currency manipulation / currency intervention

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pages: 484 words: 136,735

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

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, 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, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, 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 Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, 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

The end of market fundamentalism will erode the strict precrisis doctrine that currency relationships must be left to market forces. Instead, the years ahead are likely to see increasingly explicit negotiations over trade imbalances and concerted currency interventions. There will be no return, however, to the government’s futile efforts in the 1960s and 1970s to take full control over international financial flows. Instead, currency interventions and global macroeconomic coordination in the future are likely to represent a pragmatic compromise between the precrisis period’s exaggerated faith in efficient markets and the overly prescriptive policies of the Keynesian Golden Age. Given that the U.S. and British governments were willing to engage in the massive currency interventions of the Plaza Agreement and the Louvre Accord in the mid-1980s, during the heyday of Thatcherism and Reaganomics, it is hard to see why governments of the future should consider any interference with market forces in foreign exchanges to be ideologically out of bounds.

That governments must set parameters for global financial markets if economic stability is to be maintained, was recognized in the early phase of the free-market period, when Ronald Reagan and Margaret Thatcher were responsible for some of the biggest currency interventions and trade management decisions of all time.23 Many specific plans to influence currency movements and reduce imbalances have been proposed by prominent economists and politicians over the years. These plans have involved setting bands for acceptable exchange rate movements, automatic currency intervention under agreed conditions, integration of monetary and exchange rate policy, agreed ceilings on trade imbalances, and similar ideas.24 But none of the ideas for managing currencies, or international capital flows, or reconciling free trade with domestic macroeconomic objectives, could receive any serious attention in the ideological environment of the precrisis years.

But with health care spending excluded, the United States spends just 57 percent of GDP on private consumption, in line with the spending, excluding health care, in other advanced economies such as Germany, Britain, and France.11 In short, the growth of America’s consumption in relation to its income has been due entirely to the cost of health care—and the gap has been steadily increasing for thirty years. It could be argued from these figures that U.S. health spending, even more than Chinese currency manipulation, Alan Greenspan’s monetary policy, lax regulation, or bankers’ greed, was the true cause of the credit crunch, the subprime crisis, and the collapse of Capitalism 3.3. Had President Obama focused more attention in the health care debate on costs and less on coverage of the uninsured, he might have managed to convince Americans that their present health care system was unsustainable and threatened bankruptcy not only for the government and individual businesses but for the entire nation.


pages: 381 words: 101,559

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

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

Because of the yuan-dollar peg maintained by China, a 40 percent revaluation of the real against the dollar also meant a 40 percent revaluation against the yuan. Brazil’s exports suffered not only at the high end against U.S. technology but also at the low end against Chinese assembly and textiles. Brazil fought back with currency intervention by its central bank, increases in reserve requirements on any local banks taking short positions in dollars, and other forms of capital controls. In late 2010, Lula’s successor as president, Dilma Rousseff, vowed to press the G20 and the IMF for rules that would identify currency manipulators—presumably both China and the United States—in order to relieve the upward pressure on the real. Brazil’s efforts to restrain the appreciation of the real met with some short-term success in late 2010 but immediately gave rise to another problem—inflation.

However, this was at a time when exports were a relatively small part of Chinese GDP and the leadership was more focused on cheap imports to develop infrastructure. As the export sector grew, China engaged in a series of six devaluations over ten years so that, by 1993, the yuan had been cheapened to a level of 5.32 yuan to the dollar. Then, on January 1, 1994, China announced a reformed system of foreign exchange and massively devalued the yuan to 8.7 to the dollar. That shock caused the U.S. Treasury to label China a currency “manipulator” pursuant to the 1988 Trade Act, which requires the Treasury to single out countries that are using exchange rates to gain unfair advantage in international trade. That was the last time Treasury used the manipulator label against China despite veiled threats to do so ever since. A series of mild revaluations followed in response so that, by 1997, the yuan was pegged at 8.28 to the dollar, where it remained practically unchanged until 2004.

In our statistical age, economists prefer to present this phenomenon in percentage terms, such as 6.0 percent unemployment for year-end 2002 and 9.9 percent for 2009, but reciting the actual numbers of affected persons—more than 25 million—helps to bring home the depths of the employment problem. America desperately needed to create jobs. For a while, this human tragedy was masked by the easy money policies of Greenspan and Bernanke and the resulting euphoria of credit card spending, rising home prices, rising stock prices and large no-down-payment mortgages for all comers. Although there were some complaints about Chinese currency manipulation and lost American jobs in 2004 and 2005, these complaints were muted by the highly visible but ultimately nonsustainable prosperity of those years resulting from the easy money. When the music stopped abruptly in 2007 and the United States careened into the Panic of 2008, there was no longer a place for Chinese policy makers to hide. Now U.S. politicians, led most noisily by Senator Charles Schumer, publicly attacked the pegging of the yuan-dollar exchange rate and blamed the Chinese for lost jobs in the United States.


pages: 219 words: 61,720

American Made: Why Making Things Will Return Us to Greatness by Dan Dimicco

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Affordable Care Act / Obamacare, American energy revolution, American Society of Civil Engineers: Report Card, Bakken shale, barriers to entry, Bernie Madoff, carbon footprint, clean water, crony capitalism, currency manipulation / currency intervention, David Ricardo: comparative advantage, decarbonisation, fear of failure, full employment, Google Glasses, hydraulic fracturing, invisible hand, job automation, knowledge economy, laissez-faire capitalism, Loma Prieta earthquake, manufacturing employment, oil shale / tar sands, Ponzi scheme, profit motive, Report Card for America’s Infrastructure, Ronald Reagan, Silicon Valley, smart grid, smart meter, sovereign wealth fund, The Wealth of Nations by Adam Smith, too big to fail, uranium enrichment, Washington Consensus, Works Progress Administration

To be honest, one of the more frustrating aspects of the appointment was running into bureaucrats from various departments and federal agencies that took a rather parochial view of their responsibilities. A lot of times the answer to a question about currency manipulation or dumping or countervailing duties tended to be “You need to talk to somebody else about that.” I remember one meeting with Commerce Department officials where one of my fellow CEOs argued how one of the biggest impediments to the revival of U.S.-based manufacturing is Chinese currency manipulation. The response: “Well, that’s a Treasury Department issue. We don’t get into that.” I wasn’t too happy with that answer. But that’s the answer we get all the time. It doesn’t work. It doesn’t do us any good to say 50 percent of the problem is currency manipulation, and the other 50 percent is lax enforcement of international trade agreements, if nobody is on the same page and everyone guards their own little fiefdoms.

At the same time, you might have heard about Boeing and Airbus suffering delays and cost overruns for their next generation of passenger aircraft. All of those problems occurred in their overseas factories. We’ve tried quiet diplomacy. It’s failed miserably. We’ve tried to publicly shame China into stopping its illegal currency manipulation. President Obama appealed directly to Chinese leaders. China’s leaders flatly denied they’re doing anything wrong. And in the face of all evidence, the U.S. Treasury Department and the Commerce Department still refuse to label China as a currency manipulator. Where is the World Trade Organization in all of this? The WTO in 1995 replaced the General Agreement on Tariffs and Trade with the idea of creating a formal process of resolving global trade disputes. The WTO is a noble experiment in the tradition of the League of Nations, the Kellogg-Briand nonaggression pact of 1928, and the United Nations.

Trade Representative, our chief trade negotiator. We shouldn’t be shy about using bilateral and multilateral negotiations, either. What Good Can Institutions Do? You need accountability. That said, private enterprise cannot effectively fight foreign governments on trade disputes. Nucor, for example, cannot file an illegal steel dumping complaint with the WTO based on currency manipulation. We’ve tried to get the federal government to recognize currency manipulation as a subsidy, but we haven’t been successful. We’ll keep trying to persuade our political leaders that we’re right, because the truth is, any answer to our foreign-trade imbalance requires a government-to-government solution. I had the honor of serving on the U.S. Manufacturing Council, a group of 25 people from the private sector, mostly CEOs and COOs, appointed by the U.S. commerce secretary to offer advice on policies that affect the industry.


pages: 397 words: 112,034

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

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, 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, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, 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, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, Westphalian system, women in the workforce, yield curve

In such a scenario, quantitative easing will probably end in June 2011. The Fed’s policy will also force other countries to pursue expansionary monetary policies in order to prevent their own currencies from appreciating excessively. Japan has engaged in currency market intervention and announced its own quantitative easing program to stem the appreciation of the yen. Developing countries in both East Asia and Latin America are engaging in currency intervention that could nurture more domestic monetary growth. The European currency has suffered from investor concerns about the debt servicing problems of peripheral countries such as Greece, Ireland, and Portugal. The European Union intervened to rescue Greece in May 2010 and created a special fund to help other countries, which helped Ireland in November. Germany then undermined market confidence in the peripheral countries by suggesting that it would encourage them to pursue debt restructuring that might penalize bond holders.

