, Ponzi scheme, price mechanism, price stability, profit motive, proprietary trading, prudent man rule, Real Time Gross Settlement, reserve currency, risk free rate, risk tolerance, risk/return, Savings and loan crisis, seigniorage, shareholder value, short selling, short squeeze, tail risk, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game

As a result, bankers rarely changed the prime rate that they charged their best customers, and they felt safe lending at a fixed rate not only on 90-day notes, but also on term loans; the rate risk in both sorts of lending seemed small. Then things changed. Inflation became a problem, and to fight it, the Fed pushed up interest rates sharply and rapidly on a number of occasions starting in the mid-1960s. The banks felt the impact of the initial credit crunch largely in terms of opportunity cost. At that point, they weren’t buying huge amounts of money, so tight money didn’t dramatically raise their funding costs. It did mean, however, that funds locked up in old low-interest term loans could not be lent out at the higher current rates. Later, as banks began to rely more and more on bought money, tight money significantly increased their funding costs; and the rate risk implied in fixed-rate lending became pronounced.

Whether operation twist was successful in altering the slope of the yield curve, in stimulating investment, or in decreasing the balance of payments deficit has been much debated. The policy died in 1965, a victim of the Vietnam War, which set off inflationary pressures in the economy and caused the Fed to focus on curbing inflation. In 1966, the Fed introduced the first of several credit crunches that drove interest rates to historical highs. As fighting inflation came to be a key target of Fed policy, another change was also occurring—a gradual shift in the Fed’s attention away from interest rates toward growth of the money supply. The level of interest rates does not necessarily indicate how tight or easy monetary policy is because interest rates respond not only to what the Fed is doing, but also to general economic conditions.

Another is to invest a large sum of money in short-term instruments when it is clear that most of that money will not be needed in the short run or even in the long run. A corporation that pursues such a strategy, as some triple-A credits do, pays a large premium year in and year out to ensure that it can survive even a severe credit crunch without mild discomfort. It is sometimes suggested that the reason some large corporations do not manage their portfolios is that they have too much money; that is, it is impossible within the confines of the money market to actively manage their many billions of dollars. Sums of that magnitude are, however, actively managed; the World Bank’s multibillion-dollar portfolio is a prime example.


pages: 352 words: 107,280

Good Times, Bad Times: The Welfare Myth of Them and Us by John Hills

Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, credit crunch, Donald Trump, falling living standards, full employment, Gini coefficient, income inequality, income per capita, longitudinal study, meritocracy, mortgage debt, pension reform, plutocrats, precariat, quantitative easing, Right to Buy, unpaid internship, very high income, We are the 99%, working-age population, World Values Survey

CSJ Housing Dependency Working Group (2008) Housing poverty: From social breakdown to social mobility, London: CSJ. Cullis, A. and Hansen, K. (2008) Child development in the first three sweeps of the Millennium Cohort Study, Research Report DCSF-RW077, London: Department for Children, Schools and Families. De Agostini, P. and Brewer, M. (2013) Credit crunched: Single parents, Universal Credit and the struggle to make work pay, London: Gingerbread. De Agostini, P., Hills, J. and Sutherland, H. (2015) Were we really all in it together? The distributional effects of the 2010–2015 UK coalition government’s tax-benefit changes: An end of term update, Social Policy in a Cold Climate Working Paper 22, London: London School of Economics.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

Alan Greenspan, algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Greenspan put, hiring and firing, housing crisis, inflation targeting, junk bonds, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Rubik’s Cube, Savings and loan crisis, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

The literature does indeed suggest that the spread of interstate banking made US regional business cycles smaller and more correlated, even if the similarity of pre- and post-1990 correlations of shocks suggests the impact was limited.16 The theoretical impact on output volatility is ambiguous, as the benefits from having access to out-of-state loans over a credit crunch has to be set against the loss of local loans when there is a fall in collateral values. Empirical results, however, find that fluctuations in output in US states became smaller and more coherent as US bank integration increased.17 Strikingly, this improvement occurred even as supervision of the regulated banks was being tightened as a result of the introduction of prompt corrective action in the early 1990s.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

air traffic controllers' union, Alan Greenspan, Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Bletchley Park, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, business process, butterfly effect, call centre, capital controls, carbon tax, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, commons-based peer production, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, disinformation, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, false flag, financial engineering, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, fulfillment center, full employment, future of work, game design, Glass-Steagall Act, green new deal, guns versus butter model, Herbert Marcuse, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Perry Barlow, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, late capitalism, low interest rates, low skilled workers, market clearing, means of production, Metcalfe's law, microservices, middle-income trap, Money creation, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, power law, precariat, precautionary principle, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, scientific management, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, technological determinism, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, Twitter Arab Spring, union organizing, universal basic income, urban decay, urban planning, vertical integration, Vilfredo Pareto, wages for housework, WikiLeaks, women in the workforce, Yochai Benkler

This conundrum of rising profits alongside falling investment should be the real focus for modern crisis theory. But there is a fairly clear explanation: in the neoliberal system, firms use profits to pay dividends rather than to reinvest. And in conditions of financial stress – obvious after the Asian crisis of 1997 – they use profits to build up cash reserves as a buffer against a credit crunch. They also relentlessly pay down debt, and in the good times buy back shares as a kind of windfall profit distribution to their financial owners. They are minimizing their exposure to being financially exploited, and maximizing their own ability to play in the financial markets. So while Husson and Shaikh successfully demonstrate a ‘falling profit rate’ prior to 2008, the crisis is a result of something bigger and more structural.


pages: 383 words: 108,266

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dan Ariely

air freight, Al Roth, Alan Greenspan, Bear Stearns, behavioural economics, Bernie Madoff, Burning Man, butterfly effect, Cass Sunstein, collateralized debt obligation, compensation consultant, computer vision, corporate governance, credit crunch, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, endowment effect, financial innovation, fudge factor, Gordon Gekko, greed is good, housing crisis, IKEA effect, invisible hand, John Perry Barlow, lake wobegon effect, late fees, loss aversion, market bubble, Murray Gell-Mann, payday loans, Pepsi Challenge, placebo effect, price anchoring, Richard Thaler, second-price auction, Silicon Valley, Skinner box, Skype, subprime mortgage crisis, The Wealth of Nations by Adam Smith, Upton Sinclair

“Look,” I said, “the credit card business is cutthroat. You send out six billion direct-mail pieces a year, and all the card offers are about the same.” Reluctantly, they agreed. “But suppose one credit card company stepped out of the pack,” I continued, “and identified itself as a good guy—as an advocate for the credit-crunched consumer? Suppose one company had the guts to offer a card that would actually help consumers control their credit, and better still, divert some of their money into long-term savings?” I glanced around the room. “My bet is that thousands of consumers would cut up their other credit cards—and sign up with you!”


pages: 372 words: 109,536

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money by Frederik Obermaier

air gap, banking crisis, blood diamond, book value, credit crunch, crony capitalism, Deng Xiaoping, Edward Snowden, family office, Global Witness, high net worth, income inequality, Jeremy Corbyn, Kickstarter, Laura Poitras, liquidationism / Banker’s doctrine / the Treasury view, mega-rich, megaproject, Mikhail Gorbachev, mortgage debt, Nelson Mandela, offshore financial centre, optical character recognition, out of africa, race to the bottom, vertical integration, We are the 99%, WikiLeaks

This game of hide-and-seek has serious consequences, not only in cases where criminal activities are obviously being concealed. The legal constructs of the offshore world also create problems on a huge scale. In fact, an expert from the Tax Justice Network wrote in 2008 in a memorandum for the UK House of Commons Treasury Committee: ‘Within the financial sector it would have been impossible for the current credit crunch to have happened if offshore had not existed.’ Not surprisingly, it was those who had caused the financial crisis who were the least affected by it. While billions were spent bailing out banks, and nearly all those responsible got away without being investigated, let alone charged, the victims, the people conned into taking out enormous loans, were abandoned often without a job, a house or any prospect of ever being able to live debt-free again.


pages: 375 words: 106,536

Lost at Sea by Jon Ronson

Affordable Care Act / Obamacare, Columbine, computer age, credit crunch, Douglas Hofstadter, Downton Abbey, Dr. Strangelove, East Village, Easter island, Etonian, false memory syndrome, Gödel, Escher, Bach, income inequality, Internet Archive, Jeff Bezos, Jon Ronson, Kickstarter, late fees, Louis Pasteur, obamacare, Peter Thiel, Saturday Night Live, Search for Extraterrestrial Intelligence, Skype, subprime mortgage crisis, telemarketer

Fossie was a good guy. A good shot. He called me El Supremo.” Graham pauses sadly. “He loved guns,” he says. “He had hundreds of thousands of pounds’ worth of them. He was a real collector.” On my way home, I drive once more through posh little Maesbrook. All the talk on the radio is of the credit crunch. They’re interviewing Oliver Letwin and Harriet Harman. Both admit, quite sheepishly, that they have no savings, only overdrafts. “I wish it weren’t so,” Letwin says, “and incidentally I wish people in Britain were all saving more. I know I ought to, but my wife and I are too extravagant and we should cut back.”


pages: 417 words: 109,367

The End of Doom: Environmental Renewal in the Twenty-First Century by Ronald Bailey

3D printing, additive manufacturing, agricultural Revolution, Albert Einstein, Anthropocene, Asilomar, autonomous vehicles, biodiversity loss, business cycle, carbon tax, Cass Sunstein, Climatic Research Unit, commodity super cycle, conceptual framework, corporate governance, creative destruction, credit crunch, David Attenborough, decarbonisation, dematerialisation, demographic transition, disinformation, disruptive innovation, diversified portfolio, double helix, energy security, failed state, financial independence, Ford Model T, Garrett Hardin, Gary Taubes, Great Leap Forward, hydraulic fracturing, income inequality, Induced demand, Intergovernmental Panel on Climate Change (IPCC), invisible hand, knowledge economy, meta-analysis, Naomi Klein, negative emissions, Neolithic agricultural revolution, ocean acidification, oil shale / tar sands, oil shock, pattern recognition, peak oil, Peter Calthorpe, phenotype, planetary scale, precautionary principle, price stability, profit motive, purchasing power parity, race to the bottom, RAND corporation, Recombinant DNA, rent-seeking, rewilding, Stewart Brand, synthetic biology, systematic bias, Tesla Model S, trade liberalization, Tragedy of the Commons, two and twenty, University of East Anglia, uranium enrichment, women in the workforce, yield curve

Issues in Science and Technology, February 5, 2014. issues.org/30-2/keith/. “the adoption of GM cotton”: Matin Qaim and Shahzad Kouser, “Genetically Modified Crops and Food Security.” PLoS One, June 15, 2013, doi:10.1371/journal.pone.0064879. “did not find a systematic relation”: Anoop Sadanandan, “Political Economy of Suicide: Financial Reforms, Credit Crunches, and Farmer Suicides in India.” Journal of Developing Areas 48.4 (Fall 2014): 287–307. www.anoopsadanandan.com/PoliticalEconomyofSuicide.pdf. “male farmer suicide rates have actually declined”: Ian Plewis, “Hard Evidence: Does GM Cotton Lead to Farmer Suicide in India?” The Conversation, March 12, 2014. theconversation.com/hard-evidence-does-gm-cotton-lead-to-farmer-suicide-in-india-24045.


pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

3D printing, agricultural Revolution, Alan Greenspan, Anthropocene, Apollo 11, back-to-the-land, banking crisis, banks create money, Bear Stearns, biodiversity loss, Bretton Woods, business cycle, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, degrowth, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, global village, green transition, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jevons paradox, Kenneth Rogoff, late fees, liberal capitalism, low interest rates, mega-rich, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, rolling blackouts, Ronald Reagan, short selling, special drawing rights, systems thinking, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, WikiLeaks, working poor, world market for maybe five computers, zero-sum game

Praveen Ganta, “US Economic Energy Efficiency: 1950–2008,” Seeking Alpha, posted January 10,2010. 13. See Alan Hastings, Population Biology (New York: Springer, 1996), and William Cat-ton, Overshoot: The Ecological Basis of Revolutionary Change (Urbana: University of Illinois Press, 1982). 14. Colin Campbell, “Colin Campbell Predicts Credit Crunch Due to Peak Oil 2005,” YouTube video, posted October 16, 2008, youtube.com/watch?v=lDNMjV6sumQ&feature=related. 15. The Peak Oil scenario is laid out in more detail in my book The Party’s Over: Oil, War and the Fate of Industrial Societies (Gabriola Island, BC: New Society, 2003). 16. Richard Heinberg, “Temporary Recession or the End of Growth?”


Discover Greece Travel Guide by Lonely Planet

car-free, carbon footprint, credit crunch, G4S, haute couture, haute cuisine, low cost airline, pension reform, sensible shoes, too big to fail, trade route, urban renewal

Papandreou stepped down in 1996 and his departure produced a dramatic change of direction for PASOK, with the party abandoning Papandreou’s left-leaning politics and electing experienced economist and lawyer Costas Simitis as the new prime minister (who won a comfortable majority at the October 1996 polls). SINK or SWIM In 2009 a lethal cocktail of high public spending and widespread tax evasion, combined with the credit crunch of global recession, threatened to cripple Greece’s economy. In 2010 Greece’s fellow eurozone countries agreed to a US$145 billion package (half of Greece’s GDP) to get the country back on its feet, though with strict conditions – the ruling government, PASOK, still led by Georgios Papandreou, would have to impose austere measures of reform to reduce Greece’s bloated deficit in order to receive these handouts.


pages: 357 words: 107,984

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them.” When Congress created the Fed in 1913, the central bank could lend to other businesses only through banks. But in July 1932, as banking failures during the Great Depression deepened a credit crunch that starved businesses of working capital, Congress blurred the line between monetary and credit policy by inserting an obscure provision into a highway-construction bill that radically expanded the Fed’s potential lending spigots. This provision—the 13(3) powers requiring “unusual and exigent circumstances”—gave the Fed special authority to use its powers to create money out of thin air and to designate any of the twelve reserve banks to purchase assets from or make loans to corporations, individuals, or partnerships outside the banking system that the Fed regulates.


The Global Money Markets by Frank J. Fabozzi, Steven V. Mann, Moorad Choudhry

asset allocation, asset-backed security, bank run, Bear Stearns, Bretton Woods, buy and hold, collateralized debt obligation, credit crunch, currency risk, discounted cash flows, discrete time, disintermediation, Dutch auction, financial engineering, fixed income, Glass-Steagall Act, high net worth, intangible asset, interest rate derivative, interest rate swap, land bank, large denomination, locking in a profit, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, money market fund, moral hazard, mortgage debt, paper trading, Right to Buy, short selling, stocks for the long run, time value of money, value at risk, Y2K, yield curve, zero-coupon bond, zero-sum game

During this time, investors fled emerging markets’ equity and debt, liquidity in corporate bonds dried up, and money poured into Treasuries. The spread between 3month LIBOR and 3-month bills was 132 basis points on October 20, 1998. The spread returned to more normal levels as the Federal Reserve cut the Federal Funds rate three times in the following two months to avert a credit crunch. The final spike in the data occurs in the fall (October/November) of 1999. Although the macroeconomic climate was relatively settled during this time, uncertainty due to the Y2K calendar conversion engendered some portfolio rebalancing and a flight to quality. Once these concerns abated, spreads quickly returned to more normal levels.


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

"there is no alternative" (TINA), accounting loophole / creative accounting, air traffic controllers' union, Airbnb, Alan Greenspan, basic income, behavioural economics, Ben Bernanke: helicopter money, billion-dollar mistake, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, market bubble, means of production, military-industrial complex, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, tacit knowledge, technological determinism, The Future of Employment, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

The ECB interest rate was higher than the German inflation rate, though lower than that of the Mediterranean countries, which therefore enjoyed the luxury of negative real interest rates.26 The cost of government credit also sank dramatically in the South, largely because of the capital markets’ assumption – inspired in part by the European Commission – that, regardless of the treaties, the single currency contained a shared or even a specifically German guarantee of the solvency of the member states. The outcome was a boom in the South and stagnation in Germany, with high unemployment and rising government indebtedness. LINE STRUGGLES All this changed in 2008, with the arrival of the credit crunch – or in other words, with the collapse of the financial markets’ illusions about German or European willingness to act as lenders of last resort for the debts of the South, combined with the fall of interest rates to near zero. The reason why the single currency now favoured Germany lay in the so-called over-industrialization of its economy, a fact lamented as recently as the 1990s.


pages: 302 words: 82,233

Beautiful security by Andy Oram, John Viega

Albert Einstein, Amazon Web Services, An Inconvenient Truth, Bletchley Park, business intelligence, business process, call centre, cloud computing, corporate governance, credit crunch, crowdsourcing, defense in depth, do well by doing good, Donald Davies, en.wikipedia.org, fault tolerance, Firefox, information security, loose coupling, Marc Andreessen, market design, MITM: man-in-the-middle, Monroe Doctrine, new economy, Nicholas Carr, Nick Leeson, Norbert Wiener, operational security, optical character recognition, packet switching, peer-to-peer, performance metric, pirate software, Robert Bork, Search for Extraterrestrial Intelligence, security theater, SETI@home, Silicon Valley, Skype, software as a service, SQL injection, statistical model, Steven Levy, the long tail, The Wisdom of Crowds, Upton Sinclair, web application, web of trust, zero day, Zimmermann PGP

The financial management software underpinning investment banks performs “supercrunching” calculations on data sets pulled from public and private sources and builds sophisticated prediction models from petabytes of data.* Medical research systems * One could, of course, argue that the 2008 credit crunch should have been predicted. The lapse may be the fault of prejudices fed to the programmers, rather than the sophistication of the programs. 148 CHAPTER NINE analyze DNA for complex patterns of hereditary diseases, predicting entire populations’ hereditary probability to inherit genetic traits.


pages: 459 words: 118,959

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

activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, Blythe Masters, book value, buy and hold, Carl Icahn, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, electricity market, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Greenspan put, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Pershing Square Capital Management, Ponzi scheme, profit motive, Savings and loan crisis, short selling, short squeeze, statistical model, stock buybacks, subprime mortgage crisis, white flight, zero-sum game

CHAPTER 19 RATINGS REVISITED Doug Noland, “Wall Street Backed Finance,” David Tice & Associates, Dec. 21, 2007. William Ackman, letter to Rep. Barney Frank, Oct. 26, 2007. David Einhorn, “The Curse of the Triple-A Rating,” presentation at the Ira Sohn Investment Conference, New York City, May 27, 2009. Karen Richardson, “Credit Crunch: MBIA Gets a Capital Pain Reliever,” Wall Street Journal, Dec. 11, 2007, C2. Martin Whitman, interview with Erin Burnett, CNBC, Dec. 21, 2007. Jody Shenn, “Moody’s Had $174 Billion in CDOs on Downgrade Review,” Bloomberg News, Dec. 18, 2007. Morgan Stanley, “Fourth Quarter 2007 Earnings,” Bloomberg transcript, Dec. 19, 2007.


pages: 403 words: 119,206

Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith

Alan Greenspan, bank run, banking crisis, book value, business climate, business cycle, buy and hold, capital asset pricing model, compound rate of return, computerized trading, Cornelius Vanderbilt, credit crunch, cuban missile crisis, discounted cash flows, diversified portfolio, Donald Trump, equity risk premium, Eugene Fama: efficient market hypothesis, financial independence, financial innovation, fixed income, full employment, Glass-Steagall Act, income inequality, index arbitrage, index fund, joint-stock company, junk bonds, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market clearing, merger arbitrage, Michael Milken, money market fund, Myron Scholes, Paul Samuelson, price stability, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, Robert Bork, Robert Shiller, Ronald Reagan, scientific management, shareholder value, short selling, stocks for the long run, the market place, transaction costs

Whatever the merit of stocks as a long-run inflation hedge, the disastrous short-term performance of equities in the 1970s certainly tarnished the reputation of stocks as a good investment vehicle in times of inflation. With the benefit of twenty-twenty hindsight, however, it can be said that in spite of the seemingly dismal investment climate in late summer 1982, the stock market was poised to rise. Volker’s credit “crunch” had done its job. Inflation was finally under control and interest rates were coming down as the Fed at last eased its tight money policy. The Reagan tax cuts promised to stimulate the economy. Few market participants recognized it at the time, but Wall Street stood on the threshold of the greatest bull market ever. 14 RETURN OF THE BULL ON A SEPTEMBER night in 1976, a 35-year-old University of California at Berkeley finance professor was plagued by sleeplessness.


pages: 410 words: 114,005

Black Box Thinking: Why Most People Never Learn From Their Mistakes--But Some Do by Matthew Syed

Abraham Wald, Airbus A320, Alfred Russel Wallace, Arthur Eddington, Atul Gawande, Black Swan, Boeing 747, British Empire, call centre, Captain Sullenberger Hudson, Checklist Manifesto, cognitive bias, cognitive dissonance, conceptual framework, corporate governance, creative destruction, credit crunch, crew resource management, deliberate practice, double helix, epigenetics, fail fast, fear of failure, flying shuttle, fundamental attribution error, Great Leap Forward, Gregor Mendel, Henri Poincaré, hindsight bias, Isaac Newton, iterative process, James Dyson, James Hargreaves, James Watt: steam engine, Johannes Kepler, Joseph Schumpeter, Kickstarter, Lean Startup, luminiferous ether, mandatory minimum, meta-analysis, minimum viable product, publication bias, quantitative easing, randomized controlled trial, selection bias, seminal paper, Shai Danziger, Silicon Valley, six sigma, spinning jenny, Steve Jobs, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Toyota Production System, US Airways Flight 1549, Wall-E, Yom Kippur War

It is a way of collapsing a complex event into a simple and intuitive explanation: “It was his fault!” Of course, blame can sometimes be a matter not of cognitive bias, but of pure expediency. If we place the blame on someone else, it takes the heat off of ourselves. This process can happen at a collective as well as at an individual level. Take, for example, the credit crunch of 2007–2008. This was a disaster involving investment bankers, regulators, politicians, mortgage brokers, central bankers, and retail creditors. But the public (and many politicians) chose to focus the blame almost exclusively on bankers. Many bankers did indeed behave recklessly. Some would argue that they should have been penalized more severely.


pages: 426 words: 115,150

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century by Vicki Robin, Joe Dominguez, Monique Tilford

asset allocation, book value, Buckminster Fuller, buy low sell high, classic study, credit crunch, disintermediation, diversification, diversified portfolio, fiat currency, financial independence, fixed income, fudge factor, full employment, Gordon Gekko, high net worth, index card, index fund, intentional community, job satisfaction, junk bonds, Menlo Park, money market fund, Parkinson's law, passive income, passive investing, profit motive, Ralph Waldo Emerson, retail therapy, Richard Bolles, risk tolerance, Ronald Reagan, Silicon Valley, software patent, strikebreaker, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, Vanguard fund, zero-coupon bond

Department of Commerce, www.bea.gov/briefrm/saving.htm. 3 http://www.tns-mi.com/news/01082007.htm. 4 http://www.pwc.com/extweb/pwcpublications.nsf/docid/5AC172F2C9DED8F5852570210044EEA7?opendocument&vendor=none. 5 http://www.federalreserve.gov/releases/g19/Current/. 6 Richard Paul Evans, The Five Lessons a Millionaire Taught Me About Life and Wealth (New York: Fireside, 2006), p. 6. 7 http://www.brillig.com/debt_clock/. 8 Geoff Colvin, “The Next Credit Crunch,” Fortune Magazine, August 20, 2008. 9 Bill Clinton, in his speech at the 2008 Democratic National Convention. 10 National Science Foundation, 2007. One quarter of all Americans are lonely. 11 http://www.nchc.org/facts/cost.shtml. 12 Stephen Taub, “Pension Plans Disappearing: A new study shows the number of Fortune 1000 companies that have frozen or terminated a defined benefit pension plan has more than tripled since 2001,” CFO.com, June 27, 2006, http://www.cfo.com/article.cfm/7108045?


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

"World Economic Forum" Davos, AI winter, Alan Greenspan, algorithmic trading, AOL-Time Warner, Apollo 11, asset allocation, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, Bob Litterman, book value, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Charles Babbage, citizen journalism, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, electricity market, Emanuel Derman, en.wikipedia.org, experimental economics, fake news, financial engineering, financial innovation, fixed income, Ford Model T, Gordon Gekko, Hans Moravec, Herman Kahn, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, Ivan Sutherland, Jim Simons, John Bogle, John Nash: game theory, Kenneth Arrow, load shedding, Long Term Capital Management, machine readable, machine translation, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, military-industrial complex, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, semantic web, Sharpe ratio, short selling, short squeeze, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, stock buybacks, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, tontine, too big to fail, transaction costs, Turing machine, two and twenty, Upton Sinclair, value at risk, value engineering, Vernor Vinge, Wayback Machine, yield curve, Yogi Berra, your tax dollars at work

It wasn’t pretty: U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years. —Binyamin Appelbaum, “Banks to Continue Paying Dividends” ( Washington Post, October 30, 2008) Banks getting $125 billion from U.S. taxpayers to unlock the credit crunch are saying they’d rather hoard the money than use it for loans. —Jody Shenn, “Banks Hoard Money Meant to Boost Economy, Lender Says” (Bloomberg.com, November 7, 2008) 310 Nerds on Wall Str eet Watching CNN (with the sound off, as I tried to work on this book), I noticed Sal Khan, an earnest-looking young man, drawing colorful diagrams about the banking crisis.


pages: 335 words: 114,039

David Mitchell: Back Story by David Mitchell

British Empire, Bullingdon Club, call centre, correlation does not imply causation, credit crunch, Desert Island Discs, Downton Abbey, energy security, gentrification, Golden age of television, Kickstarter, lateral thinking, Russell Brand, Stephen Fry

I don’t want to lose that side of my career and I certainly don’t want to stop working with Rob. But I now value my ‘panel show persona’, and all the opportunities for showing off on screen, in print and online that come with it, equally highly. - 32 - Lovely Spam, Wonderful Spam It stops being Holland Park Avenue very suddenly. It’s like the credit crunch – there’s no real warning. In hindsight, there were signs. There was something slightly low rent about that Hilton hotel on the left and just a suggestion of flaky paint on Royal Crescent to the right, but nothing to prepare the casual pedestrian for what happens next. The tree-lined avenue of stucco houses ends abruptly and a bleak and vast plain of tarmac is revealed: a huge and alienating roundabout that forms a barrier between leafy Holland Park and affordable Shepherd’s Bush.


pages: 443 words: 116,832

The Hacker and the State: Cyber Attacks and the New Normal of Geopolitics by Ben Buchanan

active measures, air gap, Bernie Sanders, bitcoin, blockchain, borderless world, Brian Krebs, British Empire, Cass Sunstein, citizen journalism, Citizen Lab, credit crunch, cryptocurrency, cuban missile crisis, data acquisition, disinformation, Donald Trump, drone strike, Edward Snowden, fake news, family office, Hacker News, hive mind, information security, Internet Archive, Jacob Appelbaum, John Markoff, John von Neumann, Julian Assange, Kevin Roose, Kickstarter, kremlinology, Laura Poitras, MITM: man-in-the-middle, Nate Silver, operational security, post-truth, profit motive, RAND corporation, ransomware, risk tolerance, Robert Hanssen: Double agent, rolodex, Ronald Reagan, Russian election interference, seminal paper, Silicon Valley, South China Sea, Steve Jobs, Stuxnet, subscription business, technoutopianism, undersea cable, uranium enrichment, Vladimir Vetrov: Farewell Dossier, Wargames Reagan, WikiLeaks, zero day

Operation Ababil The financial industry in the United States is perhaps the closest analog to the oil industry in Saudi Arabia: it is both a symbol of American geopolitical might and a means of projecting and increasing that power. The United States had long worried about what an attack on the sector might look like; in particular, it worried about threats that could undermine consumer confidence in financial institutions. With memories still fresh of how the 2008 global financial crisis had weakened trust and caused a credit crunch, American government officials worried that a cyber attack might shake the faith of consumers and businesses all over the world. In September 2012, Iran made this fear more than hypothetical. The attackers called their effort Operation Ababil. To carry it out, they deployed a technique that others had used for more than a decade: a distributed denial-of-service attack.


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

The global size of an economy in which the entire population achieved HIC per capita incomes (including 2 per cent annual growth) would be $767 trillion in 2050 and £2,340 trillion in 2100. 49 See MEA (2005), TEEB (2010, 2012). 2 Prosperity lost 1 Keynes (1937), cited in Krugman (2015). 2 Felkerson (2011). 3 On rising inequality, see, for example, Credit Suisse (2014), Oxfam (2015), Piketty (2014). On health outcomes from austerity, see Stuckler and Basu (2014). See also www.theguardian.com/business/2015/oct/29/europes-politics-of-dystopia?CMP=Share_iOSApp_Other (accessed 12 March 2016). 4 See www.theguardian.com/uk/2009/jul/26/monarchy-credit-crunch (accessed 14 March 2016). 5 Turner (2015). 6 Inside Job (Sony Pictures, 2010). 7 On IMF prediction, see World Economic Outlook (IMF 2008: xiv); for OECD, see http://news.bbc.co.uk/1/hi/business/7430616.stm; on ‘financial markets’, see Soros (2008); on ‘stagflation’, see http://news.bbc.co.uk/1/hi/business/127516.stm; on food riots, see for example http://news.bbc.co.uk/1/hi/world/7384701.stm. 8 Reinhart and Rogoff (2013: figure 4). 9 See Hall and Soskice (2001).


pages: 380 words: 116,919

Britain's Europe: A Thousand Years of Conflict and Cooperation by Brendan Simms

anti-communist, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Corn Laws, credit crunch, eurozone crisis, Fall of the Berlin Wall, first-past-the-post, guns versus butter model, imperial preference, Jeremy Corbyn, land reform, Monroe Doctrine, moral panic, oil shock, open economy, plutocrats, race to the bottom, Ronald Reagan, sceptred isle, South Sea Bubble, Suez canal 1869, Suez crisis 1956, trade route, éminence grise

It was the British prime minister who pressed most strongly for the deployment of ground troops into Kosovo, and it was probably fears that this would happen which drove Miloševic´ to compromise in the end.34 Blair’s remarkable Chicago Speech, which enunciated the doctrine of international community, paved the way for the adoption of the ‘Responsibility to Protect’ principle at the United Nations. In late September and early October 2008, Britain’s Gordon Brown played a central role in coordinating the western response to the global credit crunch.35 More recently, it was David Cameron who joined the French president Nicolas Sarkozy in putting intervention in Libya on the international agenda, and it was his advocacy especially which brought the Americans onside in NATO. Whatever one makes of the results in Libya itself, the event was a showcase for the value of cooperation between London and Paris, which is central to French thinking on defence.