See also climate change career risk, 289 Carr, Nicholas, xxix, 292–293 CDOs. See collateralized debt obligations (CDOs) CDSs. See credit default swaps (CDSs) Central Africa, 126 central banks, Asia, 82–83; asset buying by, 81; demand for gold by, 169–170, 174–175; money supply and, 246–248; selling public debt to, 259 Chile, 8, 33, 48, 49, 51 China, xv, xx; Australian exports to, 145–146; climate change and, xxvi, 225; consumption in, 89–90; currency intervention by, 10; economic growth in, 10, 52; economy of, xxiii, 24; equity markets, 83–84, 85; excess of thrift in, 88–89; as financial capital, 245–246; financial sector in, xxvii; fiscal deficit, 257; gold market in, 170–171; gold reserves, xxv, 168–169, 170, 174; household incomes in, 89; influence of, in Africa, 122–123; labor costs in, 86–87, 89–90; monetary policy, 10; savings rate in, 245–246; structural shift in, 84–85 Citigroup, 272 Clean Development Mechanism (CDM), 225 climate change, adaptation to, 227–229; Canada and, xviii, 27–28; future outcomes for, 224–225; international agreements on, 220–223; oil industry and, xxv, 189–191; public policy and, xxvi–xxvii, 219–230; South Africa and, xxii coal, 125 Coates, John, 290 cognitive abilities, 293–294 cognitive biases, 287, 288–289 collateralized debt obligations (CDOs), 275 Colombia, 33, 48, 49 commodity prices, xv, xxii, 50, 52–54, 117, 195 Common Market for Eastern and Southern Africa (COMESA), 122 compensation plans, 277 composite currencies, 161–163 Conference of the Parties to the Convention (COP), 222 confirmatory evidence, 288 conflicts, in Sub-Saharan Africa, 123–124 Congdon, Tim, xxvii Constitutionalist Revolution (1906), 206 consumer debt, 18–19 Consumer Protection Financial Bureau, 267, 269 consumer spending, 8, 18 consumption-based taxes, 261–263 Copenhagen Accord, 222, 225 Cordero, Ernesto, 45 corporate compliance, xxviii–xxix, 271–282 corporate governance, 267, 268 corporate profits, 8 corporate sector: Canada, 20; US, xvi, 4, 8 corporate taxes, 260 cortisol, 290 Costa Rica, 48 Côte D’Ivoire, 127 credit default swaps (CDSs), 275 creditor status, 156 Creel, Santiago, 37, 45 crime, in Mexico, 43 culture of ethics, 276–280 currencies: African, 122; composite, 161–163; domestic, 155; international, 155–156; synthetic, 161–163.

See credit default swaps (CDSs) Central Africa, 126 central banks, Asia, 82–83; asset buying by, 81; demand for gold by, 169–170, 174–175; money supply and, 246–248; selling public debt to, 259 Chile, 8, 33, 48, 49, 51 China, xv, xx; Australian exports to, 145–146; climate change and, xxvi, 225; consumption in, 89–90; currency intervention by, 10; economic growth in, 10, 52; economy of, xxiii, 24; equity markets, 83–84, 85; excess of thrift in, 88–89; as financial capital, 245–246; financial sector in, xxvii; fiscal deficit, 257; gold market in, 170–171; gold reserves, xxv, 168–169, 170, 174; household incomes in, 89; influence of, in Africa, 122–123; labor costs in, 86–87, 89–90; monetary policy, 10; savings rate in, 245–246; structural shift in, 84–85 Citigroup, 272 Clean Development Mechanism (CDM), 225 climate change, adaptation to, 227–229; Canada and, xviii, 27–28; future outcomes for, 224–225; international agreements on, 220–223; oil industry and, xxv, 189–191; public policy and, xxvi–xxvii, 219–230; South Africa and, xxii coal, 125 Coates, John, 290 cognitive abilities, 293–294 cognitive biases, 287, 288–289 collateralized debt obligations (CDOs), 275 Colombia, 33, 48, 49 commodity prices, xv, xxii, 50, 52–54, 117, 195 Common Market for Eastern and Southern Africa (COMESA), 122 compensation plans, 277 composite currencies, 161–163 Conference of the Parties to the Convention (COP), 222 confirmatory evidence, 288 conflicts, in Sub-Saharan Africa, 123–124 Congdon, Tim, xxvii Constitutionalist Revolution (1906), 206 consumer debt, 18–19 Consumer Protection Financial Bureau, 267, 269 consumer spending, 8, 18 consumption-based taxes, 261–263 Copenhagen Accord, 222, 225 Cordero, Ernesto, 45 corporate compliance, xxviii–xxix, 271–282 corporate governance, 267, 268 corporate profits, 8 corporate sector: Canada, 20; US, xvi, 4, 8 corporate taxes, 260 cortisol, 290 Costa Rica, 48 Côte D’Ivoire, 127 credit default swaps (CDSs), 275 creditor status, 156 Creel, Santiago, 37, 45 crime, in Mexico, 43 culture of ethics, 276–280 currencies: African, 122; composite, 161–163; domestic, 155; international, 155–156; synthetic, 161–163. See also dollar; reserve currency currency intervention, 9–10 currency speculation, 250–255 Daragahi, Borzou, 209 Davos consensus, 285–286 debt deflation, 80–81 Decalogue, 39–44 Deepwater Horizon oil spill, 41, 185–186 deficit reduction, xvii, 5, 10–11 deflation, xxi, 96–97, 100, 173, 247 Democratic Party, 6, 12–13 Democratic Party of Japan (DPJ), xxi, 102–104, 106, 109–111, 113–114 Democratic Republic of the Congo (DRC), xxii, 126 Demographics: in Canada, 25–26; fiscal imbalances and, 258; in Latin America, xx, 51 Denmark, 113 derivatives, 267, 268 developing countries, climate change and, 225, 226 Dodd, Christopher, 264 Dodd-Frank Wall Street Reform and Consumer Protection Act, xxviii, 264–270 Dollar: Australian, 146; Canadian, 23; devaluation of US, xvii, 7, 25; US, as reserve currency, xxiv, 153–165; weakening of US, and commodity prices, 53 domestic currency, 155 DPJ.


pages: 248 words: 57,419

The New Depression: The Breakdown of the Paper Money Economy by Richard Duncan

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asset-backed security, bank run, banking crisis, banks create money, Ben Bernanke: helicopter money, Bretton Woods, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, income inequality, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, market bubble, market fundamentalism, mass immigration, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, private sector deleveraging, quantitative easing, reserve currency, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

When the fixed exchange rate system ended with the collapse of the Bretton Woods system, however, that changed. Gradually, it became apparent that a country could gain an export advantage if its central bank created fiat money and used it to buy the currencies of its trading partners. Such intervention served to push up the value of the other currencies and depress the value of the currency being created, making the products of the currency-manipulating country more price competitive in the international marketplace. Central banks accumulated approximately $6.7 trillion worth of foreign exchange between 1971 and 2007, when the global economic crisis began to take hold. (See Exhibit 2.1.) To do so, they created the equivalent of $6.7 trillion worth of their own fiat money. Approximately 75 percent of that money, roughly $5 trillion, went into the United States and, by 2007, supplied 10 percent of total credit market debt (TCMD) there.

The reason the dollar does not depreciate enough to correct the U.S. trade deficit is because many of the countries that the United States trades with are manipulating the currency’s value by creating fiat money and buying dollars. The extent to which a country acts in this manner can be seen in the amount of foreign exchange that country’s central bank holds. Thus the U.S. trade deficit and its financial account surplus are both the result of fiat money creation and currency manipulation by many of the United States’ trading partners. While fiat money created for this purpose is not solely responsible for bringing about the global economic crisis, it has been one of the leading culprits. What Percentage of Total Foreign Exchange Reserves Are Dollars? Most countries disclose the breakdown of their foreign exchange reserves by currency. China, however, does not.

Therefore, the equations expressing the determinants of the balance on the current account must be rewritten as follows: (Savings + Fiat money creation) > Investment = Current account surplus When a country’s savings when combined with the paper money created by its central bank exceed the amount of its investment, then that country will have a current account surplus that will force other countries that do not create as much paper money to have current account deficits. And, Investment > (Savings + Fiat money creation) = Current account deficit Thus, it has not been a savings imbalance so much as an imbalance in the amount of paper money being created by the world’s central banks that is responsible for the global imbalances that destabilized the world. Seen in this light, it is clear that the paper money creation by the PBOC and other currency manipulating central banks, which amounted to nearly $5 trillion between 1999 and 2007 alone, is responsible for destabilizing the world economy, and not differences in the rate of real “savings,” as Bernanke contends. China’s economy has been growing at roughly 10 percent a year for two decades. It has the highest level of investment relative to GDP any country has ever experienced (46 percent in 2009).


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, lump of labour, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

Countries can also enter the foreign exchange market directly, buying or selling their currencies in an effort to change their relative value, as the British government tried to do while fighting off the 1992 devaluation. Given the enormous size of the foreign exchange market—with literally trillions of dollars in currencies changing hands every day—most governments don’t have deep enough pockets to make much of a difference. As the British government and many others have learned, a currency intervention can feel like trying to warm up a cold bathtub with one spoonful of hot water at a time, particularly while speculators are doing the opposite. As the British government was buying pounds, Soros and others were selling them—effectively dumping cold water in the same tub. We still haven’t really answered the basic question at the beginning of the chapter: How many yen should a dollar be worth?