Financial Statement Analysis: A Practitioner's Guide by Martin S. Fridson, Fernando Alvarez

Bear Stearns, book value, business cycle, corporate governance, credit crunch, discounted cash flows, diversification, Donald Trump, double entry bookkeeping, Elon Musk, financial engineering, fixed income, information trail, intangible asset, interest rate derivative, interest rate swap, junk bonds, negative equity, new economy, offshore financial centre, postindustrial economy, profit maximization, profit motive, Richard Thaler, shareholder value, speech recognition, statistical model, stock buybacks, the long tail, time value of money, transaction costs, Y2K, zero-coupon bond

Instead of going to the capital markets to raise money, Wal-Mart achieved net reductions in its long-term and short-term debt, along with a net retirement of $7.3 billion of common stock. Wal-Mart's ability to self-finance its expansion is a great advantage. At times, new financing becomes painfully expensive, as a function of high interest rates or depressed stock prices. During the credit crunches that occasionally befall the business world, external financing is unavailable at any price. Underlying Wal-Mart's lack of dependence on external funds is a highly profitable discount store business. If this engine were to slow down for a time, as a result of an economic contraction or increased competitive pressures, the company would have two choices.


Ireland (Lonely Planet, 9th Edition) by Fionn Davenport

air freight, Berlin Wall, Bob Geldof, British Empire, carbon credits, carbon footprint, Celtic Tiger, centre right, classic study, country house hotel, credit crunch, Easter island, glass ceiling, global village, haute cuisine, Intergovernmental Panel on Climate Change (IPCC), Jacquard loom, Kickstarter, McMansion, new economy, period drama, reserve currency, risk/return, sustainable-tourism, three-masted sailing ship, urban planning, urban renewal, urban sprawl, young professional

Return to beginning of chapter SHOPPING In 2007 Europe’s busiest shopping street was Dublin’s very own Henry St, which saw an average of 16,000 frothing retail junkies an hour, each pram-pushing family and consumer couple playing catch-me-if-you-can with the credit card companies. But that was before the global credit crunch. On the surface, nothing seems to have changed. Dubliners still throng the main shopping streets both north and south of the Liffey, even though the overall numbers have dipped, in some cases quite dramatically. British and US chains dominate the high street and major shopping centres but there are also numerous small, independent shops selling high-quality, locally made goods.

Its claim to fame is St Fintan’s Tree, a large sycamore; the water that collects in the groove in one of its lower branches is said to have healing properties. Ballyfin House (8km north of Mountrath) is an architectural treasure, designed by Richard Morrison in 1850. Used for years as a college, work began (and was then suspended due to the credit crunch) on a painstaking restoration in order to transform the mansion into a luxury hotel. The original target date for completion was 2010 but it’s likely it’ll be at least a year behind schedule. Instead, head for Roundwood House ( 057-873 2120; www.roundwoodhouse.com; Slieve Blooms Rd; s/d from €110/170; Feb-Dec; ), a lush country estate, family home and hotel, where you’ll feel like you’re a family friend rather than a paying guest.

Spaniard (Map; 9023 2448; 3 Skipper St) Forget ‘style’: this narrow, crowded bar, which looks as if it’s been squeezed into someone’s flat, has more atmosphere in one battered sofa than most ‘style bars’ have in their shiny entirety. Friendly staff, good beer, an eclectic crowd and cool tunes played at a volume that still allows you to talk: bliss. On Sunday from 9pm to midnight is You Say We Play, with the DJ playing requests only. Rotterdam (Map; 9074 6021; 54 Pilot St) Saved from demolition in 2008 by the credit crunch (which halted construction of the surrounding apartment development), the Rotterdam is a purist’s pub, unrepentantly old-fashioned and wonderfully atmospheric, with stone floors, an open fire, low ceilings and a perfectly poured pint of Guinness. It’s famed for the quality of its live-music sessions – jazz, folk, rock or blues plays most nights, and in summer the tables, and the gigs, spill outdoors.


Great Britain by David Else, Fionn Davenport

active transport: walking or cycling, Albert Einstein, Beeching cuts, Boris Johnson, British Empire, call centre, car-free, carbon footprint, clean water, colonial rule, Columbine, congestion charging, country house hotel, credit crunch, Crossrail, David Attenborough, Etonian, food miles, gentrification, glass ceiling, global village, haute cuisine, high-speed rail, illegal immigration, Isaac Newton, James Watt: steam engine, Kickstarter, land reform, Livingstone, I presume, Mahatma Gandhi, mass immigration, mega-rich, negative equity, new economy, North Ronaldsay sheep, North Sea oil, Northern Rock, offshore financial centre, period drama, place-making, retail therapy, Skype, Sloane Ranger, South of Market, San Francisco, Stephen Hawking, the market place, three-masted sailing ship, trade route, transatlantic slave trade, upwardly mobile, urban planning, urban renewal, urban sprawl, Winter of Discontent

Encouraged by the belief that prices can only go up, by banks offering loans for 125% of a house’s value, and by TV channels clogged with ‘property porn’, thousands of Britons have sunk their savings into bricks and mortar. But at the time of going to press, Britain was under a cloud in more ways than one, with recession looming on the horizon. The global credit crunch that began in late 2007 has seen interest rates rise, mortgages dry up and house prices tumble – possibly by as much as 30% by 2010. Those who bought into the get-rich-quick, property-owning dream in the last few years are feeling the clammy grip of negative equity, and tens of thousands of homes are being repossessed

* * * FAST FACTS Population: 59 million Area: 88,500 sq miles (230,000 sq km) Inflation: 5.2% (October 2008) Unemployment: 5.7% (August 2008) Head of State: Queen Elizabeth II Per capita GNP: approximately £23,500 (US$41,000) Average annual rainfall in southeast England: 550mm Average annual rainfall in northwest Highlands: 3000mm Male life expectancy (posh part of Glasgow): 82 Male life expectancy (poor part of Glasgow): 54 * * * The economic crisis has seen a backlash against the investment bankers, chief executives and hedge fund managers whose actions are seen by many as the cause of the credit crunch – ordinary people suffer while the ‘fat cats’ walk away with millions in their pockets. Financially speaking, Britain today is one of the most unequal societies in the developed world. Back in 1970 the average chief executive of a FTSE 100 company was paid around 10 times the earnings of the average employee; today that multiple is well over 100 times, and the wealthiest 10% of the population get 40% of the income.

However, critics claim that this success has been built on the insecure foundations of an irrational housing market and a mountain of consumer debt. The ratio of household debt to national income in 2008 was 1.62, the highest of any major economy, and the total stock of consumer debt has trebled over the last 10 years – at £1,325 billion it is now greater than Britain’s GDP. The global credit crunch that began in late 2007 hit Britain hard. The nationalisation of Northern Rock and Bradford & Bingley – two major British banks – was followed by a massive taxpayer bailout of the financial sector, including the merger of HBOS with Lloyds TSB to create a megabank that holds one third of the country’s savings and current accounts.


pages: 320 words: 33,385

Market Risk Analysis, Quantitative Methods in Finance by Carol Alexander

asset allocation, backtesting, barriers to entry, Brownian motion, capital asset pricing model, constrained optimization, credit crunch, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, en.wikipedia.org, financial engineering, fixed income, implied volatility, interest rate swap, low interest rates, market friction, market microstructure, p-value, performance metric, power law, proprietary trading, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, seminal paper, Sharpe ratio, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic bias, Thomas Bayes, transaction costs, two and twenty, value at risk, volatility smile, Wiener process, yield curve, zero-sum game

See Alexander and Kaeck (2008) and references therein for further details. These data were used in Alexander and Kaeck (2008) in a Markov switching regression model of regimes in credit spreads. 19 Introduction to Linear Regression 173 the equity index fell, and interest rates were subsequently reduced to alleviate the effects of the credit crunch. Estimation of the model (I.4.56) is performed using the Excel regression analysis tool and the results are shown in the ‘iTraxx Models’ spreadsheet of the case study. The fitted model is ŝ = 01223 − 19184 r − 03984 R + 01904 02832 −09118 −58720 23669 (I.4.57) The coefficients on the equity return and equity volatility are significant and of the correct sign, which supports the structural models of default.


pages: 382 words: 120,064

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do by Brett King

3D printing, Abraham Maslow, additive manufacturing, Airbus A320, Albert Einstein, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apollo 11, Apollo 13, Apollo Guidance Computer, asset-backed security, augmented reality, barriers to entry, behavioural economics, bitcoin, bounce rate, business intelligence, business process, business process outsourcing, call centre, capital controls, citizen journalism, Clayton Christensen, cloud computing, credit crunch, crowdsourcing, disintermediation, en.wikipedia.org, fixed income, George Gilder, Google Glasses, high net worth, I think there is a world market for maybe five computers, Infrastructure as a Service, invention of the printing press, Jeff Bezos, jimmy wales, Kickstarter, London Interbank Offered Rate, low interest rates, M-Pesa, Mark Zuckerberg, mass affluent, Metcalfe’s law, microcredit, mobile money, more computing power than Apollo, Northern Rock, Occupy movement, operational security, optical character recognition, peer-to-peer, performance metric, Pingit, platform as a service, QR code, QWERTY keyboard, Ray Kurzweil, recommendation engine, RFID, risk tolerance, Robert Metcalfe, self-driving car, Skype, speech recognition, stem cell, telepresence, the long tail, Tim Cook: Apple, transaction costs, underbanked, US Airways Flight 1549, web application, world market for maybe five computers

That is, banks are simply no longer going to be necessary when it comes to point of sale, neither are credit card companies. Does anyone remember payment by installment, lay-aways or lay-bys? My kids have never heard of them, and I can’t remember seeing them for at least a decade, but they used to be a pretty popular method of getting us through the Christmas credit crunch in the old days. But lay-aways have mostly disappeared because credit cards were a better idea. Just like lay-aways were under threat from a new payment mechanism, physical credit cards may also be on their way out due to mobile payments. The other poignant issue is that credit cards are a risky business for banks in the post-financial crisis world.


pages: 407 words: 121,458

Confessions of an Eco-Sinner: Tracking Down the Sources of My Stuff by Fred Pearce

additive manufacturing, air freight, Berlin Wall, biodiversity loss, blood diamond, British Empire, car-free, carbon footprint, clean water, congestion charging, corporate social responsibility, credit crunch, demographic transition, export processing zone, Fall of the Berlin Wall, food miles, ghettoisation, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Kibera, Kickstarter, mass immigration, megacity, Nelson Mandela, new economy, oil shale / tar sands, out of africa, peak oil, Pearl River Delta, profit motive, race to the bottom, Shenzhen was a fishing village, Silicon Valley, South China Sea, Steve Jobs, the built environment, urban planning, urban sprawl, women in the workforce

‘They are getting treatment, and hopefully soon they will be back at the rock face,’ she says. But ultimately many of them will go back to their villages to die. For several years from the late 1990s, world gold prices slumped. High-cost mines like Driefontein seemed destined to close. But gold prices have soared again since 2005. The credit crunch created a whole new gold rush, and the push is on to extract more and more of the precious metal while prices stay high. Billions of dollars are being bet on that eventuality. Goldfields plans to excavate yet deeper at Driefontein. Shaft 9 is set to go down a further half-kilometre or so, to give the mine another twenty years’ life.


pages: 516 words: 116,875

Greater: Britain After the Storm by Penny Mordaunt, Chris Lewis

"World Economic Forum" Davos, 2021 United States Capitol attack, 3D printing, accelerated depreciation, Ada Lovelace, Airbnb, banking crisis, battle of ideas, behavioural economics, Bernie Madoff, bitcoin, Black Lives Matter, blockchain, Bob Geldof, Boeing 747, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, carbon footprint, Charles Babbage, collective bargaining, Corn Laws, corporate social responsibility, COVID-19, credit crunch, crowdsourcing, data is not the new oil, data is the new oil, David Attenborough, death from overwork, Deng Xiaoping, Diane Coyle, Donald Trump, Downton Abbey, driverless car, Elon Musk, en.wikipedia.org, experimental economics, failed state, fake news, Firefox, fixed income, full employment, gender pay gap, global pandemic, global supply chain, green new deal, happiness index / gross national happiness, high-speed rail, impact investing, Jeremy Corbyn, Khartoum Gordon, lateral thinking, Live Aid, lockdown, loss aversion, low skilled workers, microaggression, mittelstand, moral hazard, Neil Kinnock, Nelson Mandela, Ocado, off-the-grid, offshore financial centre, Panamax, Ponzi scheme, post-truth, quantitative easing, remote working, road to serfdom, Salesforce, Sheryl Sandberg, Skype, smart cities, social distancing, South China Sea, sovereign wealth fund, Steve Jobs, Steven Pinker, surveillance capitalism, transaction costs, transcontinental railway