At the same time, a cheap currency raises the costs of imports, which is bad for consumers. (Ironically, a weak currency can also harm exporters by making any imported inputs more expensive.) A government that deliberately keeps its currency undervalued is essentially taxing consumers of imports and subsidizing producers of exports. An overvalued currency does the opposite—making imports artificially cheap and exports less competitive with the rest of the world. Currency manipulation is like any other kind of government intervention: It may serve some constructive economic purpose—or it may divert an economy’s resources from their most efficient use. Would you support a tax that collected a significant fee on every imported good you bought and used the revenue to mail checks to firms that produce exports? How do governments affect the strength of their currencies? At bottom, currency markets are like any other market: The exchange rate is the function of the demand for some currency relative to the supply.


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

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, 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, 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, forward guidance, Fractional reserve banking, full employment, 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, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, 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, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, 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: Great Stagnation, very high income, winner-take-all economy, zero-sum game

This is because of an array of policies and structural features of the economy that shift income from households to corporations. Professor Lin emphasizes, among these, the virtually non-existent taxation of profits, low royalties on natural resources, the use of the monopolistic state-owned financial sector as a way of taxing savers via low interest rates on deposits, and the monopoly power of financial and telecommunications industries. Yet, as Professor Pettis argues, currency intervention also increases corporate profitability, by keeping the real exchange rate undervalued.22 A crucial element in the story was massive intervention in currency markets by governments, mainly of emerging countries. It is possible to distinguish four reasons for this. The first, particularly relevant to the oil exporters, was accumulation of supposedly high-quality foreign assets, often government bonds.

The Federal Reserve effectively is the world’s central bank, because it issues the closest thing it has to a world currency. This is a role it has played, for better or worse, since the First World War.32 Meanwhile, the countries intervening in foreign-exchange markets and exporting savings had to stabilize their own economies. Among other things, this meant ensuring that the consequences of export surpluses, including the monetary results of the currency interventions, were offset or sterilized, to avoid chronic excess demand. Thus, when a foreign central bank buys dollars at a pre-determined exchange rate, it creates domestic currency, which it hands over in return for the holdings of foreign currency. This newly created domestic-base money is deposited in domestic banks, which then hold a claim on the central bank and a liability to their domestic customer.

Such a ‘balance-sheet recession’ is the biggest danger consequent upon a huge credit boom.40 The second aspect concerns the structure of balance sheets. Overall demand for high-grade assets – particularly investment-grade bonds – exceeded the supply in the years preceding the crisis, driving prices up and yields down. This was partly because of those huge current-account surpluses, foreign-currency interventions and consequent demands for safe assets. Many investors – particularly those concerned with providing incomes in retirement, such as pension funds – needed higher returns than government bonds provided, while stocks looked less attractive after the collapse of the market in 2000. The market’s response was to mass-produce higher-yielding, pseudo-high-grade assets. In an inversion of Joseph Schumpeter’s idea of ‘creative destruction’, Jagdish Bhagwati of Columbia University called this ‘destructive creation’.41 It was the new structured finance that provided investors with what they thought they wanted.


pages: 183 words: 17,571

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

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banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, lump of labour, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, 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

Otherwise, the money China earned making and selling Broken Markets the TVs would simply melt away as the dollar lost value and the RMB gained value in the currency markets.This is always the case, because when a country runs a trade surplus, its currency becomes stronger relative to the promises to pay being pumped out the deficit ­country in exchange for goods. Absent the Chinese authorities’ actions to keep the RMB from appreciating too much relative to the dollar, Chinese internal costs would be much higher. Currency Manipulation or Fair Dealing? This is why China regularly stands accused of currency manipulation—an unfair trade policy in the eyes of American politicians. The “problem” of the Chinese trade surplus with the United States is simplistically attributed to artificially low Chinese costs in dollar terms. The truth cuts both ways: if China did not carefully restrict the use of its currency in international markets—in banker-speak, if the RMB was freely convertible at market prices—its currency would no doubt be substantially higher in dollar terms.

One of the ironies of the whole drama is that although many Germans would like to return to their beloved Deutsche Mark and leave the euro to the profligate, the German business community knows better.The German exporters sell on quality and innovation, but there is a point at which an expensive Broken Markets currency just prices you out of whole markets.The euro makes German goods more affordable to other Europeans than if they had retained their previous, weaker national currencies. Equally, although the euro has been expensive in dollar terms for several years, overall it has probably been cheaper than the old Deutsche Mark would have been given the same German export success. In this sense, it has had some of the same benefits as the currency manipulation that China (and before that Japan) has been pilloried for over the years. Nobody can be certain of the costs for any country of leaving the euro—or, if a major country defaults, the costs staying in. The Maastricht Treaty—the treaty that launched the European Union—left no line of retreat; joining the euro was specifically intended to be an irreversible decision with no escape hatches allowed.

eBook <www.wowebook.com> 170 Index Global whirlwinds (continued) economic primacy, 113 European banking crisis ECB, 102–103 federal funds market, 102 Federal Reserve, 103 global money market, 102 interbank market, 101 interbank-lending market, 102 interest rate and currency risks, 101 investment-banking industry, 101 recession, 103 short-and medium-term credit, 101 short-term funding and liquidity, 101 sovereign risk, 102 steroids, 103 globalization, 113 global money pump, 103–105 global trade, zero-sum game ants and grasshoppers, 96 cheap TV deal, 94–95 Chinese Central Bank, 94 currency manipulation, 95–96 multilateral trade, 94 political demagoguery, 94 hegemon, 113–116 sustainable development, 112 technology vs. friction, 105–106 US global economic leadership, 112 US losing clout, 111–112 war, settlement risk, 108–109 Western decline acceleration, 113 Government-sponsored enterprises (GSEs), 17 Graham-Leach-Bliley Act, 36 Great Depression, 5, 44, 61 Great Moderation, 16–18, 21, 61 “Green” economy, 85 Growth-killing austerity, 111 H Home equity lines of credit (HELOCs), 16 I Industrial Revolution, 77 Infinite customization, 68 J Joint-stock banking, 63, 76 L Laissez-faire economy, 84–86 Liberal arts, 132 Life after finance, 75 credit-driven economy, 76–77 death knell, consumer credit American optimism, 90 big data, 90 entrepreneurs starvation, 91–92 loan factories, 90 per-account/per-transaction, 90 securitization, 90 unbanking, 91 financial repression Bretton Woods system, 79 capital exports and foreignexchange transactions, 79 captive domestic audience, 79 debt restructuring, 78 GDP, 79 government banks ownership, 79 industrial policy, 86 monopolies, 86 negative real interest rates, 78, 79 prudential regulation, 79 rules, 80 subsidized green energy, 86 tax raising and lowering, 81–82 World War II, 79 Government expenditure, 75–76 low interest rates, 77–78 political direction, credit and investment formal taxation, 82 government-run utility, 83 Japanese banks, 83 laissez-faire economy myth, 84–86 Index market-driven banking system, 83 winners and losers, 83–84 risky business amalgamation, 88 coincidence, 88 competition, 89–90 joint-stock banks, 87 often-contradictory rules and requirements, 88 private partnerships, 87 separation of functions, 87 shareholder-owned banks, 87 small-town banks, 87 Life-line banking, 70 R Liquidity trap, 72 Ring fencing, 88 London Interbank Offered Rate (LIBOR), 102 Rules-based regulation, 59, 61 M S “Market-centric” financial system, 110 Real Time Gross Settlement (RTGS), 108 Regulation process “Anglo-Saxon” world, 36 balance sheets and trading desks, 35 definition, 36 finance deregulation, 35–36 Graham-Leach-Bliley Act, 36 Triple A–rated bonds, 37 “ultra-safe” money market mutual fund, 37 Regulatory arbitrage, 61 Resolution Trust Corporation (RTC), 31 Savings-and-loan (S&L) industry, 28, 30 Mass-market retail banking, 66 Securities and Exchange Commission (SEC) rules, 33 McKinsey Global Institute (MGI), 110 S&L industry.See Savings-and-loan industry Micro-regulation, 92 Ministry of International Trade and Industry (MITI), 83 Society for Worldwide Interbank Financial Telecommunications (SWIFT), 107 Moral hazard, 18 Straight-through procession, 107 N National Bank Act, 49 National Bureau of Economic Research (NBER), 78 O Outsourcing, 13 P Personal Consumption Expenditure (PCE), 90 Price discovery, 104 Principles-based regulation, 59 Printing money, 78 Professional/proprietary trading, 12 Subprime mortgage market, 66 T The Dodd-Frank Act, 49 Trillion-pound banking groups, 60 Troubled Asset Relief Program (TARP), 39 U US Federal Reserve, 6 V Volcker rule, 88 W Working capital, 11 171 Broken Markets A User’s Guide to the Post-Finance Economy Kevin Mellyn Broken Markets: A User’s Guide to the Post-Finance Economy Copyright © 2012 by Kevin Mellyn All rights reserved.


pages: 264 words: 115,489

Take the money and run: sovereign wealth funds and the demise of American prosperity by Eric Curt Anderson

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asset allocation, banking crisis, Bretton Woods, business continuity plan, business intelligence, business process, collective bargaining, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, diversified portfolio, fixed income, floating exchange rates, housing crisis, index fund, Kenneth Rogoff, open economy, passive investing, profit maximization, profit motive, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, sovereign wealth fund, the market place, The Wealth of Nations by Adam Smith, too big to fail, Vanguard fund

According to Kirshner, there are three means of exercising what he calls “international monetary power.” These are currency manipulation, the fostering and exploitation of monetary dependence, and the exercise of systemic disruption.53 Kirshner argues currency manipulation is the “simplest instrument” of monetary power and that it can be used in a positive or negative manner. Positive currency manipulation is an effort to maintain the value of a particular nation’s money— think of England and France in the 1960s and, more recent and pertinent to our argument, the apparent GCC member states’ campaign to maintain the dollar’s position on international currency markets. Negative currency manipulation is an effort to drive a currency away from a preferred value, typically down. Why execute such a campaign? As Kirshner notes, negative currency manipulation “can cause increased inflation, capital flight, difficulty in attracting new foreign investment, real debt burden, and a reduction in . . . living standards.”54 This, quite simply, is the threatened Chinese fiscal nuclear option come to life.