NOTES 1 https://www.thetimes.co.uk/article/the-times-view-on-millennial-attitudes-to-government-and-morality-on-liberty-qn6zj7lvt 2 The Leadership LAB 2018, reproduced with the kind permission of Kogan Page Ltd. 3 http://fortune.com/2017/11/06/apple-tax-avoidance-jersey/ 4 https://www.reuters.com/article/us-deutschebank-libor-settlement/deutsche-bank-fined-record-2-5-billion-over-rate-rigging-idUSKBN0NE12U20150423 5 http://www.bbc.com/news/business-31248913 6 https://www.theguardian.com/business/2012/jul/17/hsbc-executive-resigns-senate 7 https://www.forbes.com/sites/kenrapoza/2017/09/15/tax-haven-cash-rising-now-equal-to-at-least-10-of-world-gdp/?sh=556f93d970d6 8 https://www.theguardian.com/business/2016/nov/08/rbs-facing-400m-bill-to-compensate-small-business-customers 9 https://www.ft.com/content/87f72e9e-bafb-11e7-9bfb-4a9c83ffa852 10 https://www.theguardian.com/business/2008/dec/28/markets-credit-crunch-banking-2008 11 http://www.businessinsider.com/how-bernie-madoffs-ponzi-scheme-worked-2014-7 12 https://www.forbes.com/sites/greatspeculations/2019/05/03/20-years-since-the-uks-massive-gold-sales-heres-the-big-lesson-for-gold-investors/#51fb3a932ac6 13 https://www.cnn.com/2017/06/29/world/timeline-catholic-church-sexual-abuse-scandals/index.html 14 http://www.bbc.co.uk/news/uk-43121833 15 http://www.bbc.com/news/education-11621391 16 https://www.pwc.com/ee/et/publications/pub/sb87_17208_Are_CEOs_Less_Ethical_Than_in_the_Past.pdf 17 https://www.bbc.co.uk/news/business-34324772 18 https://www.theguardian.com/environment/2015/oct/09/mercedes-honda-mazda-mitsubishi-diesel-emissions-row 19 https://edition.cnn.com/2019/12/30/business/carlos-ghosn-lebanon/index.html 20 https://www.bbc.co.uk/news/business-48755329 21 http://www.bbc.co.uk/news/entertainment-arts-41594672 22 https://www.theguardian.com/media/greenslade/2014/feb/19/newsnight-lord-mcalpine 23 https://www.telegraph.co.uk/news/uknews/crime/jimmy-savile/12172773/Jimmy-Savile-sex-abuse-report-to-be-published-live.html 24 http://www.bbc.co.uk/sport/athletics/43301116 25 https://www.theguardian.com/law/2017/feb/02/iraq-human-rights-lawyer-phil-shiner-disqualified-for-professional-misconduct 26 https://www.theguardian.com/us-news/2018/aug/22/how-many-of-trumps-close-advisers-have-been-convicted-and-who-are-they 27 https://www.icij.org/investigations/panama-papers/ 28 https://www.bostonglobe.com/ideas/2018/01/20/trillions-dollars-have-sloshed-into-offshore-tax-havens-here-how-get-back/2wQAzH5DGRw0mFH0YPqKZJ/story.html 29 https://www.visualcapitalist.com/80-trillion-world-economy-one-chart/ 30 https://uk.reuters.com/article/us-davos-meeting-eu-tax/tax-avoidance-evasion-costs-eu-170-billion-euros-a-year-says-poland-idUKKBN1ZL1H4 31 https://www.theguardian.com/commentisfree/2018/nov/29/im-credited-with-having-coined-the-acronym-terf-heres-how-it-happened 32 https://stonewallhousing.org/wp-content/uploads/2018/09/FindingSafeSpaces_StonewallHousing_LaptopVersion.pdf 33 https://www.telegraph.co.uk/news/2016/11/10/white-working-class-boys-perform-worst-at-gcses-research-shows/ 34 https://www.visualcapitalist.com/the-decline-of-upward-mobility-in-one-chart/ 35 https://www.theguardian.com/society/2020/jan/21/social-mobility-decline-britain-official-survey-finds 36 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/622214/Time_for_Change_report_-_An_assessement_of_government_policies_on_social_mobility_1997-2017.pdf 37 https://www.thetimes.co.uk/article/johnson-says-half-of-mps-should-be-women-vdgnw2gpx 38 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/622214/Time_for_Change_report_-_An_assessement_of_government_policies_on_social_mobility_1997-2017.pdf 39 https://www.gov.uk/government/publications/social-mobility-in-great-britain-state-of-the-nation-2018-to-2019 40 https://www.oecd.org/social/broken-elevator-how-to-promote-social-mobility-9789264301085-en.htm 41 https://www.bbc.com/news/world-africa-36132151 42 https://www.bbc.com/news/uk-politics-53246899 43 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/413347/Music_in_schools_wider_still__and_wider.pdf 44 https://www.statista.com/statistics/685208/number-of-female-ceo-positions-in-ftse-companies-uk/ 45 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/814080/GEO_GEEE_Strategy_Gender_Equality_Monitor_tagged.pdf 46 https://www.telegraph.co.uk/women/work/just-who-are-the-7-women-bosses-of-the-ftse-100/ 47 https://www.bloomberg.com/gei/ 48 https://www.wsj.com/articles/blackrock-companies-should-have-at-least-two-female-directors-1517598407 49 https://www.bloomberg.com/news/articles/2018-02-02/blackrock-asks-companies-to-explain-dearth-of-women-on-boards 50 https://hbr.org/2016/02/study-firms-with-more-women-in-the-c-suite-are-more-profitable 51 https://fortune.com/2015/06/29/black-women-entrepreneurs/ 52 https://www.nawbo.org/resources/women-business-owner-statistics 53 https://www.nawbo.org/resources/women-business-owner-statistics 54 https://www.womensbusinesscouncil.co.uk/wp-content/uploads/2017/02/DfE-WBC-Two-years-on-report_update_AW_CC.pdf 55 https://www.intheblack.com/articles/2016/08/01/challenging-the-myth-that-self-confidence-equals-success 56 https://hbr.org/2014/07/the-dangers-of-confidence 57 https://researchbriefings.files.parliament.uk/documents/SN05878/SN05878.pdf 58 https://www.telegraph.co.uk/culture/charles-dickens/9048771/Gradgrind-My-favourite-Charles-Dickens-character.html 59 https://www.independent.co.uk/news/education/education-news/sir-anthony-seldon-historian-says-test-obsession-wrecks-education-a6779891.html 60 https://www.youtube.com/watch?


pages: 371 words: 122,273

Tenants: The People on the Frontline of Britain's Housing Emergency by Vicky Spratt

Airbnb, Albert Einstein, basic income, Big bang: deregulation of the City of London, Black Lives Matter, Boris Johnson, British Empire, Buy land – they’re not making it any more, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, clean water, coronavirus, COVID-19, credit crunch, cryptocurrency, edge city, en.wikipedia.org, full employment, garden city movement, gender pay gap, gentrification, gig economy, global pandemic, housing crisis, Housing First, illegal immigration, income inequality, Induced demand, Jane Jacobs, Jeremy Corbyn, land bank, land reform, land value tax, lockdown, longitudinal study, low interest rates, mass immigration, mega-rich, meta-analysis, negative equity, Overton Window, Own Your Own Home, plutocrats, quantitative easing, rent control, Right to Buy, Rishi Sunak, Rutger Bregman, side hustle, social distancing, stop buying avocado toast, the built environment, The Death and Life of Great American Cities, The Spirit Level, The Wealth of Nations by Adam Smith, trickle-down economics, universal basic income, urban planning, urban renewal, working-age population, young professional, zero-sum game

Shortly before Kelly and her family were asked to leave, David Cameron and Nick Clegg’s Coalition government’s benefit cap, first announced at the Conservative Party conference in 2010, kicked in. The government predicted that this policy would reduce public expenditure by £225 million by 2015, which, during a credit crunch, they passed off as rebalancing the books. Housing and poverty experts warned that the reduction to the amount of rent that state support covered would have serious implications for at least 100,000 households, predominantly in the south-east where rents were higher than in the rest of the country.


pages: 525 words: 146,126

Ayn Rand Cult by Jeff Walker

affirmative action, Alan Greenspan, Alvin Toffler, anti-communist, Ayatollah Khomeini, Berlin Wall, buy and hold, credit crunch, deindustrialization, dematerialisation, Doomsday Book, Elliott wave, gentleman farmer, George Gilder, Herbert Marcuse, Jane Jacobs, laissez-faire capitalism, Lewis Mumford, market fundamentalism, Michael Milken, Money creation, Mont Pelerin Society, price stability, Ralph Waldo Emerson, road to serfdom, Ronald Reagan, Saturday Night Live, Savings and loan crisis, school vouchers, Tipper Gore, Torches of Freedom

He rejects sound stock-market advances as ‘irrational exuberance. Although Beckner’s account approximates an authorized biography, he acknowledges: “Mistakes were clearly made. The Fed could have done more to head off the banking problems of the late eighties and early nineties. It could have recognized the credit crunch and other economic headwinds” earlier than it did. “It could have eased credit more aggressively during the 1989 to 1992 period. . . . If the Fed proceeded more cautiously in the later period”—when raising rates during Clintons first mid-term—“perhaps it was because memories were fresh of what happened in the earlier one,” namely: a spectacular worldwide stock market crash, additional regulation of the U.S. stock markets, a damaging and widespread recession, an initially anemic recovery, and the premature ending of the Reagan-Bush era.


pages: 442 words: 135,006

ZeroZeroZero by Roberto Saviano

Berlin Wall, Bernie Madoff, call centre, credit crunch, double entry bookkeeping, Fall of the Berlin Wall, illegal immigration, Julian Assange, Kinder Surprise, London Interbank Offered Rate, Mikhail Gorbachev, new economy, open borders, planetary scale, Ponzi scheme, Ronald Reagan, Skype, Steve Jobs, uranium enrichment, WikiLeaks

When your father, who has a regular salary, has to sign in order for you to get a mortgage on a house, because both you and your wife make do with temp work? What concepts have you learned to associate with words like spread or rating, liquidity or deficit crises? Which of these terms are you familiar with: hedge fund, subprime, credit crunch, swap, blind trust? Can you explain what they mean? Are you too convinced that you belong to the 99 percent whose combined wealth does not even match that of the remaining 1 percent? That financial capitalism is primarily to blame for your increasingly difficult struggle to make ends meet? And do you too believe that the banks, which manage to get billions from the state—from you, in other words—and yet won’t renew your credit, are a giant Moloch controlled by an invisible and untouchable clique of speculators and high-level executives?


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

activist fund / activist shareholder / activist investor, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Black-Scholes formula, book value, Brownian motion, business cycle, buy and hold, buy low sell high, buy the rumour, sell the news, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, currency risk, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, global macro, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, junk bonds, late capitalism, law of one price, Long Term Capital Management, low interest rates, managed futures, margin call, market clearing, market design, market friction, Market Wizards by Jack D. Schwager, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, Phillips curve, price discovery process, price stability, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Thaler, risk free rate, risk-adjusted returns, risk/return, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, short squeeze, SoftBank, sovereign wealth fund, statistical arbitrage, statistical model, stocks for the long run, stocks for the long term, survivorship bias, systematic trading, tail risk, technology bubble, time dilation, time value of money, total factor productivity, transaction costs, two and twenty, value at risk, Vanguard fund, yield curve, zero-coupon bond

This market exposure happens because a large drop in the market increases the general risk of deal failure (as discussed above). In particular, acquirers are more likely to walk away from their bid in down markets, especially if they made a cash bid that suddenly looks too expensive. Furthermore, obtaining financing becomes more difficult in down markets, especially if a credit crunch hits the financial sector. The non-linear market exposure means that the standard capital asset pricing model (CAPM) model is not appropriate to evaluate the performance of merger arbitrage. The merger arbitrage payoff resembles a risk-free bond plus idiosyncratic noise and less a short put option on the market.


pages: 483 words: 143,123

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

activist fund / activist shareholder / activist investor, addicted to oil, Alan Greenspan, American energy revolution, Asian financial crisis, Bakken shale, Bear Stearns, Bernie Sanders, Buckminster Fuller, Carl Icahn, corporate governance, corporate raider, credit crunch, energy security, Exxon Valdez, Great Leap Forward, housing crisis, hydraulic fracturing, Kickstarter, LNG terminal, man camp, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, Timothy McVeigh, urban decay

Joe Carroll, Jef Feeley, and Laurel Brubaker Calkins, “Chesapeake CEO Disavowed Role in 2008 Plunge, Sold Shares,” Bloomberg News, June 27, 2012. 7. Jef Feeley, Laurel Brubaker Calkins, and Joe Carroll, “Chespeake’s McClendon Said Company Overpaid for Leases,” Bloomberg News, June 26, 2012. 8. Ben Casselman, “Credit Crunch and Sinking Prices Threaten Chesapeake Energy’s Growth,” Wall Street Journal, October 10, 2008. 9. Russell Gold, “Bad Call,” Wall Street Journal, February 8, 2009. CHAPTER THIRTEEN 1. Ben Casselman, “Chesapeake Energy CEO Defends Stewardship,” Wall Street Journal, June 13, 2009. 2.


pages: 448 words: 142,946

Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein

Albert Einstein, back-to-the-land, bank run, Bernie Madoff, big-box store, bread and circuses, Bretton Woods, capital controls, carbon credits, carbon tax, clean water, collateralized debt obligation, commoditize, corporate raider, credit crunch, David Ricardo: comparative advantage, debt deflation, degrowth, deindustrialization, delayed gratification, disintermediation, diversification, do well by doing good, fiat currency, financial independence, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global supply chain, God and Mammon, happiness index / gross national happiness, hydraulic fracturing, informal economy, intentional community, invisible hand, Jane Jacobs, land tenure, land value tax, Lao Tzu, Lewis Mumford, liquidity trap, low interest rates, McMansion, means of production, megaproject, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, multilevel marketing, new economy, off grid, oil shale / tar sands, Own Your Own Home, Paul Samuelson, peak oil, phenotype, planned obsolescence, Ponzi scheme, profit motive, quantitative easing, race to the bottom, Scramble for Africa, special drawing rights, spinning jenny, technoutopianism, the built environment, Thomas Malthus, too big to fail, Tragedy of the Commons

Today, state and local governments deposit tax proceeds with multinational banks that lend it wherever they can profit the most; indeed, in an era of banking consolidation they have little choice, as local banks have merged into larger ones. State-owned banks, exemplified by the Bank of North Dakota, can lend locally, finance local projects without having to issue high-interest debt on the bond market, exercise a contracyclical effect by lending during credit crunches, and keep banking profits local instead of exporting them to Wall Street. Publicly owned banks needn’t be driven by profit, and any profits they do make can be returned to their owners, the people, thus restoring the credit commons. These advantages pertain even in the present monetary system.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

"there is no alternative" (TINA), "World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, barriers to entry, battle of ideas, behavioural economics, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low interest rates, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

For further discussions, see, for instance, Adrian Alter and Yves Schueler, “Credit Spread Interdependencies of European States and Banks during the Financial Crisis,” Journal of Banking and Finance 36, no. 12 (December 2011): 3444–68; and Patrick Bolton and Olivier Jeanne, “Sovereign Default Risk and Bank Fragility in Financially Integrated Economies,” IMF Economic Review 59, no. 2 (2011): 162–94. 9 See, for instance, the discussion in my book Freefall or in Simon Johnson’s 13 Bankers (New York: Pantheon Books, 2010). 10 The exit from Spanish banks, while significant—and leading to a credit crunch—has been slower than some had anticipated. Some refer to it as a “capital jog” rather than capital flight. This, in turn, is a consequence of institutional and market imperfections (for example, rules about knowing your customer, designed to curb money laundering), which, interestingly, the neoclassical model underlying much of Europe’s policy agenda ignored.


pages: 537 words: 144,318

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

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

My last book, Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets (John Wiley & Sons), published in 2006, captured the process behind global macro investing through a series of interviews with some of the top global macro hedge fund traders at the time. Many of these managers foresaw the coming credit crunch, and elements of this foresight were captured through the animated discussions in the book. This book seeks to ignite a discussion about portfolio management in light of the lessons learned in 2008. Through another series of interviews, this time with top global hedge fund traders who managed risk well through 2008 and into 2009, the book highlights certain valuable elements of the global macro approach that could be applied to other mandates within money management.