As the trade figures above testify, it was not because Chinese foreign exchange earnings diminished in 2007—quite the contrary. Nor can it be argued that the Chinese were compelled to slow investment in U.S. Treasury notes as a result of American political pressure. Although one could suggest that the yuan’s appreciation in 2007 was prompted by Washington’s ceaseless 44 Take the Money and Run complaints about currency manipulation, similar pressure was not being brought to bear on China’s purchase of U.S. government securities. Quite frankly, Bush administration officials seem to have welcomed Beijing’s investment with open arms11—and appear to be taking a similar approach to acquisitions by China’s new sovereign wealth fund.12 It is hard to fault the White House for proceeding down this path. Confronted with growing budget deficits, a slowing economy, the subprime crisis, and continuing wars in Afghanistan and Iraq, the Bush administration had little choice but to welcome the Chinese acquisition of U.S.


pages: 357 words: 99,684

Why It's Still Kicking Off Everywhere: The New Global Revolutions by Paul Mason

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back-to-the-land, balance sheet recession, bank run, banking crisis, Berlin Wall, capital controls, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, creative destruction, credit crunch, Credit Default Swap, currency manipulation / currency intervention, currency peg, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, ghettoisation, illegal immigration, informal economy, land tenure, 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

Returning to the Alien metaphor, if the ‘floor’ represented by the state burns through, then it is clear where the acid will start corroding next: the hull of the spaceship itself, that is, globalization. For if the state can’t contain the crisis, the crisis will move on to relationships between states and classes. Brazil’s finance minister has already fired the warning shots. At the World Trade Organization in January 2011, exasperated by the impact of QEII, he threatened to sanction the USA for currency manipulation: ‘This’, he affirmed, ‘is a currency war that is turning into a trade war.’22 As monetary stimulus becomes currency manipulation and G20 summit agreements give way to summits that end inconclusively (as in Seoul in 2010), the possibility looms of trade wars, outright competitive devaluations and the nuclear option of debt default. As one bond market participant put it to me, we are no longer dealing with market forces: ‘all market risk is now political risk’.

Saudi Arabia stood exactly where England had stood as Europe raged 150 years ago: with food price stability and minimal unrest.21 Commodity price inflation, as all global agencies agree, hammers the poor. It turns the ‘acceptable’ poverty of $2 a day into utter destitution. And the problem is that it has become endemic. Every economic recovery now sparks a commodity boom, mainly because of structural factors which currency manipulation by rich countries only exacerbates: population growth, rising demand in India and China, resource scarcity and the impact of climate change. As the experts bicker over the precise role of poverty and food inflation in the Arab Spring, they do so to the sound of unrest across the developing world. Fragile dictatorships that have not yet fallen wonder how long they would survive in any second financial crisis, or any third commodity spike.

P. 127 cellphones 75–76, 133–34 Central Security (Egypt) 9, 11, 17 Challenge of Slums, The (UN) 198–99 Charles, Prince 51–52 Chávez, Hugo 33 China 38, 78, 108, 112, 121, 125; consumption 109; foreign currency reserves 107; monetary policy 123 Chomsky, N. 28–29 Chris (student demonstrator) 48 Cinco, Mena 196–98, 206, 206–9 Citigroup 67 civil disobedience 56 class struggles 131 Clegg, Nick 44 Climate Camp movement 1, 55 Clinton, Hillary 26 collaborative production 139–41 Coming Insurrection, The 189–91 commodity price inflation 120–22, 195 communes 189, 190 Communiqué from an Absent Future 38–39 Communist Manifesto, The (Marx and Engels) 174, 188–89 communists 80 computer gamers 136 Conservative/Liberal Democrat coalition 44 consumption, and self-esteem 80–81 control 148 co-operatives 84 corruption, threat of 177–78, 205 creative destruction 106 credit crisis 106, 109 credit default swaps 99, 107 Critical Legal Thinking website 54 cross-border links 69–70 Cruz, Gloria 204 cultural stereotypes 27 culture: mass 29–30; popular 65, 176; transnational 69; working-class 72; youth 70 culture wars 178–84 currency manipulation 121–22 currency war 122–24 cyber-repression 78 Czechoslovakia 173 Darkness at Noon (Koestler) 128–29 Davies, Nick 148 Davos 17, 111 Dawkins, Richard 75, 150 Day X, 24 November 2010, London 41–42, 46–48 Debord, Guy 42, 46–17, 51 debt, toxic 110–11 default theory 111 deflationary slump 123 Deleuze, Gilles 46, 85 Delius, Frederick 127, 132, 152, 176 democratic counter-revolution 177, 188 demographics of revolt 66, 66–73; Athens, December 2008 uprising 73; students 66–71; the urban poor 70–72 Deptford 57 Detrick, Terry 154, 155–56, 156 devaluation 91, 122–23 @digitalmaverick 1–2 discontent, three tribes 68–69 disillusionment 68–69 disinformation, counteracting 146 disposable income 67 Dodd–Frank Act (USA) 167 @dougald 1 Dubstep Rebellion 48–52; blog 52; the Book Bloc 50–51; casualties 51; Fleet Street photographers 51; graffiti 51; marchers 49; police–student confrontation 50–51 durable authoritarianism 27, 30, 191 Durkheim, Emile 103–4 Dworkin, Ronald 46 eBay 74 e-commerce 81 economic crisis 3; revolutions, 1848 173 economic stagnation 191–92 economic theory 111 Economist, the 25 egoism 132 Egypt: bread prices 11; democratic counter-revolution 177; economic growth 119; economic indicators 119–20; elections, November 2011 177; Gini Index 119; inflation 120–21; opposition movement 10; organized workforce 72; police corruption 11; privatizations 17–18; unemployment 119–120; urban poor 71; working class 19–20 Egyptian revolution, the: the Army and 178; balance sheet 5; bread prices 11; casualties 17; chants 191, 211; counter-revolution 18; Day of Rage, 28 May 15–17; and Facebook 6, 10, 11, 12, 14; freedom 5; immolations 11, 71; Internet switched off 14; medical professions 20–22; military coup 17–19; numbers involved 13; outbreak, 25 January 10–14, 83; police violence 15; questions facing 23–24; Twitter blocked 14; Twitter feeds 13, 14; ultras 16–17; working class 20; on YouTube 11, 14, 15–16; zabbaleen riots 6–10 email 10 emancipated life 143–44 Engels, Friedrich 174, 188–89, 190 @eponymousthing 184 equity withdrawal 114 Estero de San Miguel, Manila 196–99, 205–6, 206–9 Eternal Sunshine of the Spotless Mind, The (film) 29 Eurobonds 113 Eurocrisis, the 111–13 European Central Bank 92, 98, 104, 112 European Financial Stability Facility 92, 104 European Financial Stabilization Facility 113 European monetary union 112, 113 European Union: response to Greek debt crisis 91–92, 96, 98–99, 104; sovereign debt crisis 104 Europe, revolutions, 1848 172 Eurozone 104; debt crisis 91–92, 99, 111–13 Execution of Maximilian (Manet) 53 exploitation 85 Facebook 74; Arab world growth of 135; and the Egyptian revolution 6, 10, 11, 12, 14; establishing connections with 75; ‘We are all Khaled Said’ page 11; and the Iranian revolution 34; and London trade-union demonstration, March 2011 57–58; Middle East usage 135; reciprocity 77; user numbers 135 Farewell to the Working Class (Gorz) 79–80 fatalism 30, 31 feedback loops 187 Feldstein–Horioka paradox 107 Feldstein, Martin 107 Fennimore and Gerda (Delius) 127, 132 First World War 128 Fisher, Mark 30 Flaubert, Gustave 171, 192 Flickr 10, 75 Food Price Index 121 Fordist era 28 Foucault, Michel 46, 84–85 fragmentation 80–81, 82 fragmented power 17 ‘Fragment on Machines’ (Marx) 143–44 France 173; Languedoc, 1848 174, 187; socialism 188; see also Paris freedom 27, 124; of expression 127; individual 127–30; Marx on 141–42; suppression of 131–33 Freeman, Richard 108 free-market economics 92, 188 Friedman, Milton 111 Fukuyama, Francis 30 G20 Summit, 2009 48, 122 Gaddafi, Muammar 25, 31 Gapan City, Philippines 193–96 Gates, Bill 23, 110 gay rights 132 Gaza 37; Israeli invasion of 33 Gaza City 31 Gaza Flotilla, May 2010 55 general intellect, the 144, 145–47 General Motors 39 Germany 113, 191; revolution of 1848 172; wages 108, 112 @Ghonim 13 Giddens, Anthony 31 Gide, André 127 Giffords, Gabrielle 182 Gini Index 119 Gladwell, Malcolm 81–82, 83 global capital flows 107–8 global financial crisis 31, 39, 66–67, 85, 110–11, 115, 191 globalization 69,72, 105, 108, 109, 122, 124, 149, 191 Golkar, Saeid 78 Googlebombs 78 Gorz, André 79–80, 143 graduate with no future, the 66–73, 96–97; disposable income 67; as international sub-class 69; life-arc 67; numbers 70; revolutionary role 72–73; and the urban poor 70–71 Grapes of Wrath, The (Steinbeck) 153, 155, 159, 163, 164 Great Britain: anti-road movement 56; benefit system 113–14; changing forms of protest 54–57; collapse of Labour 113–15; devaluation 123; Education Maintenance Allowance 47; end of winter of discontent 61–62; equity withdrawal 114; European elections, 2009 115; general election, 2010 43; the graduate with no future 96–97; Millbank riot 42–44; non-UK born workers 115; police failures 61; public spending cuts 54–55; radical tactics 54–57; spontaneous horizontalists 44–46; Strategic Security and Defence Review 124; student population 70; UK Uncut actions 54–55; university fees 44, 47, 50, 54; youth 41–42, 44, 53–54; youth unemployment 66 Great Depression, lessons of 123–25 Great Doubling 108 Great Unrest, 1914 175–76 Greece 37, 188; anomic breakdown 103–4; austerity programme 92–93, 102; bailouts 92, 96, 98, 113; cabinet reshuffle 96, 97–98; debt crisis 90, 91–92, 98–99, 112; GDP 91; general election, 2009 91; general strike 99; the left 100; media ownership 87; Medium Term Fiscal Strategy 91; model of capitalism 102; MP resignations 89; Papandreou government falls 96; political legitimacy lost 104; the salariat 101; tax evasion 97; tax revenues 92; tax system 91; see also Athens Greek Communist Party (KKE) 88, 90 Grigoropoulos, Alexandras 32 grime (music) 52 Grossman, Vasily 129 @GSquare86 69 Guindi, Ezzat 9 hackers 35 el-Hamalawy, Hossam, @3arabawy 10, 22, 71 Hardy, Simon 69 Hayek, Friedrich 111, 209 Henderson, Maurice 161–62 Hennawy, Abd El Rahman, @Hennawy89 12–13 Here Comes Everybody (Shirky) 138 Herman, Edward S. 28–29 hidemyass.com 14 hierarchy: erosion of 80–81; informal 83; predictability of 77 higher education market 67 Hill, Joe 176 historical materialism 131 Hogge, Becky 140 homelessness 159–63 Hoon, Geoff 114 Horioka, Charles 107 horizontalism 45, 55, 56, 62, 100 Huffington Post blog 184 human rights 143 Hungary 172 Ian’s Pizza, Madison, Wisconsin 184 Ibrahim, Gigi, @GSquare86 69 ideology 29, 149 immolations 11, 32, 71 impotence, zeitgeist of 29–30 impoverishment 209 Inception (film) 29 India 120–21 Indiana 116–17, 125 indignados, the 88, 100–1, 104 individual: freedom of 127–30; power of the 65, 79; rise of the 127–30 Indorama group 22 industrialization 192 Indymedia 74 inequality 209 inflation 109, 120–21 info-capitalism 148, 211 info-hierarchies 147–52 info-revolution, the 146, 149–50 informal hierarchies 83 information capitalism 145 information management 147 information networks 77 information tools 75 Inkster, Nigel 65 institutional loyalty 68 interest rates 67 International Labour Organization 19–20, 120 International Monetary Fund 92 Internet consciousness 136–38 Internet, the: access in slums 207; Arab world growth 135; and behaviour changes 131; and the Iranian revolution 35; out of reach for some 152; power of 29; shutdowns 14, 78; and the spread of ideas 150–51 investment, and savings 107 Invisible Committee, the 189–91 Iran 25; causes of failure of revolution 36–37; election, 2009 33–34; and the Internet 35; and the Middle East balance of power 178; rooftop poems 36; Twitter Revolution 33–37, 78, 178; on YouTube 34, 35 Iraq 25, 55 Ireland 92, 111, 112, 188 Islam 30, 37 Israel 26, 33, 179–80 Italy 104 Jakarta 33 James, C.