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

Firms and very wealthy people could always find clever ways to get cash and make higher returns (often via the methods devised by bankers like Wriston, who much preferred to lend to large, wealthy borrowers rather than average Joes). But ordinary people who needed mortgages were the first to feel the effects of credit crunches. During one such crunch, in the summer of 1973, a Texas homemaker named Vivian Cates wrote to her congressman complaining that her family could not find a bank to give them a mortgage, even though they had a 25 percent cash down payment and her husband was gainfully employed. “I can feed my family meatless meals and more rice and beans, we can buy less clothing, wash it more often, and wear it longer, but we cannot postpone having a place to live,” she said.48 Such public reaction was obviously a political conundrum.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

Abraham Maslow, Adam Curtis, addicted to oil, affirmative action, Alan Greenspan, Amazon Mechanical Turk, An Inconvenient Truth, anti-globalists, AOL-Time Warner, banks create money, Bear Stearns, benefit corporation, big-box store, Bretton Woods, car-free, Charles Lindbergh, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, congestion pricing, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, digital divide, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, General Motors Futurama, gentrification, Glass-Steagall Act, global village, Google Earth, greed is good, Herbert Marcuse, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, Kickstarter, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, military-industrial complex, moral hazard, multilevel marketing, mutually assured destruction, Naomi Klein, negative equity, new economy, New Urbanism, Norbert Wiener, peak oil, peer-to-peer, place-making, placebo effect, planned obsolescence, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, public intellectual, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, scientific management, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, vertical integration, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional, zero-sum game

Ironically, the PLENTY has a much smaller role in our local finance efforts than the peer-to-peer financing that also rose from an experiment I outlined in Small Is Possible. I took ten thousand dollars of my kid’s college savings and lent it to a local cabinetmaker at 4 percent so she could pay off her credit cards that were charging 28 percent. And it worked. She got back on her feet. Micro-loans started popping up everywhere. When the “credit crunch” of 2009 set upon us, money started coming out of the woodwork. Landlords were lending to tenants for capital equipment necessary to keep small businesses alive. The Abundance Foundation started a revolving credit program out of static “restricted funds.” Neighbors started lending to neighbors.


pages: 447 words: 141,811

Sapiens: A Brief History of Humankind by Yuval Noah Harari

Admiral Zheng, agricultural Revolution, Albert Einstein, Alfred Russel Wallace, An Inconvenient Truth, Apollo 11, Atahualpa, British Empire, cognitive dissonance, correlation does not imply causation, credit crunch, David Graeber, Easter island, Edmond Halley, European colonialism, Francisco Pizarro, glass ceiling, global village, Great Leap Forward, greed is good, income per capita, invention of gunpowder, Isaac Newton, joint-stock company, joint-stock limited liability company, Kickstarter, liberal capitalism, life extension, low interest rates, Mahatma Gandhi, megacity, Mikhail Gorbachev, military-industrial complex, Neil Armstrong, out of africa, personalized medicine, Ponzi scheme, Silicon Valley, South China Sea, stem cell, Steven Pinker, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, urban planning, zero-sum game

It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession. The Capitalist Hell There is an even more fundamental reason why it’s dangerous to give markets a completely free rein. Adam Smith taught that the shoemaker would use his surplus to employ more assistants. This implies that egoistic greed is beneficial for all, since profits are utilised to expand production and hire more employees.


The New Enclosure: The Appropriation of Public Land in Neoliberal Britain by Brett Christophers

Alan Greenspan, book value, Boris Johnson, Capital in the Twenty-First Century by Thomas Piketty, Corn Laws, credit crunch, cross-subsidies, Diane Coyle, estate planning, Garrett Hardin, gentrification, ghettoisation, Hernando de Soto, housing crisis, income inequality, invisible hand, Jeremy Corbyn, land bank, land reform, land tenure, land value tax, late capitalism, market clearing, Martin Wolf, New Journalism, New Urbanism, off grid, offshore financial centre, performance metric, Philip Mirowski, price mechanism, price stability, profit motive, radical decentralization, Right to Buy, Skype, sovereign wealth fund, special economic zone, the built environment, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tragedy of the Commons, Tyler Cowen, urban sprawl, wealth creators

This just leaves the land occupied by private residences. This will become Berkeley’s property. The cost to Berkeley? Zero. To justify this extraordinary subsidy and the de-risking it effected, the panel referenced the ‘very challenging economic climate’ in which negotiations were conducted, with ‘the credit crunch impacting on the global economy from 2007’.1 Thus, the stark, even shameful, reality is that the government’s ‘buy our surplus land’ overtures to local authorities – and especially to community groups, charities and voluntary organizations – are little more than a sick joke. The Community Right to Reclaim Land?


pages: 459 words: 138,689

Slowdown: The End of the Great Acceleration―and Why It’s Good for the Planet, the Economy, and Our Lives by Danny Dorling, Kirsten McClure

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Anthropocene, Berlin Wall, Bernie Sanders, Boeing 747, Boris Johnson, British Empire, business cycle, capital controls, carbon tax, clean water, creative destruction, credit crunch, Donald Trump, drone strike, Elon Musk, en.wikipedia.org, Extinction Rebellion, fake news, Flynn Effect, Ford Model T, full employment, future of work, gender pay gap, global supply chain, Google Glasses, Great Leap Forward, Greta Thunberg, Henri Poincaré, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, It's morning again in America, James Dyson, Jeremy Corbyn, jimmy wales, John Harrison: Longitude, Kickstarter, low earth orbit, Mark Zuckerberg, market clearing, Martin Wolf, mass immigration, means of production, megacity, meta-analysis, military-industrial complex, mortgage debt, negative emissions, nuclear winter, ocean acidification, Overton Window, pattern recognition, Ponzi scheme, price stability, profit maximization, purchasing power parity, QWERTY keyboard, random walk, rent control, rising living standards, Robert Gordon, Robert Shiller, Ronald Reagan, School Strike for Climate, Scramble for Africa, sexual politics, Skype, Stephen Hawking, Steven Pinker, structural adjustment programs, Suez crisis 1956, the built environment, Tim Cook: Apple, time dilation, transatlantic slave trade, trickle-down economics, very high income, wealth creators, wikimedia commons, working poor

When oil prices rise, car companies cut their production, and thus in 1998 only 37.3 million new cars were made worldwide—down from 38.5 million. The car production numbers recovered, rising to 38.8 million in 1999 and then 40.7 million in 2000. The tally fell briefly with the dot.combubble crash (and the associated minor credit crunch) in 2001, when emissions also briefly stalled; however, car production regained strength in 2002 to 41.2 million and in 2003 to 41.7 million before slowing again, but only briefly before falling sharply in 2008 and dramatically in 2009 following the worldwide economic crash. Production most recently recovered again before falling in 2015 and then rising again.


pages: 495 words: 136,714

Money for Nothing by Thomas Levenson

Albert Einstein, asset-backed security, bank run, British Empire, carried interest, clockwork universe, credit crunch, do well by doing good, Edmond Halley, Edward Lloyd's coffeehouse, experimental subject, failed state, fake news, Fellow of the Royal Society, fiat currency, financial engineering, financial innovation, Fractional reserve banking, income inequality, Isaac Newton, joint-stock company, land bank, market bubble, Money creation, open economy, price mechanism, quantitative easing, Republic of Letters, risk/return, side project, South Sea Bubble, The Wealth of Nations by Adam Smith, tontine

Freed from the need to maintain gold reserves, the Bank was able to issue enough notes to keep cash in circulation in Britain, a distant homage to John Law’s monetary ideas. Once the income tax and other measures strengthened the Treasury’s ability to make its debt payments, the market for government securities rebounded, and interest on consols dropped—with occasional hiccups—to between just under 4 and 5 percent for the rest of the war. Once the cash-and-credit crunch of the late 1790s eased, Britain in the Napoleonic era never approached the precipice that King William had faced in the 1690s—that cliff-edge past which the nation might simply run out of money. All that followed—the navy’s victories from St. Vincent to Trafalgar; the army’s work in the Peninsular War and beyond; that little side project known in the United States as the War of 1812—every skirmish and grand conflagration rode on the steady flow of borrowed money from the heart of London to the tip of the spear


pages: 476 words: 139,761

Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis

active measures, Anton Chekhov, banking crisis, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Brexit referendum, British Empire, collapse of Lehman Brothers, coronavirus, corporate governance, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, disinformation, do-ocracy, Donald Trump, energy security, Etonian, failed state, fake news, Gordon Gekko, high net worth, Honoré de Balzac, illegal immigration, invisible hand, Julian Assange, liberal capitalism, light touch regulation, lockdown, Mark Zuckerberg, Martin Wolf, Michael Milken, Mikhail Gorbachev, Mohammed Bouazizi, Northern Rock, offshore financial centre, Right to Buy, Ronald Reagan, Skype, sovereign wealth fund, trade route, WikiLeaks

He knew that BSI’s London office had already received a private warning from the Financial Services Authority that it was conducting insufficient checks on the origins of its ‘high risk’ clients’ money. That was back in 2004, before he joined the bank. On September 11 he wrote to his bosses again, suggesting that he be kept on because he had worked at the City regulator, which ‘is being obliged to supervise firms more closely in the aftermath of Northern Rock and the credit crunch’. To no avail: after the Lehman weekend, Nigel’s boss wrote to him to confirm that he was being dismissed and that there was no job for him elsewhere at BSI. His last day would be a fortnight hence. Still Nigel did not relent. He explained that most of the bank’s London clients were using the same techniques – creating sham companies, avoiding paper trails – that had come to light in the UBS scandal.


pages: 561 words: 138,158

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

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

The Fed didn’t actually need to buy debt. Others did the buying for it. * * * — Together with the massive downward pressure that it was exercising on Treasury yields, the Fed’s promise that it would if necessary back the private bond market unleashed a tidal wave of money into corporate bonds. Far from suffering a credit crunch, corporate borrowers embarked on a historic binge of bond issuance. In the second quarter of 2020, as American society reeled under the effects of the shutdown and the sharpest recession on record, corporate America made its own record. It issued $873 billion in bonds in a single quarter.74 As the stock market recovered, initial public offerings of shares bounced back too.


Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

Alistair Cooke, American ideology, business cycle, clean water, collective bargaining, creative destruction, credit crunch, declining real wages, endowment effect, fiat currency, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, Jones Act, Joseph Schumpeter, laissez-faire capitalism, land bank, manufacturing employment, means of production, military-industrial complex, minimum wage unemployment, plutocrats, post-industrial society, power law, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

After the 1980 election Stockman, in collaboration with his congressional colleague Jack Kemp, wrote a memorandum entitled "Avoiding a GOP Economic Dunkirk," which he presented to the President-elect and his chief advisers (and leaked to the press and other strategic parties).48 After cataloging the "multiple challenges and threats lying in ambush," including an impending "credit crunch," a "double-dip recession," and a "federal budget and credit hemorrhage," Stockman proposed that the new administration act quickly, decisively, and dramatically to allay the impending risks and get the economy back on a prosperous track. His specific policy objectives included cuts in federal spending and taxing, further deregulation, and support for a stead- Crisis and Leviathan 255 fastly disinflationary monetary policy-nothing revolutionary or even especially radical, as every element had a clear precedent in the later phase of the Carter administration.


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, book value, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, Cornelius Vanderbilt, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, flying shuttle, Glass-Steagall Act, Gordon Gekko, Henri Poincaré, Henry Singleton, high net worth, impact investing, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, John Bogle, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, margin call, means of production, Menlo Park, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Performance of Mutual Funds in the Period, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit maximization, proprietary trading, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Sand Hill Road, Savings and loan crisis, seminal paper, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, tail risk, technology bubble, Teledyne, The Wealth of Nations by Adam Smith, time value of money, tontine, too big to fail, transaction costs, two and twenty, underbanked, Vanguard fund, working poor, yield curve

We also need to comprehend the nature of tail risks more effectively; that is, we need to understand how portfolios and markets behave under extreme scenarios. These types of outlier events have monumental consequences on all aspects of money management and lead to corresponding extreme shocks, from liquidity crises to credit crunches to fundamental changes in the economics of the underlying investments. Our failure to really conceptualize the nature of tail risk events has resulted in some investors and institutions becoming far too risky and some others, in truth, acting too conservatively. While the former is clearly worse, as this sort of aggressive behavior can jeopardize the very existence of the institution, being too conservative leaves returns on the table and can result in suboptimal performance.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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

Gradually, places such as garment production centers in Dhaka and Addis Ababa begin to feel almost detached from their own country even as they become key drivers of its growth; they belong as much to the global supply chain as to their nation. So synchronized are global supply chains that they serve as a seismograph of our amplified connectivity. Like earthquakes causing equally powerful aftershocks, the financial crisis of 2008 contracted world trade five times more severely than it did world GDP. First the credit crunch created a demand shock, meaning a huge slump in purchases of durable goods. Then the adjustment in inventories cascaded horizontally as the velocity of trade in most goods slowed in unison, shrinking industrial production cycles from Germany and Korea to China. The same phenomenon occurred when oil prices collapsed in 2014, causing new investments in oil fields to shrink from Fort McMurray to Malaysia.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, business cycle, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, Easter island, European colonialism, Fall of the Berlin Wall, financial engineering, Francisco Pizarro, full employment, Great Leap Forward, Gregor Mendel, guns versus butter model, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, Kickstarter, Kitchen Debate, land reform, land tenure, liberal capitalism, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, mass immigration, means of production, megacity, Mikhail Gorbachev, new economy, Pearl River Delta, Pierre-Simon Laplace, power law, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, retail therapy, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, undersea cable, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, work culture , World Values Survey

Nemesis came first in the backstreets of Sadr City and the fields of Helmand, which exposed not only the limits of American military might but also, more importantly, the naivety of neo-conservative visions of a democratic wave in the Greater Middle East. It struck a second time with the escalation of the subprime mortgage crisis of 2007 into the credit crunch of 2008 and finally the ‘great recession’ of 2009. After the bankruptcy of Lehman Brothers, the sham verities of the ‘Washington Consensus’ and the ‘Great Moderation’ – the central bankers’ equivalent of the ‘End of History’ – were consigned to oblivion. A second Great Depression for a time seemed terrifyingly possible.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

NONFARM BUSINESS OPERATING RATE SEASONALLY ADJUSTED, PLOTTED QUARTERLY, Q1 1855 – Q3 2017 The panic of 1819 was America’s first experience of a financial crisis in peacetime. In August 1818, the Second Bank of the United States began to reject banknotes because it worried that credit was dangerously overextended. Then in October, the U.S. Treasury tightened the credit crunch still further by forcing the bank to transfer $2 million in specie to redeem bonds on the Louisiana Purchase. State banks across the South and West began to call in their loans on heavily mortgaged farms. The value of many farms fell by 50 percent or more. Local banks began foreclosing on farms and transferring the title deeds to the Second Bank of the United States.


pages: 525 words: 153,356

The People: The Rise and Fall of the Working Class, 1910-2010 by Selina Todd

"there is no alternative" (TINA), call centre, collective bargaining, conceptual framework, credit crunch, deindustrialization, deskilling, different worldview, Downton Abbey, financial independence, full employment, income inequality, longitudinal study, manufacturing employment, meritocracy, Neil Kinnock, New Urbanism, Red Clydeside, rent control, Right to Buy, rising living standards, scientific management, sexual politics, strikebreaker, The Spirit Level, unemployed young men, union organizing, upwardly mobile, urban renewal, Winter of Discontent, women in the workforce, work culture , young professional

Increasing numbers of people described themselves as working class. A survey by the thinktank British Future indicated that more than 60 per cent of Britons identified themselves as being working class.59 It was no coincidence that this new interest in class coincided with the first major recession for twenty years. Following the credit crunch of 2008, many workers – regardless of whether they considered themselves working or middle class – felt much less financially secure. In 2011 less than a quarter of those people who described themselves as middle class felt they possessed financial security. This group were retired and they had a corporate or professional career behind them; they were among the 7 per cent of the population wealthy enough to have paid for their children to have a private education.60 The majority felt far less confident about their circumstances.


pages: 524 words: 155,947

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

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

“Blocked pipes”, The Economist, October 2nd 2008 12. David Fiderer, “Hank Paulson, the unnamed ‘decider’ in the Merrill Lynch saga”, HuffPost, December 6th 2017 13. “Alistair Darling: from here to uncertainty”, Financial Times, August 31st 2017 14. Andrew Pierce, “The Queen asks why no one saw the credit crunch coming”, The Daily Telegraph, November 5th 2008. This was not quite fair. Some, like Bill White at the Bank for International Settlements, had been warning for years of the dangers of excessive credit growth. 15. Piergiorgio Alessandri and Andrew Haldane, “Banking on the state”, Bank of England, November 2009 16.


pages: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

Airbus A320, Alan Greenspan, Albert Einstein, Albert Michelson, algorithmic trading, anti-fragile, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Bear Stearns, behavioural economics, Benoit Mandelbrot, bitcoin, Black Swan, Boeing 737 MAX, Bonfire of the Vanities, Brexit referendum, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, DeepMind, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, Dutch auction, easy for humans, difficult for computers, eat what you kill, Eddington experiment, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Goodhart's law, Hans Rosling, Helicobacter pylori, high-speed rail, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Jim Simons, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Kōnosuke Matsushita, Linda problem, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, military-industrial complex, Money creation, Moneyball by Michael Lewis explains big data, Monty Hall problem, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, nudge theory, oil shock, PalmPilot, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Phillips curve, Pierre-Simon Laplace, popular electronics, power law, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, reality distortion field, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Suez crisis 1956, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, world market for maybe five computers, World Values Survey, Yom Kippur War, zero-sum game

., Frank Ramsey (1903–1930): A Sister’s Memoir (London: Smith-Gordon and Co., 2012) Phillips, A. W., ‘The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom 1861–1957’, Economica , Vol. 25, No. 100 (1958), 283–99 Pierce, A., ‘The Queen Asks Why No One Saw the Credit Crunch Coming’, Daily Telegraph (5 Nov 2008) Pilkey, O. H. and Pilkey-Jarvis, L., Useless Arithmetic: Why Environmental Scientists Can’t Predict the Future (New York: Columbia University Press, 2007) Pinker, S., The Blank Slate (London: Penguin, 2003) Planck, M. (trans. Gaynor, F.), Scientific Autobiography and Other Papers (Westport, Connecticut: Greenwood Press Publishers, 1968) Plato (trans.


pages: 566 words: 160,453

Not Working: Where Have All the Good Jobs Gone? by David G. Blanchflower

90 percent rule, active measures, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, bank run, banking crisis, basic income, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Lives Matter, Black Swan, Boris Johnson, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clapham omnibus, collective bargaining, correlation does not imply causation, credit crunch, declining real wages, deindustrialization, Donald Trump, driverless car, estate planning, fake news, Fall of the Berlin Wall, full employment, George Akerlof, gig economy, Gini coefficient, Growth in a Time of Debt, high-speed rail, illegal immigration, income inequality, independent contractor, indoor plumbing, inflation targeting, Jeremy Corbyn, job satisfaction, John Bercow, Kenneth Rogoff, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, mass incarceration, meta-analysis, moral hazard, Nate Silver, negative equity, new economy, Northern Rock, obamacare, oil shock, open borders, opioid epidemic / opioid crisis, Own Your Own Home, p-value, Panamax, pension reform, Phillips curve, plutocrats, post-materialism, price stability, prisoner's dilemma, quantitative easing, rent control, Richard Thaler, Robert Shiller, Ronald Coase, selection bias, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, trade liberalization, universal basic income, University of East Anglia, urban planning, working poor, working-age population, yield curve

My theme was that the UK was exhibiting broad similarities to the U.S. experience, essentially drawing on the evidence from the economics of walking about. I argued this suggested that in the UK we were also going to see a “substantial decline in growth, a pick-up in unemployment, little if any growth in real wages, declining consumption growth driven primarily by significant declines in house prices. The credit crunch is starting to hit and hit hard.” I set out four phases of the downturn the United States had already been through and suggested the same was true of the UK, which was already in stage three and approaching stage four. I presented the data that I had available at the time, which are in the appendix (table A.1).


pages: 511 words: 151,359

The Asian Financial Crisis 1995–98: Birth of the Age of Debt by Russell Napier

Alan Greenspan, Asian financial crisis, asset allocation, bank run, banking crisis, banks create money, Berlin Wall, book value, Bretton Woods, business cycle, Buy land – they’re not making it any more, capital controls, central bank independence, colonial rule, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, Deng Xiaoping, desegregation, discounted cash flows, diversification, Donald Trump, equity risk premium, financial engineering, financial innovation, floating exchange rates, Fractional reserve banking, full employment, Glass-Steagall Act, hindsight bias, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, if you build it, they will come, impact investing, inflation targeting, interest rate swap, invisible hand, Japanese asset price bubble, Jeff Bezos, junk bonds, Kickstarter, laissez-faire capitalism, lateral thinking, Long Term Capital Management, low interest rates, market bubble, mass immigration, means of production, megaproject, Mexican peso crisis / tequila crisis, Michael Milken, Money creation, moral hazard, Myron Scholes, negative equity, offshore financial centre, open borders, open economy, Pearl River Delta, price mechanism, profit motive, quantitative easing, Ralph Waldo Emerson, regulatory arbitrage, rent-seeking, reserve currency, risk free rate, risk-adjusted returns, Ronald Reagan, Savings and loan crisis, savings glut, Scramble for Africa, short selling, social distancing, South China Sea, The Wealth of Nations by Adam Smith, too big to fail, yield curve

They were very interested in the plight of the foreign banks that had lent excessively in the region. In 1982, the Mexican sovereign default and the numerous defaults by other LDCs had eradicated the capital of some of the world’s biggest banks. That sudden evaporation of bank capital threatened to create a credit crunch that would grind developed world bank capital even lower and reduce bank lending and global economic growth. In response, Paul Volcker, Chairman of the US Federal Reserve, abandoned his broad money targeting regime, interest rates collapsed and something even worse than a recession was narrowly averted.


pages: 542 words: 145,022

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest by Andrew W. Lo, Stephen R. Foerster

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, backtesting, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, Charles Babbage, Charles Lindbergh, compound rate of return, corporate governance, COVID-19, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, Edward Glaeser, equity premium, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, fake news, family office, fear index, fiat currency, financial engineering, financial innovation, financial intermediation, fixed income, hiring and firing, Hyman Minsky, implied volatility, index fund, interest rate swap, Internet Archive, invention of the wheel, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John von Neumann, joint-stock company, junk bonds, Kenneth Arrow, linear programming, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, new economy, New Journalism, Own Your Own Home, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, prediction markets, price stability, profit maximization, quantitative trading / quantitative finance, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, South Sea Bubble, stochastic process, stocks for the long run, survivorship bias, tail risk, Thales and the olive presses, Thales of Miletus, The Myth of the Rational Market, The Wisdom of Crowds, Thomas Bayes, time value of money, transaction costs, transfer pricing, tulip mania, Vanguard fund, yield curve, zero-coupon bond, zero-sum game

Internet Archive, April 25, https://web.archive.org/web/20111212200647/http://www.bu.edu/mfd/mfdmerton.pdf. ________. 1999b. “In Honor of the Nobel Laureates Robert C. Merton and Myron S. Scholes: A Partial Differential Equation That Changed the World.” Journal of Economic Perspectives 13, no. 4: 229–48. Jeffries, Tanya. 2014. “ ‘We Saw This before the Wall St Crash, the Dot-com Bubble and the Credit Crunch’—How Nobel Economist Robert Shiller’s CAPE Warning Light Is Flashing Again.” This Is Money, September 5, http://www.thisismoney.co.uk/money/investing/article-2742297/PROF-ROBERT-SHILLER-INTERVIEW-How-stocks-crash-2014.html. Jenkins, Holman W., Jr. 2016. “Jack Bogle: The Undisputed Champion of the Long Run.”


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

1919 Motor Transport Corps convoy, agricultural Revolution, Alan Greenspan, An Inconvenient Truth, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bear Stearns, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, Charles Lindbergh, classic study, collateralized debt obligation, collective bargaining, Columbian Exchange, commoditize, Cornelius Vanderbilt, corporate governance, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, fixed income, Ford Model T, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, General Magic , Glass-Steagall Act, Gordon Gekko, Great Leap Forward, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, Ida Tarbell, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, John Bogle, joint-stock company, Joseph Schumpeter, junk bonds, knowledge economy, land bank, land reform, Livingstone, I presume, Long Term Capital Management, low interest rates, Mahatma Gandhi, Martin Wolf, military-industrial complex, moral hazard, Nixon triggered the end of the Bretton Woods system, PalmPilot, Parag Khanna, pneumatic tube, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, scientific management, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, Suez canal 1869, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transcontinental railway, two and twenty, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, vertical integration, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

Although the center of the subprime mortgage debacle was in the United States, the meltdown of credit credibility spilled over the entire globe. The trouble brewing in lower Manhattan quickly reached cities and towns across the nation, not to mention foreign investors who took a ride with America’s financial Evel Knievels. Even America’s cockiest center of enterprise, Silicon Valley, felt the cascading effect of the credit crunch as orders dropped off, no small matter considering that computer and software sales account for half the capital spending of businesses in the United States. Normally awash in venture capital, the technology sector saw that dry up some as well. When people who had borrowed against the rising value of their houses in the frenetic days of the real estate boom stopped spending, it hurt big and little exporters who counted on the dependable American consumer.


pages: 553 words: 168,111

The Asylum: The Renegades Who Hijacked the World's Oil Market by Leah McGrath Goodman

Alan Greenspan, anti-communist, Asian financial crisis, automated trading system, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, Carl Icahn, computerized trading, corporate governance, corporate raider, credit crunch, Credit Default Swap, East Village, energy security, Etonian, family office, Flash crash, global reserve currency, greed is good, High speed trading, light touch regulation, market fundamentalism, Oscar Wyatt, peak oil, Peter Thiel, pre–internet, price mechanism, profit motive, proprietary trading, regulatory arbitrage, reserve currency, rolodex, Ronald Reagan, side project, Silicon Valley, upwardly mobile, zero-sum game

a blogger wailed on one of the many Web sites chronicling the mushrooming events. Gramm indicated that he didn’t think he should be blamed for it. He had no regrets, he told the New York Times, explaining again that the home loan received by his mother had been similar to the devastating subprime loans tied to the credit crunch. “There is this idea afloat that if you had more regulation, you would have fewer mistakes,” he told the Times. “I don’t see any evidence in our history or anyone else’s able to substantiate it.” Also not substantiated was why Wendy Gramm, just before leaving the CFTC, decided to issue a special exemption to Enron to conduct unregulated, over-the-counter energy trades—before she joined Enron’s board.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-border payments, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, Suez canal 1869, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

Some support for orthodoxy, however, came from the Japanese experience in the 1990s when the combination of an expansive monetary policy and the depreciation of the yen produced a ‘liquidity trap’. Both Japanese interest rates and bank loans decreased after the declines in stock prices and real estate prices, and the inference was that there was a ‘credit crunch’. Banks were reluctant to lend because their loan losses had eroded their capital and firms were reluctant to borrow because of the sluggish growth in the demand for their products. The decline in short-term interest rates in Tokyo to 1 percent and below led to a surge in the ‘carry-trade’; US hedge funds borrowed yen, which they sold to buy US dollars which were used to buy US dollar securities that yielded 3 or 4 percent.


pages: 708 words: 176,708

The WikiLeaks Files: The World According to US Empire by Wikileaks

affirmative action, anti-communist, banking crisis, battle of ideas, Boycotts of Israel, Bretton Woods, British Empire, capital controls, central bank independence, Chelsea Manning, colonial exploitation, colonial rule, corporate social responsibility, credit crunch, cuban missile crisis, Deng Xiaoping, drone strike, Edward Snowden, energy security, energy transition, European colonialism, eurozone crisis, experimental subject, F. W. de Klerk, facts on the ground, failed state, financial innovation, Food sovereignty, Francis Fukuyama: the end of history, full employment, future of journalism, high net worth, invisible hand, Julian Assange, Kickstarter, liberal world order, Mikhail Gorbachev, millennium bug, Mohammed Bouazizi, Monroe Doctrine, Nelson Mandela, no-fly zone, Northern Rock, nuclear ambiguity, Philip Mirowski, post-war consensus, RAND corporation, Ronald Reagan, Seymour Hersh, Silicon Valley, South China Sea, statistical model, Strategic Defense Initiative, structural adjustment programs, too big to fail, trade liberalization, trade route, UNCLOS, UNCLOS, uranium enrichment, vertical integration, Washington Consensus, WikiLeaks, zero-sum game, éminence grise

Covering some 90 percent of global finance by revenue, its job was mainly to integrate economies of the global South—there being relatively few trade barriers between the US and EU. Given that it was signed shortly after a major financial crash in Southeast Asia, this agreement took some selling. But a crucial ingredient of the elite debacle that led to the “credit crunch” and global depression was the extraordinary cultural success of capitalism in the era of neoliberalism. Finance came to be understood as the true epitome of capitalism and was linked to the virtues of innovation, dynamism, and the allure of testosterone-driven aggression and risk-taking. With great risks, after all, came great rewards.


Lonely Planet Andalucia: Chapter From Spain Travel Guide by Lonely Planet

bike sharing, British Empire, car-free, carbon footprint, centre right, credit crunch, discovery of the americas, Francisco Pizarro, haute cuisine, Kickstarter, Skype, trade route, urban renewal

The official foreign population grows to a record 700,000. 2003 The Museo Picasso opens in Málaga, which joins Barcelona, Paris and New York as cities with major collections of the art of Pablo Picasso, born in Málaga in 1881. 2004 The PSOE wins the Spanish national and Andalucian regional elections, days after the Madrid train bombings by Islamic extremists, which kill 191 people and injure 1800. 2008 A record 9.76 million foreign tourists visit Andalucía, more than one for every Andalucian. They spend an average €706 each and nearly one-third of them come from the UK. 2008–12 Andalucía, over-dependent on tourism and construction, is savaged by the credit crunch and economic recession; unemployment leaps from 14% to 31%, the highest in Spain. Top of section Andalucian Architecture Architecturally speaking, Spain – and in particular Andalucía - is different from the rest of Europe. While most of the themes and variations evident elsewhere on the continent have permeated the region at one time or another, they have been diluted by one important invariable: the Moorish factor.


pages: 651 words: 180,162

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb

"World Economic Forum" Davos, Air France Flight 447, Alan Greenspan, Andrei Shleifer, anti-fragile, banking crisis, Benoit Mandelbrot, Berlin Wall, biodiversity loss, Black Swan, business cycle, caloric restriction, caloric restriction, Chuck Templeton: OpenTable:, commoditize, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discrete time, double entry bookkeeping, Emanuel Derman, epigenetics, fail fast, financial engineering, financial independence, Flash crash, flying shuttle, Gary Taubes, George Santayana, Gini coefficient, Helicobacter pylori, Henri Poincaré, Higgs boson, high net worth, hygiene hypothesis, Ignaz Semmelweis: hand washing, informal economy, invention of the wheel, invisible hand, Isaac Newton, James Hargreaves, Jane Jacobs, Jim Simons, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, knowledge economy, language acquisition, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, Marc Andreessen, Mark Spitznagel, meta-analysis, microbiome, money market fund, moral hazard, mouse model, Myron Scholes, Norbert Wiener, pattern recognition, Paul Samuelson, placebo effect, Ponzi scheme, Post-Keynesian economics, power law, principal–agent problem, purchasing power parity, quantitative trading / quantitative finance, Ralph Nader, random walk, Ray Kurzweil, rent control, Republic of Letters, Ronald Reagan, Rory Sutherland, Rupert Read, selection bias, Silicon Valley, six sigma, spinning jenny, statistical model, Steve Jobs, Steven Pinker, Stewart Brand, stochastic process, stochastic volatility, synthetic biology, tacit knowledge, tail risk, Thales and the olive presses, Thales of Miletus, The Great Moderation, the new new thing, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Malthus, too big to fail, transaction costs, urban planning, Vilfredo Pareto, Yogi Berra, Zipf's Law