pages: 632 words: 159,454

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

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

The Chinese leaders also ‘noted with shock the ability of a convertible currency to take a country’s ropy banking system to the point of collapse’.28 The stance of China’s leaders is ironic, given that the same Americans who intermittently criticized China for being a currency manipulator applauded its stability in 1997. The Chinese were praised by US officials during the crisis for ‘holding the line’, even though in Beijing they just thought they were being consistent. In the summer of 1999, the Economist of London stated that a devaluation of the yuan was ‘now increasingly likely’.29 In February 1998, the magazine Business China confidently expected that ‘the present RMB: dollar exchange rate can last until the last quarter of 1998 or the first quarter of 1999’. Then, the magazine believed, the rate would ‘be adjusted down about 11% to RMB 9.3: US$1’.30 The Chinese leaders themselves would have found the comments of the Western press amusing. On the one hand, they were accused of being currency manipulators and keeping their currency undervalued.

In a paper entitled ‘Caliban: The Future of Sterling’, written in June 1949, Hall applied his formidable powers of analysis to the problem of the British currency. He started his memorandum in a defensive way: ‘It is often felt that there is something disreputable in changing the gold or other parity of a country.’ This was the ‘19th century view’, based on the ‘quite proper reason that currency manipulation was usually disastrous in practice, and partly on the feeling that gold was the nearest thing to a fixed standard of value’. In Hall’s lucid and delightfully jargon-free account, the view in the nineteenth century had been that ‘to write down deliberately the gold content of paper money was in effect cheating all those who had been persuaded to take the money’. The rules of the nineteenth century as described in a highly abstract, though perfectly clear, manner by Robert Hall were elegant in their simplicity: ‘The theory of foreign exchanges on the gold standard . . . required all countries to be willing to keep to the so-called rules: to restrict credit when gold was being lost, to expand it when it was being gained, and to accept whatever unemployment was required in order to deflate costs when these were too high to secure a balance of payments.’

In November 2012, the US administration decided not to declare China ‘as having manipulated its currency to gain an unfair trade advantage’, even though the US Treasury expressed its belief that the yuan remained ‘significantly undervalued’ and urged the Chinese ‘to make further progress’. The Republican candidate in the 2012 presidential election, Mitt Romney, had declared that he would have branded China ‘a currency manipulator’ on his first day in office.42 Romney’s stance was in tune with the Republican Party’s traditional support for economic nationalism, as demonstrated in its consistent support for protective tariffs throughout the nineteenth century. The Chinese themselves unsurprisingly began to show growing exasperation over US attempts to increase pressure over the currency issue. The Xinhua News Agency, the official press agency of the People’s Republic of China, reported in March 2010 that some ‘politicians in the West are playing the game of politicizing China’s RMB exchange rate again’.


pages: 287 words: 81,970

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments by Charles Goyette

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bank run, banking crisis, Ben Bernanke: helicopter money, Berlin Wall, Bernie Madoff, Bretton Woods, British Empire, Buckminster Fuller, California gold rush, currency manipulation / currency intervention, Deng Xiaoping, diversified portfolio, Elliott wave, fiat currency, fixed income, Fractional reserve banking, housing crisis, If something cannot go on forever, it will stop - Herbert Stein's Law, index fund, Lao Tzu, margin call, market bubble, McMansion, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, oil shock, peak oil, pushing on a string, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Saturday Night Live, short selling, Silicon Valley, transaction costs

By seven o’clock in the evening, the secretary and the chairman were meeting with congressional leaders to discuss what eventually became the $700 billion taxpayer-funded bailout. The next morning, Friday, September 19, Paulson announced the establishment of a U.S. guarantee program for the money market fund industry, funded with $50 billion from the Exchange Stabilization Fund, a government fund used for currency manipulation. On Saturday, September 20, an overnighted bailout bill was in the hands of lawmakers. It was a simple, three-page, $700 billion package which raised the debt ceiling to $11.315 trillion. And it included a little self-referential, Constitution-upending twist that maintained that decisions by the secretary under that act “may not be reviewed by any court of law or any administrative agency.”

The Federal Reserve System is unconstitutional. Preeminently, the enumerated powers granted the federal government do not include the establishment of a central or national bank. In addition, federal revenue must only be raised by means of bills originating in the House of Representatives, not in the marbled halls of the Federal Reserve. Federal Reserve activities that fund the government’s debt by currency manipulation are not without cost; trillions of dollars have been embezzled from Americans by this device. By debt monetization, government acquires money to spend without debate, legislation, or vote, by commensurately devaluing the currency held by the people. No wonder critics say this amounts to nothing less than taxation without representation. The Constitution also delegates to Congress, and only to Congress, the power to coin money and regulate its value.

As I watched the broadcast from the newsroom, I knew that Nixon’s actions would have a long-term impact on the dollar and the country. I began to wonder exactly how events would unfold and vowed to follow them carefully. I had a lot to learn, but every day for the next few years was like a class in the conditions described in this book: shortages, unemployment, dollar destruction, strains on the middle class and business, inflation, deficits and debt, the costs of war, taxes, currency manipulation, recessions, and stagflation. Why did prices suddenly rise dramatically? And why were we subjected to a continuous series of booms and busts? Was Karl Marx right? Was it somehow endemic to capitalism, that we were consigned to these destructive episodes of systemic distortions and painful corrections? And I wondered why the conventional wisdom never seemed to see what was coming. It was then I found that my questions had already been answered.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, 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, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, Vilfredo Pareto, wages for housework, women in the workforce

In the late 1960s the future Federal Reserve boss Alan Greenspan had denounced the proposed move away from gold as a plot by ‘welfare statists’ to finance government spending by confiscating people’s money.17 But then, like the rest of America’s elite, he realized that it would first allow the USA, effectively, to confiscate other countries’ money – setting the scene for Washington to indulge in three decades of currency manipulation. The result enabled America to accumulate, at the time of writing, a $6 trillion debt with the rest of the world.18 This move to a pure paper currency was the precondition for every other phase of the neoliberal project. So it took the American right a long time to figure out they didn’t like it. Today, however, right-wing economics has become one long howl of rage against fiat money. Its critics believe it is the ultimate source of boom and bust – and they are partly right.

Plus, the diplomatic crisis over Ukraine has seen the first serious trade and financial sanctions imposed on Russia by the West since globalization began. The Middle East is on fire, from Islamabad to Istanbul, while military rivalries between China and Japan are more intense than at any time since 1945 and underpinned by an intense currency war. All that would be needed to blow the whole thing apart is for one or more country to ‘head for the exit’, using protectionism, currency manipulation or debt default. Since the most important nation, the USA, now has a Republican Party rhetorically committed to all three of these things, the chances of this are high. The imbalances were fundamental to the very nature of globalization and were thrown into reverse only by financial collapse. Let’s spell out what this means: the current form of globalization has a design fault. When it produces high growth it can do so only by fuelling unsustainable distortions, which are corrected by financial crisis.

The problem here is that assets – whether they be a star racehorse, a secret bank account or the copyright on the Nike swoosh – tend to be held in jurisdictions dedicated to avoiding wealth taxes, even if anybody had the will to raise them, which they currently don’t. If things do not change, says the OECD, it is realistic to expect stagnation in the West, a slowing pace of growth in emerging markets and the likely bankruptcy of many states. So what’s more likely is that at some point one or more countries will quit globalization, via protectionism, debt write-offs and currency manipulation. Or that a de-globalization crisis originating in diplomatic and military conflict spills over into the world economy and produces the same results. The lesson from the OECD’s report is that we need a complete system redesign. The most highly educated generation in the history of the human race, and the best connected, will not accept a future of high inequality and stagnant growth. Instead of a chaotic race to de-globalize the world, and decades of stagnation combined with rising inequality, we need a new economic model.


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

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Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

The argument was essentially that China had piled up trade surpluses with America by deliberately suppressing the value of the Chinese currency and refusing to let it float freely on the world’s currency markets. The Chinese had then recycled their dollar surpluses into the United States by buying American assets. This had depressed U.S. interest rates and so fed the credit boom that had popped in 2008. Meanwhile American and European workers lost their jobs because Chinese goods were kept artificially cheap by currency manipulation. China angrily rejected this line of argument. Desperate to maintain growth in the wake of a collapse in demand in the months after the fall of Lehman Brothers, the last thing the Chinese wanted to do was to raise the cost of their exports by letting their currency rise. But Chinese resistance was more than a knee-jerk reaction to an emergency. Many Chinese policy makers believe that the Japanese economic miracle effectively ended during the 1980s when the government in Tokyo succumbed to American pressure to let the yen rise against the dollar, permanently damaging the competitiveness of Japanese industry.8 As it became clear that the Chinese would not respond to the Great Recession by letting their currency rise, calls for protectionism became more mainstream in the United States.

He argued that “Americans have been patient—too patient—in accepting the loss of several million U.S. manufacturing jobs because of China’s determined pursuit of mindless mercantilist policies.” His solution was simple and brutal: “a uniform tariff of 10% on all Chinese imports.”11 Over the following year, protectionist sentiment made headway in the U.S. Congress. Shortly before the midterm elections of 2010, the House of Representatives passed a law that would allow the U.S. to raise tariffs in response to Chinese currency manipulation. The bill enjoyed strong bipartisan support. Mike Rogers, a Republican from Michigan, put academic economists’ arguments into blunt political language, when he complained of the Chinese: “They cheat to steal our jobs.”12 It is likely that China will attempt to head off some of these pressures by allowing a modest appreciation of its currency. But concessions by the government in Beijing may well be too weak to prevent an anti-China backlash in America, fueled by high unemployment and a growing sense of geopolitical rivalry.

Martin Wolf, “The dangers of living in a zero-sum world economy,” Financial Times, December 18, 2007. 6. “U.S. Seen as Less Important, China as More Powerful: Isolationist Sentiment Surges to Four-Decade High,” Pew Research Center, Washington, D.C., December 3, 2009. Available from http://pewresearch.org/pubs/1428/america-seen- less-important-china-more-powerful-isolationist-sentiment-surges. 7. Malcolm Moore, “Timothy Geithner currency manipulation accusation angers China,” Daily Telegraph, London, January 23, 2009. 8. Alan Beattie, “The perception in China is that revaluation ended the Japanese miracle,” Financial Times, December 1, 2009. 9. Paul Krugman, “The Chinese Disconnect,” New York Times, October 23, 2009. 10. Paul Krugman, “Chinese New Year,” New York Times, January 1, 2010. 11. Robert Aliber, “Tariffs can persuade Beijing to free the renminbi,” Financial Times, December 7, 2009. 12.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

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Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

The United States would gain another 2.1 million full-time jobs if the Chinese stopped violating international copyright laws and intellectual property protection, according to the U.S. International Trade Commission. Congress is ready to take a tougher line toward China. “China’s currency manipulation is like a boot on the throat of our economic recovery,” asserted New York Democratic senator Charles Schumer. “There is no bigger step we can take to promote U.S. job creation, particularly in the manufacturing sector, than to confront China’s currency manipulation.” Republicans such as Senator Lindsey Graham of South Carolina have shown a willingness to co-sponsor legislation with Democrats to impose stiff tariffs on Chinese goods unless China raises its currency value. The last time Congress threatened action, China allowed its currency value to rise a fraction but pressures have been building again for action by Congress.

Scott, “The Benefits of Revaluation,” EPI Briefing Paper, June 17, 2011, Economic Policy Institute, http://​www.​epi.​org. 80 Gain another 2.1 million full-time jobs “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy,” U.S. International Trade Commission, May 2011, http://​www.​usitc.​gov. 81 “China’s currency manipulation” Office of Senator Robert B. Casey, Jr., press release, “China’s Currency Manipulation Undermines U.S. Manufacturing Base by Making U.S.-Made Goods More Expensive Relative to Foreign Goods,” January 17, 2011. 82 Accused China of violating free trade rules Keith Bradsher, “In Victory for the West, W.T.O. Orders China to Stop Export Taxes on Minerals,” The New York Times, January 30, 2012. 83 $450 billion in projected defense cuts President Barack Obama, remarks, U.S.