BOOK IV: Optionality, Technology, and the Intelligence of Antifragility The Teleological Aristotle and his influence: Rashed (2007), both an Arabist and a Hellenist. The nobility of failure: Morris (1975). Optionality Bricolage: Jacob (1977a, 1977b), Esnault (2001). Rich getting richer: On the total wealth for HNWI (High Net Worth Individuals) increasing, see Merrill Lynch data in “World’s wealthiest people now richer than before the credit crunch,” Jill Treanor, The Guardian, June 2012. The next graph shows why it has nothing to do with growth and total wealth formation. FIGURE 39. Luxury goods and optionality. On the vertical the probability, on the horizontal the integral of wealth. Antifragility city: the effect of change in inequality on the pool of very rich increases nonlinearly in the tails: the money of the superrich reacts to inequality rather than total wealth in the world.


pages: 612 words: 179,328

Buffett by Roger Lowenstein

Alan Greenspan, asset allocation, Bear Stearns, book value, Bretton Woods, buy and hold, Carl Icahn, cashless society, collective bargaining, computerized trading, corporate raider, credit crunch, cuban missile crisis, Eugene Fama: efficient market hypothesis, index card, index fund, interest rate derivative, invisible hand, Jeffrey Epstein, John Meriwether, junk bonds, Long Term Capital Management, Michael Milken, moral hazard, Paul Samuelson, random walk, risk tolerance, Robert Shiller, Ronald Reagan, Savings and loan crisis, selection bias, Teledyne, The Predators' Ball, traveling salesman, Works Progress Administration, Yogi Berra, young professional, zero-coupon bond

Buffett replied that while he wouldn’t manufacture cigarettes, he had no problem with owning traded tobacco securities—or, for that matter, a newspaper that advertised the product. “I’m not sure that this is strictly logical,” he admitted, but in a complex world, he deemed it a practical way to draw the line.39 With Iraq’s seizure of Kuwait, in August 1990, the “credit crunch” snowballed into a full-blown recession. New decades do not necessarily portend new eras, but this one did. In the eighties, spirits had run high. Buffett, conversely, had hewed to caution. In the nineties, Wall Street rediscovered fear. People who had lent money wanted it back; companies that once could have borrowed millions found the window slammed shut.


pages: 708 words: 196,859

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

Alan Greenspan, Albert Einstein, anti-communist, bank run, banking crisis, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, centre right, credit crunch, currency manipulation / currency intervention, Etonian, Ford Model T, full employment, gentleman farmer, German hyperinflation, Glass-Steagall Act, index card, invisible hand, Lao Tzu, large denomination, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, mobile money, money market fund, moral hazard, new economy, open economy, plutocrats, price stability, purchasing power parity, pushing on a string, rolodex, scientific management, the market place

The days of the great Pierpont Morgan, when large banks assumed responsibility for propping up smaller ones and for supporting the integrity of the entire financial system, were long gone. The bank runs, the spike in currency hoarding, and now the rising cost of money imposed a massive and sudden credit crunch upon an already fragile United States. Between September 1931 and June 1932 the total amount of bank credit in the country shrank by 20 percent, from $43 billion to $36 billion. As loans were called in, small businesses were driven into default. Lenders were forced to absorb losses and in turn lost their own cushion of capital, making depositors quite justly fearful for the security of their money and leading to further withdrawals from banks, which in turn forced more loan recalls and thus more defaults.


pages: 745 words: 207,187

Accessory to War: The Unspoken Alliance Between Astrophysics and the Military by Neil Degrasse Tyson, Avis Lang

active measures, Admiral Zheng, airport security, anti-communist, Apollo 11, Arthur Eddington, Benoit Mandelbrot, Berlin Wall, British Empire, Buckminster Fuller, Carrington event, Charles Lindbergh, collapse of Lehman Brothers, Colonization of Mars, commoditize, corporate governance, cosmic microwave background, credit crunch, cuban missile crisis, dark matter, Dava Sobel, disinformation, Donald Trump, Doomsday Clock, Dr. Strangelove, dual-use technology, Eddington experiment, Edward Snowden, energy security, Eratosthenes, European colonialism, fake news, Fellow of the Royal Society, Ford Model T, global value chain, Google Earth, GPS: selective availability, Great Leap Forward, Herman Kahn, Higgs boson, invention of movable type, invention of the printing press, invention of the telescope, Isaac Newton, James Webb Space Telescope, Johannes Kepler, John Harrison: Longitude, Karl Jansky, Kuiper Belt, Large Hadron Collider, Late Heavy Bombardment, Laura Poitras, Lewis Mumford, lone genius, low earth orbit, mandelbrot fractal, Maui Hawaii, Mercator projection, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Neil Armstrong, New Journalism, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, operation paperclip, pattern recognition, Pierre-Simon Laplace, precision agriculture, prediction markets, profit motive, Project Plowshare, purchasing power parity, quantum entanglement, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, skunkworks, South China Sea, space junk, Stephen Hawking, Strategic Defense Initiative, subprime mortgage crisis, the long tail, time dilation, trade route, War on Poverty, wikimedia commons, zero-sum game

Elsewhere the “lunar cycle effect” has been even more pronounced: for the final three decades of the twentieth century, in stock exchanges around the world, the returns were as much as 10 percent higher.39 Meanwhile, the half month surrounding the new Moon generates, on average, the same gravity and the same tidal forces as the half month that surrounds the full Moon. One “classical scientific astrologer” and financial commentator has stressed planetary transits and oppositions rather than the phases of the Moon. Posting his analyses in the late summer of 2007 amid the deepening credit crunch, the flood of home foreclosures and bank failures, and the ubiquitous (though widely ignored) signs of imminent global economic meltdown, Theodore White warned of the bursting housing bubble, contending that Jupiter helped inflate values and that Saturn had begun to deflate them. “Saturn’s long transit of Virgo (26 months) and another four months by retrograde in the year 2010, takes place in a sign ruled by Mercury,” he wrote.


pages: 1,057 words: 239,915

The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931 by Adam Tooze

anti-communist, bank run, banking crisis, British Empire, centre right, collective bargaining, Corn Laws, credit crunch, failed state, fear of failure, first-past-the-post, floating exchange rates, Ford Model T, German hyperinflation, imperial preference, labour mobility, liberal world order, low interest rates, mass immigration, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, negative equity, price stability, reserve currency, Right to Buy, Suez canal 1869, Suez crisis 1956, the payments system, trade route, transatlantic slave trade, union organizing, zero-sum game

The ‘Urshock’ of the British Interwar: The First Spike in UK Unemployment, 1920–21 The United States, Britain and Japan were the worst affected by the crisis, but deflation was a global phenomenon. Even in Germany, in the wake of the Kapp putsch, in the summer of 1920 prices actually began to fall, raising both hopes of a return to economic normality and fear of a credit-crunch and British levels of unemployment. The question was how far to push this reversal? Given the scale of their financial problems and the pain of deflation, France, Italy and Japan opted for stabilization rather than a punishing attempt to restore pre-war parities. In France the Bloc national government acquired a black reputation on the left for breaking two attempts in May 1919 and May 1920 to launch general strikes.


pages: 1,042 words: 273,092

The Silk Roads: A New History of the World by Peter Frankopan

access to a mobile phone, Admiral Zheng, anti-communist, Ayatollah Khomeini, banking crisis, Bartolomé de las Casas, Berlin Wall, bread and circuses, British Empire, clean water, Columbian Exchange, credit crunch, cuban missile crisis, Deng Xiaoping, discovery of the americas, disinformation, drone strike, dual-use technology, energy security, European colonialism, failed state, financial innovation, Isaac Newton, land reform, Mahatma Gandhi, Malacca Straits, mass immigration, Mikhail Gorbachev, Murano, Venice glass, New Urbanism, no-fly zone, Ronald Reagan, sexual politics, South China Sea, spice trade, statistical model, Stuxnet, Suez crisis 1956, the built environment, the market place, The Wealth of Nations by Adam Smith, too big to fail, trade route, transcontinental railway, uranium enrichment, wealth creators, WikiLeaks, yield management, Yom Kippur War

It was not that appetites were sated or that tastes had changed, it was that the exchange mechanism went wrong: Europe in particular had little to give in return for the fabrics, ceramics and spices that were so highly prized. With China effectively producing more than it could sell abroad, there were predictable consequences when the ability to keep buying goods dried up. The result has often been described as a ‘bullion famine’.92 Today, we would call it a credit crunch. In China, state officials were not well paid, which led to regular corruption scandals and extensive inefficiencies. Worse, even when correctly and fairly assessed, taxpayers could not keep up with the irrational exuberance of a government that was keen to spend on grandiose schemes on the assumption that revenues would only ever rise.


pages: 898 words: 266,274

The Irrational Bundle by Dan Ariely

accounting loophole / creative accounting, air freight, Albert Einstein, Alvin Roth, An Inconvenient Truth, assortative mating, banking crisis, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, cognitive load, compensation consultant, computer vision, Cornelius Vanderbilt, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Demis Hassabis, Donald Trump, end world poverty, endowment effect, Exxon Valdez, fake it until you make it, financial engineering, first-price auction, Ford Model T, Frederick Winslow Taylor, fudge factor, Garrett Hardin, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, IKEA effect, Jean Tirole, job satisfaction, John Perry Barlow, Kenneth Arrow, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, name-letter effect, new economy, operational security, Pepsi Challenge, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, search costs, second-price auction, Shai Danziger, shareholder value, Silicon Valley, Skinner box, Skype, social contagion, software as a service, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tragedy of the Commons, ultimatum game, Upton Sinclair, Walter Mischel, young professional

“Look,” I said, “the credit card business is cutthroat. You send out six billion direct-mail pieces a year, and all the card offers are about the same.” Reluctantly, they agreed. “But suppose one credit card company stepped out of the pack,” I continued, “and identified itself as a good guy—as an advocate for the credit-crunched consumer? Suppose one company had the guts to offer a card that would actually help consumers control their credit, and better still, divert some of their money into long-term savings?” I glanced around the room. “My bet is that thousands of consumers would cut up their other credit cards—and sign up with you!”


pages: 492 words: 70,082

Immigration worldwide: policies, practices, and trends by Uma Anand Segal, Doreen Elliott, Nazneen S. Mayadas

affirmative action, Asian financial crisis, Berlin Wall, borderless world, British Empire, Celtic Tiger, centre right, conceptual framework, credit crunch, demographic transition, deskilling, en.wikipedia.org, European colonialism, export processing zone, Fall of the Berlin Wall, financial independence, full employment, global village, guest worker program, illegal immigration, immigration reform, income inequality, income per capita, informal economy, it's over 9,000, knowledge economy, labor-force participation, labour mobility, language acquisition, longitudinal study, low skilled workers, mass immigration, minimum wage unemployment, moral panic, Nelson Mandela, New Urbanism, open borders, phenotype, scientific management, South China Sea, structural adjustment programs, Suez canal 1869, trade route, transaction costs, upwardly mobile, urban planning, women in the workforce

The main driver for economic migration (and undoubtedly part of the decision-making calculus for other migrants) has been the strength of the UK economy. The UK has enjoyed high growth, low unemployment, and high levels of unfilled vacancies (Somerville, 2007). (Indeed, the UK economy enjoyed uninterrupted quarterly growth from the mid-1990s until the credit crunch, entering recession officially only at the end of 2008). Both employers and government have recruited economic migrants in order to address labor market needs.4 According to the Labor Force Survey, in 2008 there were an estimated 2.3 million foreign nationals working in the UK. Many UK labor migration schemes are designed to fill gaps in the domestic labor market.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

Alan Greenspan, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, book scanning, book value, Bretton Woods, Brexit referendum, call centre, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, fear index, financial intermediation, floating exchange rates, forward guidance, George Akerlof, German hyperinflation, global macro, global supply chain, global value chain, hiring and firing, Home mortgage interest deduction, income inequality, inflation targeting, Irish property bubble, Isaac Newton, job automation, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, Kickstarter, land bank, liberal capitalism, light touch regulation, liquidity trap, loadsamoney, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low-wage service sector, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, mortgage tax deduction, neoliberal agenda, offshore financial centre, oil shock, open borders, pension reform, precautionary principle, premature optimization, price stability, public intellectual, purchasing power parity, quantitative easing, rent-seeking, Republic of Letters, Robert Gordon, Robert Shiller, Robert Solow, short selling, Silicon Valley, subprime mortgage crisis, The Great Moderation, The Rise and Fall of American Growth, too big to fail, total factor productivity, trade liberalization, transaction costs, urban renewal, working-age population, Yogi Berra

IMF Working Paper WP/​12/​284, Washington, DC, https://​www.imf.org/​external/​ pubs/​ft/​wp/​2012/​Data/​wp12284.zip. p o l i c y w o u n d s l e av e b e h i n d s c a r t i s s u e 305 reading of the state of affairs. The LTROs, he said, were “powerful and complex measures.” They were providing “relief,” for example, by preventing a “credit crunch.”97 In effect, Draghi was saying that eurozone borrowers were desperate for more credit and that the ECB’s liquidity facilities had enabled banks to lend more to households and businesses. This analysis, of course, was incorrect. The unemployment rate was climbing to new heights, households had suffered huge income losses, and they had debts to repay.


pages: 1,042 words: 266,547

Security Analysis by Benjamin Graham, David Dodd

activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, Bear Stearns, behavioural economics, book value, business cycle, buy and hold, capital asset pricing model, Carl Icahn, carried interest, collateralized debt obligation, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, diversified portfolio, fear of failure, financial engineering, financial innovation, fixed income, flag carrier, full employment, Greenspan put, index fund, intangible asset, invisible hand, Joseph Schumpeter, junk bonds, land bank, locking in a profit, Long Term Capital Management, low cost airline, low interest rates, Michael Milken, moral hazard, mortgage debt, Myron Scholes, prudent man rule, Right to Buy, risk free rate, risk-adjusted returns, risk/return, secular stagnation, shareholder value, stock buybacks, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, two and twenty, zero-coupon bond

The planned liquidation of Telecor and spin-off of its Electro Rent subsidiary in 1980 forever imprinted in my mind the merit of fundamental investment analysis. A buyer of Telecor stock was effectively creating an investment in the shares of Electro Rent, a fast-growing equipment rental company, at the giveaway valuation of approximately 1 times the cash flow. You always remember your first value investment. 5 The credit crunch triggered by subprime mortgage losses that began in July 2007 is a recent and dramatic example. 6 Graham and Dodd recommended that investors purchase stocks trading for less than two-thirds of “net working capital,” defined as working capital less all other liabilities. Many stocks fit this criterion during the Depression years, far fewer today. 7 Another sort of constraint involves the “prudent man rule,” which is a legal concept that divides permissible from impermissible investments.


pages: 918 words: 260,504

Nature's Metropolis: Chicago and the Great West by William Cronon

active transport: walking or cycling, book value, British Empire, business cycle, City Beautiful movement, classic study, conceptual framework, credit crunch, gentleman farmer, it's over 9,000, Lewis Mumford, machine readable, New Urbanism, Ralph Waldo Emerson, refrigerator car, Robert Gordon, short selling, The Chicago School, Thorstein Veblen, trade route, transaction costs, transcontinental railway, traveling salesman, Upton Sinclair, vertical integration, zero-sum game

Dun and Company considered him a superb credit risk: “Strong, wealthy, and v[er]y good in every way.”8 But Gardner believed that the most effective way to make money was to expand business on borrowed capital, a strategy that worked only so long as the general economy was healthy. When times turned bad, he was caught in the same credit crunch that had trapped him in 1857. His business collapsed in August 1873, leaving over $700,000 in bad debts to the Chicago and Wisconsin firms that had been his suppliers. His son, who had managed the Chicago hotel, soon followed him into bankruptcy, so father and child shared in the general disaster of the family.9 The Gardners suffered their fate because they gambled on living beyond their means.