Forbes, “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” Journal of Finance, April 27, 2010, http://​www.​nber.​org. 73 Want tax reform to require proof Hindery and Gerard, “Vision for Economic Renewal.” 74 Jobs advocates want ironclad provisions Kocieniewski, “Companies Push for Tax Break”; Dan Eggen, “The Influence Industry: Companies Lobbying for Tax Holiday on Overseas Money,” The Washington Post, April 27, 2011; Mike Zapler, “Big Biz: How About a Tax Holiday?” Politico, March 4, 2011, http://​www.​politico.​com. 75 China manipulates the value Currency data from Peterson Institute for International Economics, in press release, Alliance for American Manufacturing, “Ending China’s Currency Manipulation Would Create Over 2 Million Jobs,” June 17, 2011. 76 Widespread intellectual piracy “Ballmer Bares China Travails,” The Wall Street Journal, May 26, 2011; “Piracy: China Still in the Game,” ABC News, November 16, 2010; “Special Report: Warren Buffett’s China Car Deal Could Backfire,” Reuters, March 9, 2011. 77 A major national intelligence report “Foreign Spies Stealing U.S. Economic Secrets in Cyberspace: Report to Congress on Foreign Economic Collection and Industrial Espionage, 2009–2011,” Office of the National Counterintelligence Executive, October 2011, accessed January 27, 2012, http://​www.​dni.​gov. 78 Violating rules of the World Trade Organization “Intel Chief: Obama (Still) Driving US off Cliff,” The Register, August 25, 2010, http://​www.​theregister.​co.​uk; Clyde Prestowitz, interview, January 11, 2011. 79 The United States would gain 2.25 million jobs Robert E.


pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

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airline deregulation, Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Gordon Gekko, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low skilled workers, Mark Zuckerberg, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Upton Sinclair, We are the 99%, working poor, Works Progress Administration

The point, however, is that in both cases the changes in the economic situation over the past three years have opened up opportunities for some technically easy yet surprisingly major actions to boost our economy. And More The list of policies above isn’t meant to be exhaustive. There are other fronts on which policy could and should move, notably foreign trade: it’s long past time to take a tougher line on China and other currency manipulators, and sanction them if necessary. Even environmental regulation could play a positive role: by announcing targets for much-needed curbs on particulate emissions and greenhouse gases, with the rules to phase in gradually over time, the government could provide an incentive for businesses to spend on environmental upgrades now, helping accelerate economic recovery. Without question, some of the policy measures I’ve described here will, if tried, not work as well as we might hope.

., 200 conservatives: anti-government ideology of, 66 anti-Keynesianism of, 93–96, 106–8, 110–11 Big Lie of 2008 financial crisis espoused by, 64–66, 100 free market ideology of, 66 Consumer Financial Protection Bureau, 84 Consumer Price Index (CPI), 156–57, 159, 160 consumer spending, 24, 26, 30, 32, 33, 39, 41, 113, 136 effect of government spending on, 39 household debt and, 45, 47, 126, 146 income inequality and, 83 in 2008 financial crisis, 117 conventional wisdom, lessons of Great Depression ignored in, xi corporations, 30 see also business investment, slump in; executive compensation correlation, causation vs., 83, 198, 232–33, 237 Cowen, Brian, 88 credit booms, 65 credit crunches: of 2008, 41, 110, 113, 117 Great Depression and, 110 credit default swaps, 54, 55 credit expansion, 154 currency, manipulation of, 221 currency, national: devaluation of, 169 disadvantages of, 168–69, 170–71 flexibility of, 169–73, 179 optimum currency area and, 171–72 see also euro Dakotas, high employment in, 37 debt, 4, 34, 131 deregulation and, 50 high levels of, 34, 45, 46, 49–50, 51 self-reinforcing downward spiral in, 46, 48, 49–50 usefulness of, 43 see also deficits; government debt; household debt; private debt “Debt-Deflation Theory of Great Depressions, The” (Fisher), 45 debt relief, 147 defense industry, 236 defense spending, 35, 38–39, 148, 234–35, 235, 236 deficits, 130–49, 151, 202, 238 Alesina/Ardagna study of, 196–99 depressions and, 135–36, 137 exaggerated fear of, 131–32, 212 job creation vs., 131, 143, 149, 206–7, 238 monetary policy and, 135 see also debt deflation, 152, 188 debt and, 45, 49, 163 De Grauwe, Paul, 182–83 deleveraging, 41, 147 paradox of, 45–46, 52 demand, 24–34 in babysitting co-op example, 29–30 inadequate levels of, 25, 29–30, 34, 38, 47, 93, 101–2, 118, 136, 148 spending and, 24–26, 29, 47, 118 unemployment and, 33, 47 see also supply and demand Democracy Corps, 8 Democrats, Democratic Party, 2012 election and, 226, 227–28 Denmark, 184 EEC joined by, 167 depression of 2008–, ix–xii, 209–11 business investment and, 16, 33 debt levels and, 4, 34, 47 democratic values at risk in, 19 economists’ role in, 100–101, 108 education and, 16 in Europe, see Europe, debt crisis in housing sector and, 33, 47 income inequality and, 85, 89–90 inflation rate in, 151–52, 156–57, 159–61, 189, 227 infrastructure investment and, 16–17 lack of demand in, 47 liquidity trap in, 32–34, 38, 51, 136, 155, 163 long-term effects of, 15–17 manufacturing capacity loss in, 16 as morality play, 23, 207, 219 private sector spending and, 33, 47, 211–12 unemployment in, x, 5–12, 24, 110, 117, 119, 210, 212 see also financial crisis of 2008–09; recovery, from depression of 2008– depressions, 27 disproportion between cause and effect in, 22–23, 30–31 government spending and, 135–36, 137, 231 Keynes’s definition of, x Schumpeter on, 204–5 see also Great Depression; recessions deregulation, financial, 54, 56, 67, 85, 114 under Carter, 61 under Clinton, 62 income inequality and, 72–75, 74, 81, 82, 89 under Reagan, 50, 60–61, 62, 67–68 rightward political shift and, 83 supposed benefits of, 69–70, 72–73, 86 derivatives, 98 see also specific financial instruments devaluation, 169, 180–81 disinflation, 159 dot-com bubble, 14, 198 Draghi, Mario, 186 earned-income tax credit, 120 econometrics, 233 economic output, see gross domestic product Economics (Samuelson), 93 economics, economists: academic sociology and, 92, 96, 103 Austrian school of, 151 complacency of, 55 disproportion between cause and effect in, 22–23, 30–31 ignorance of, 106–8 influence of financial elite on, 96 Keynesian, see Keynesian economics laissez-faire, 94, 101 lessons of Great Depression ignored by, xi, 92, 108 liquidationist school of, 204–5 monetarist, 101 as morality play, 23, 207, 219 renewed appreciation of past thinking in, 42 research in, see research, economic Ricardian, 205–6 see also macroeconomics “Economics of Happiness, The” (Bernanke), 5 economy, U.S.: effect of austerity programs on, 51, 213 election outcomes and, 225–26 postwar boom in, 50, 70, 149 size of, 121, 122 supposed structural defects in, 35–36 see also global economy education: austerity policies and, 143, 213–14 depression of 2008– and, 16 income inequality and, 75–76, 89 inequality in, 84 teachers’ salaries in, 72, 76, 148 efficient-markets hypothesis, 97–99, 100, 101, 103–4 Eggertsson, Gauti, 52 Eichengreen, Barry, 236 elections, U.S.: economic growth and, 225–26 of 2012, 226 emergency aid, 119–20, 120, 144, 216 environmental regulation, 221 Essays in Positive Economics (Friedman), 170 euro, 166 benefits of, 168–69, 170–71 creation of, 174 economic flexibility constrained by, 18, 169–73, 179, 184 fixing problems of, 184–87 investor confidence and, 174 liquidity and, 182–84, 185 trade imbalances and, 175, 175 as vulnerable to panics, 182–84, 186 wages and, 174–75 Europe: capital flow in, 169, 174, 180 common currency of, see euro creditor nations of, 46 debtor nations of, 4, 45, 46, 139 democracy and unity in, 184–85 fiscal integration lacking in, 171, 172–73, 176, 179 GDP in, 17 health care in, 18 inflation and, 185, 186 labor mobility lacking in, 171–72, 173, 179 1930s arms race in, 236 social safety nets in, 18 unemployment in, 4, 17, 18, 176, 229, 236 Europe, debt crisis in, x, 4, 40, 45, 46, 138, 140–41, 166–87 austerity programs in, 46, 144, 185, 186, 188, 190 budget deficits and, 177 fiscal irresponsibility as supposed cause of (Big Delusion), 177–79, 187 housing bubbles and, 65, 169, 172, 174, 176 interest rates in, 174, 176, 182–84, 190 liquidity fears and, 182–84 recovery from, 184–87 unequal impact of, 17–18 wages in, 164–65, 169–70, 174–75 European Central Bank, 46, 183 Big Delusion and, 179 inflation and, 161, 180 interest rates and, 190, 202–3 monetary policy of, 180, 185, 186 European Coal and Steel Community, 167 European Economic Community (EEC), 167–68 European Union, 172 exchange rates, fixed vs. flexible, 169–73 executive compensation, 78–79 “outrage constraint” on, 81–82, 83 expansionary austerity, 144, 196–99 expenditure cascades, 84 Fama, Eugene, 69–70, 73, 97, 100, 106 Fannie Mae, 64, 65–66, 100, 172, 220–21 Farrell, Henry, 100, 192 Federal Deposit Insurance Corporation (FDIC), 59, 172 Federal Housing Finance Agency, 221 Federal Reserve, 42, 103 aggressive action needed from, 216–19 creation of, 59 foreign exchange intervention and, 217 inflation and, 161, 217, 219, 227 interest rates and, 33–34, 93, 105, 117, 134, 135, 143, 151, 189–90, 193, 215, 216–17 as lender of last resort, 59 LTCM crisis and, 69 money supply controlled by, 31, 32, 33, 105, 151, 153, 155, 157, 183 recessions and, 105 recovery and, 216–19 in 2008 financial crisis, 104, 106, 116 unconventional asset purchases by, 217 Federal Reserve Bank of Boston, 47–48 Feinberg, Larry, 72 Ferguson, Niall, 135–36, 139, 160 Fianna Fáil, 88 filibusters, 123 financial crisis of 2008–09, ix, x, 40, 41, 69, 72, 99, 104, 111–16 Bernanke on, 3–4 Big Lie of, 64–66, 100, 177 capital ratios and, 59 credit crunch in, 41, 110, 113, 117 deleveraging in, 147 Federal Reserve and, 104, 106 income inequality and, 82, 83 leverage in, 44–46, 63 panics in, 4, 63, 111, 155 real GDP in, 13 see also depression of 2008–; Europe, debt crisis in financial elite: political influence of, 63, 77–78, 85–90 Republican ideology and, 88–89 top 0.01 percent in, 75, 76 top 0.1 percent in, 75, 76, 77, 96 top 1 percent in, 74–75, 74, 76–77, 96 see also income inequality financial industry, see banks, banking industry financial instability hypothesis, 43–44 Financial Times, 95, 100, 203–4 Finland, 184 fiscal integration, 171, 172–73, 176 Fisher, Irving, 22, 42, 44–46, 48, 49, 52, 163 flexibility: currency and, 18, 169–73 paradox of, 52–53 Flip This House (TV show), 112 Florida, 111 food stamps, 120, 144 Ford, John, 56 foreclosures, 45, 127–28 foreign exchange markets, 217 foreign trade, 221 Fox News, 134 Frank, Robert, 84 Freddie Mac, 64, 65–66, 100, 172, 220–21 free trade, 167 Friedman, Milton, 96, 101, 181, 205 on causes of Great Depression, 105–6 Gabriel, Peter, 20 Gagnon, Joseph, 219, 221 Gardiner, Chance (char.), 3 Garn–St.