Lonely Planet Greek Islands by Lonely Planet, Alexis Averbuck, Michael S Clark, Des Hannigan, Victoria Kyriakopoulos, Korina Miller

car-free, carbon footprint, credit crunch, Easter island, eurozone crisis, G4S, haute couture, haute cuisine, low cost airline, Norman Mailer, pension reform, period drama, restrictive zoning, sensible shoes, sustainable-tourism, trade route, transfer pricing, urban sprawl

Domestic tourism to the islands, however, was down, with shrunken budgets forcing Greeks to cut back on travel and holiday spending. » Population: 10.7 million » Percentage of women: 50% » Life expectancy: 80 years » Inhabitants per square kilometre: 87 » Tourists: 15 million National Crisis While the languid islands may feel like a long way from Athens, the islanders closely watch developments on the mainland and are not immune to national controversies and events. In the three decades since Greece joined the European Union, increased wealth and improved living standards have gone hand in hand with rising unemployment, growing public debt, corruption allegations and a credit crunch that’s left many Greeks disillusioned and angry. Since the early ’70s, clashes (occasionally violent) between youth and the police in central Athens have been a mainstay of Greek society. Rising youth unemployment and downward mobility have added fuel to the fire, while plans for far-reaching privatisation, tax reforms and public-sector cuts have incited many people to take to the street in massive strikes and demonstrations, occasionally spreading to the larger islands such as Crete.


Egypt by Matthew Firestone

call centre, clean water, credit crunch, friendly fire, haute cuisine, Khartoum Gordon, Right to Buy, spice trade, Suez canal 1869, Suez crisis 1956, sustainable-tourism, Thales and the olive presses, trade route, urban sprawl, young professional

Palace Port Ghalib Resort ( 336 0000; www.ichotelsgroup.com/intercontinental; s/d all-inclusive from US$175/195; ) Run by the prestigious InterContinental group of hotels and resorts, the Palace is the new face of Marsa Alam and the heart of the new Port Ghalib development just 5km from the international airport. While development has slowed considerably in light of the global credit-crunch, the Palace opened up to considerable fanfare, and can now easily compete with other luxury properties in Hurghada and Sharm el-Sheikh. The Palace is a slightly subdued yet wholly hedonistic affair where you can lap up the beauty of the coastline. Eating In Marsa Alam there are a couple of cafes at the junction where you can find basic fare as well as a small supermarket with a modest selection.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

accelerated depreciation, activist fund / activist shareholder / activist investor, air freight, ASML, barriers to entry, Basel III, Black Monday: stock market crash in 1987, book value, BRICs, business climate, business cycle, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable:, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, currency risk, discounted cash flows, distributed generation, diversified portfolio, Dutch auction, energy security, equity premium, equity risk premium, financial engineering, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, low interest rates, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, proprietary trading, purchasing power parity, quantitative easing, risk free rate, risk/return, Robert Shiller, Savings and loan crisis, shareholder value, six sigma, sovereign wealth fund, speech recognition, stocks for the long run, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, two and twenty, value at risk, yield curve, zero-coupon bond

Although external market factors may lower potential proceeds from a divestiture, management should balance this against the (hidden) costs of continuing with the status quo. Alternatively, management could look into transaction types that do not generate cash proceeds and thereby do not lock in an exit price for the company’s shareholders. For example, as the credit crunch unfolded in 2008, Cadbury decided against a planned trade sale (in cash) of its American beverages business. Instead, it opted for a noncash demerger of the corporate group into two listed entities. This left Cadbury shareholders with the option to hold the shares of the American business and sell at some later stage, when prices might be higher.


The First Tycoon by T.J. Stiles

book value, British Empire, business cycle, business logic, buttonwood tree, buy and hold, buy low sell high, California gold rush, Cornelius Vanderbilt, credit crunch, Edward Glaeser, gentleman farmer, informal economy, invisible hand, Isaac Newton, James Watt: steam engine, joint-stock company, margin call, Monroe Doctrine, new economy, public intellectual, risk free rate, short selling, Snow Crash, strikebreaker, The Wealth of Nations by Adam Smith, three-masted sailing ship, tontine, transatlantic slave trade, transcontinental railway, vertical integration, working poor

Then the perpetrator would take the checks to other banks and use them as collateral for loans, which he would take in the form of actual greenbacks; these he would lock up in a safe. Now he had removed from circulation far more money than was in his original account—and it was high-powered money. Banks, short of greenbacks, would call in loans to brokers, who would curtail trading on margin on Wall Street, causing stock prices to fall. A self-reinforcing credit crunch could ensue, as falling share values caused further reductions in loans against stock. The lock-up was a sawed-off shotgun of a financial weapon—devastating, imprecise, and likely to injure innocent bystanders.39 Vanderbilt accused Drew of carrying out a lock-up during his bear campaign of 1866, when he laid Erie low with his secret 58,000 shares.


Lonely Planet Ireland by Lonely Planet

bank run, banking crisis, Berlin Wall, Bernie Sanders, bike sharing, Bob Geldof, British Empire, carbon footprint, Celtic Tiger, classic study, country house hotel, credit crunch, Easter island, G4S, glass ceiling, global village, haute cuisine, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), Jacquard loom, Kickstarter, land reform, reserve currency, sustainable-tourism, three-masted sailing ship, young professional

Recession Looms From 2002 the Irish economy was kept buoyant by a gigantic construction boom that was completely out of step with any measure of responsible growth forecasting. The out-of-control international derivatives market flooded Irish banks with cheap money, and they lent it freely. Then American global financial services firm Lehman Bros and the credit crunch happened. The Irish banks nearly went to the wall, but were bailed out at the last minute, and before Ireland could draw breath, the International Monetary Fund (IMF) and the EU held the chits of the country's midterm economic future. Ireland found itself yet again confronting the familiar demons of high unemployment and emigration, but a deep-cutting program of austerity saw the corner turned by the end of 2014.


Greece Travel Guide by Lonely Planet

active transport: walking or cycling, Airbnb, capital controls, car-free, carbon footprint, credit crunch, haute couture, haute cuisine, illegal immigration, indoor plumbing, Kickstarter, low cost airline, pension reform, period drama, sensible shoes, trade route, urban sprawl

A general election held in October 2009, midway through Karamanlis’ term, saw PASOK (under Georgios Papandreou) take back the reins in a landslide win against the conservatives. The web portal www.ancientgreece.com is great for all things ancient and Greek. Sink or Swim In 2009 a lethal cocktail of high public spending and widespread tax evasion, combined with the credit crunch of global recession, threatened to cripple Greece’s economy. In 2010 Greece’s fellow eurozone countries agreed to a US$145 billion package (half of Greece’s GDP) to get the country back on its feet, though with strict conditions – the ruling government, PASOK, still led by Georgios Papandreou, would have to impose austere measures of reform and reduce Greece’s bloated deficit.


pages: 1,544 words: 391,691

Corporate Finance: Theory and Practice by Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann le Fur, Antonio Salvi

"Friedman doctrine" OR "shareholder theory", accelerated depreciation, accounting loophole / creative accounting, active measures, activist fund / activist shareholder / activist investor, AOL-Time Warner, ASML, asset light, bank run, barriers to entry, Basel III, Bear Stearns, Benoit Mandelbrot, bitcoin, Black Swan, Black-Scholes formula, blockchain, book value, business climate, business cycle, buy and hold, buy low sell high, capital asset pricing model, carried interest, collective bargaining, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, delta neutral, dematerialisation, discounted cash flows, discrete time, disintermediation, diversification, diversified portfolio, Dutch auction, electricity market, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, German hyperinflation, Glass-Steagall Act, high net worth, impact investing, implied volatility, information asymmetry, intangible asset, interest rate swap, Internet of things, inventory management, invisible hand, joint-stock company, joint-stock limited liability company, junk bonds, Kickstarter, lateral thinking, London Interbank Offered Rate, low interest rates, mandelbrot fractal, margin call, means of production, money market fund, moral hazard, Myron Scholes, new economy, New Journalism, Northern Rock, performance metric, Potemkin village, quantitative trading / quantitative finance, random walk, Right to Buy, risk free rate, risk/return, shareholder value, short selling, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stocks for the long run, supply-chain management, survivorship bias, The Myth of the Rational Market, time value of money, too big to fail, transaction costs, value at risk, vertical integration, volatility arbitrage, volatility smile, yield curve, zero-coupon bond, zero-sum game

The balance resulting from the activity is what appears on the balance sheet, i.e. the profit or loss, not the activity itself measured by sales. In order of listing: net debt, shareholders’ equity, fixed assets, working capital, working capital, net debt. In theory, no, as the company may be facing a temporary credit crunch, but most of the time yes because it will have to dispose of assets quickly or stop its activities, which will result in a big reduction in equity, and then it is in insolvency. In order of decreasing liquidity: listed securities, commercial paper, raw materials inventories, head office, unlisted securities, ships and aircraft, work-in-progress inventories, plant.


Greece by Korina Miller

car-free, carbon footprint, credit crunch, flag carrier, Google Earth, haute cuisine, illegal immigration, informal economy, invention of the printing press, pension reform, period drama, restrictive zoning, sensible shoes, Suez canal 1869, too big to fail, trade route, upwardly mobile, urban renewal, urban sprawl, women in the workforce

When problems do arise, they’re debated and handled with a strong will, as is evident in the heated conversations outside the local kafeneio (coffee house). The past three decades of increased wealth and improved living standards have gone hand in hand with rising unemployment, growing public debt and a credit crunch that’s left many Greeks disillusioned and angry. The government’s proposals of reforms in pensions and labour, plans for privatisation, and alleged corruption, incited many Greeks to take to the street in massive strikes and protests. * * * FAST FACTS Population: 11.26 million Percentage of women: 50% Life expectancy: 80 years Inhabitants per square kilometre: 87 Tourists: 18.8 million annually GDP: US$345 billion Per capita income: US$32,005 Inflation: 1.57% Unemployment: 9.3% External debt: US$92.19 billion * * * Since the early ’70s, battles between youth and the police have been a mainstay of Greek society.


pages: 1,744 words: 458,385

The Defence of the Realm by Christopher Andrew

Able Archer 83, active measures, anti-communist, Ayatollah Khomeini, Berlin Wall, Bletchley Park, Boeing 747, British Empire, classic study, Clive Stafford Smith, collective bargaining, credit crunch, cuban missile crisis, Desert Island Discs, disinformation, Etonian, Fall of the Berlin Wall, false flag, G4S, glass ceiling, illegal immigration, information security, job satisfaction, large denomination, liquidationism / Banker’s doctrine / the Treasury view, Mahatma Gandhi, Mikhail Gorbachev, Neil Kinnock, North Sea oil, operational security, post-work, Red Clydeside, Robert Hanssen: Double agent, Ronald Reagan, sexual politics, strikebreaker, Suez crisis 1956, Torches of Freedom, traveling salesman, union organizing, uranium enrichment, Vladimir Vetrov: Farewell Dossier, Winter of Discontent, work culture

Jonathan Evans noted, however, in early 2009 that the success of counter-terrorist operations over the last few years had had ‘a chilling effect on the enthusiasm of the plotters’ for mounting new attacks. It is too early to tell whether the ‘chilling effect’ is a short-term fluctuation or a long-term trend. Save for climate change, the study of long-term trends has had little appeal to early twenty-first-century policy-makers. The shock caused by the sub-prime crisis and credit crunch of 2008–9 derived, at least in part, from what I have termed Historical Attention Span Deficit Disorder (HASDD). To many bankers and financial commentators, the precedent of 1929 and the Wall Street Crash, to which they had previously paid little attention, suddenly seemed surprisingly relevant.


Germany by Andrea Schulte-Peevers

Albert Einstein, bank run, Berlin Wall, Boeing 747, call centre, capitalist realism, car-free, carbon footprint, centre right, company town, computer age, credit crunch, Donald Trump, Fall of the Berlin Wall, Frank Gehry, gentrification, glass ceiling, Google Earth, haute couture, haute cuisine, Honoré de Balzac, Johann Wolfgang von Goethe, Johannes Kepler, Kickstarter, low cost airline, messenger bag, Mikhail Gorbachev, New Urbanism, Peace of Westphalia, Peter Eisenman, place-making, post-work, Prenzlauer Berg, retail therapy, ride hailing / ride sharing, sensible shoes, Skype, trade route, urban planning, urban renewal, V2 rocket, white picket fence

It has five simple but cosy rooms, with ancient exposed beams, above a sprawling restaurant-pub that makes its own beer and schnapps and serves hearty meals in belt-loosening portions (€5 to €14). Aparthotel 1A ( 275 750; www.1a-aparthotel.de; Robert-Müller-Strasse 1A; s/d €57/77; ) No prizes for originality or flair here, just clean, no-nonsense rooms in a fairly central location, popular with post-credit-crunch business travellers. Rates include breakfast buffet. Return to beginning of chapter Eating & Drinking Zwickau’s almost-hip Kneipenstrasse (pub row), aka Peter-Breuer-Strasse, is good for arm wrestling a few jugs of ale or sipping a cocktail or five. For fast food, try the Zwickau Arcaden shopping mall on Innere-Plauensche-Strasse.


pages: 3,292 words: 537,795

Lonely Planet China (Travel Guide) by Lonely Planet, Shawn Low

Albert Einstein, anti-communist, bike sharing, birth tourism , carbon footprint, clean water, colonial rule, country house hotel, credit crunch, Deng Xiaoping, G4S, gentrification, Great Leap Forward, haute couture, haute cuisine, high-speed rail, income inequality, indoor plumbing, Japanese asset price bubble, Kickstarter, land reform, mass immigration, off-the-grid, Pearl River Delta, place-making, Rubik’s Cube, Shenzhen special economic zone , Skype, South China Sea, special economic zone, sustainable-tourism, trade route, upwardly mobile, urban planning, urban renewal, urban sprawl, women in the workforce, Xiaogang Anhui farmers, young professional

For many, the first decade of the 21st century was marked by spectacular riches for some – the number of dollar billionaires doubled in just two years – and property prices began moving dramatically beyond the reach of the less fortunate. This period coincided with the greatest migration of workers to the cities the world has ever seen. China responded to the credit crunch of 2007 and the downturn in Western economies with a stimulus package of US$586 billion between 2008 and 2009. Property and infrastructure construction enjoyed spectacular growth, buffering China from the worst effects of the downturn, but the export sector contracted as demand dried up overseas.