pages: 249 words: 73,731

Car Guys vs. Bean Counters: The Battle for the Soul of American Business by Bob Lutz

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corporate governance, creative destruction, currency manipulation / currency intervention, flex fuel, medical malpractice, Ponzi scheme, profit maximization, Ralph Nader, shareholder value, Steve Jobs, Toyota Production System, transfer pricing, Unsafe at Any Speed, upwardly mobile

A healthy, prosperous Japan, interlinked economically with the United States, was the best guarantee for reliable, pro-Western stability in the area. Presumably at Japanese urging, it was determined that the best way to achieve this goal was for the United States to tacitly permit Japan to manipulate the yen to a le vel below that justified by the country’s costs, wages, balance of payments, and general economic might. Administrations of both parties, while occasionally joining the chorus of protest against “blatant currency manipulation” by the Japanese, did precisely nothing to stop it. Subsequently, under the most airtight protectionist umbrella ever witnessed in the era of alleged “free trade,” the Japanese industrial machine cranked up and soon became a powerful force in cars, consumer electronics, watches, cameras—in short, just about anything that could be manufactured and exported. The cost advantage handed to the Japanese carmakers by the artificially low yen was in the thousands of dollars per unit, estimated at as much as four thousand dollars.

Davis,Tom Delphi Dennis, Lyle Devine, John diesel engines Dodge Trucks Durant, Billy Earl, Harley economic value electric vehicles aerodynamics and EV1 Nissan Leaf see also hybrid vehicles End of Detroit, The: How the Big Three Lost Their Grip on the American Car Market (Maynard) Estes, Pete EV1 excellence Exide Technologies Federico, Jim Ferrari Fiat Fields, Mark financial crisis of auto industry bailout congressional automotive hearings Ford and GM’s bankruptcy stimulus and subprime mortgage disaster Ford Escape Explorer financial crisis and Flex fuel rules and Lincoln media and Mercury trucks and SUVs of Ford of Europe camshaft problem and Escort Sierra Franz, Klaus Friedman,Thomas fuel cells fuel economy regulations fuel prices Fuji Heavy Industries gasoline prices Gates, Bill GCG General Motors (GM): advertising by alliance strategy of APEX process at apologetic ad produced by Asia-Pacific operations of Australian operations of, see Holden automation at Automotive Task Force and bankruptcy of best practices at brand management at brand pyramids at brands shed by brand studios at culture of excellence at decline of design department of European operations of; see also Opel; Saab;Vauxhall exaggerated respect for authority at federal “ownership” of financial offices of fuel economy regulations and global integration of health care costs of history of Jobs Bank and Latin American operations of Lutz’s departure from Lutz’s hypothetical tenure as CEO of Lutz’s memo circulated in Lutz’s return to manufacturing standards at media and meetings at North American division of Perceptual Quality Program Review at Performance Management Process at product clinics at product development at product portfolio of rebirth of regional “companies” of strategy board meetings at Tech Center of vehicle line executives at General Motors vehicles: ashtrays in body fit of body paint on electric front-wheel drive in Global Epsilon architecture in interiors of prototypes of trucks wheels and tires of German automakers fuel rules and Gettelfinger, Ron global warming GMAC (General Motors Acceptance Corporation) GMC Terrain XUV Gonko, Betty Gore,Al grade-point averages Guts (Lutz) Harbour Report Hazen, Jack health care Henderson, Fritz “hider” design techniques Holden Honda Accord Acura CR-V Horn, Art Hudson Hummer hybrid vehicles Chevrolet Volt parallel vs. sequential Toyota Prius hydrogen fuel cells Iacocca, Lee federal loan guarantees and media and Inconvenient Truth, An Insolent Chariots, The (Keats) Isuzu Jaguar Japanese automakers alliances with CEOs of currency manipulation and fuel rules and health care and quality surveys and standardized work and truck and SUV market and voluntary restraint agreement and Jeep jets, corporate Jobs, Steve Jobs Bank Kady,Wayne Keats, John Korthoff, Douglas Land Rover LaSalle Lauckner, Jon leadership styles Lexus LG Chem Limbaugh, Rush lithium-ion batteries Lutz, Robert A.: departure from GM Guts hypothetical tenure as CEO of GM media and memo of motto of return to GM strongly held beliefs of Magna Corporation Mair,Alex management by objective management styles Marine Attack Squadron Mavroleon, Mano Maynard, Micheline Mazur, Dave McDonald, Jim McNamara, Robert media global warming and GM and Lutz and Saab and SUVs and Mercedes-Benz metal finishing military strategy Miller, Steve mission statement Mitchell, Bill Mitsubishi mortgages Mulally, Alan Nader, Ralph Nardelli, Bob Nash Nesbitt, Bryan New York Times Niedermeyer, Edward Nissan Armada Leaf Titan North American International Auto Show Norton, Andy NUMMI (New United Motorcar Manufacturing Company) Obama, Barack Oldsmobile Opel Antara Astra cost-cutting at Dudenhofen Proving Ground of Insignia metal finishing and midsize car program of selling of Vectra Zafira Packard Packard,Vance Paine, Chris Palmer, Jerry Pebble Beach Concours d’Elegance Piëch, Ferdinand PMP (Performance Management Process) Pontiac, Aztek Firebird G6 G8 V6 and V8, Grand Prix GTO Solstice Vibe PQPR (Perceptual Quality Program Review) Prechter, Heinz process religion product development at GM product portfolio creation Queen, Jim Range Rover Rattner, Steven Reilly, Nick ResCap Reuss, Mark Roche, Jim Rybicki, Irv Saab Saturn Aura Ion Vue science, business as Shelby, Richard Sloan, Alfred P.


pages: 561 words: 87,892

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

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

The capital market would be made up of many players, none of whom would be large enough to distort prices. All players would, therefore, have to accept the prevailing price: they would all be ‘price takers’. Those people investing funds would be doing so purely on the basis of risk and reward, with no consideration given to alternative rent-seeking or political aims. With one currency, there would be no debate over currency manipulation through the accumulation of foreign-exchange reserves. Meanwhile, those choosing to borrow would do so knowing the money would have to be repaid in full, with interest, and that failure to do so would result in the ignominy of default, possible loss of access to capital markets for years to come and, perhaps, the threat of incarceration in the nearest prison. This, of course, is a fantasy world to be found only in textbooks.

The sub-prime crisis and credit crunch that followed ten years later suggests this was not solely an issue for Asia specifically or, indeed, for emerging economies more generally. 5. In its semi-annual Report to Congress on International Economic and Exchange Rate Policies, the US Treasury typically berates China for its exchange-rate policies, even though at the time of writing it had yet to make the charge that China was a ‘currency manipulator’. The October 2009 version of the report can be found at http://www.treasury.gov/offices/international-affairs/economic-exchange-rates/ pdf/FX%20Report%20FINAL%20October%2015%202009.pdf. 6. Source: HSBC global currency research. 7. The yield on Ukrainian debt had dropped back to around 14.3 per cent by the summer of 2009, but this still implied a big loss in relation to the halcyon pre-credit crunch days.


pages: 354 words: 92,470

Grave New World: The End of Globalization, the Return of History by Stephen D. King

9 dash line, Admiral Zheng, air freight, 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, British Empire, 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, 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, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, Plutocrats, plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, 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, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

Representing a basket of major currencies, they allowed reserve managers to escape the heightened dollar volatility associated with the vagaries of US monetary policy. Second, with the abandonment of the fixed currency regime, the IMF’s ‘surveillance’ role was bolstered: most major industrialized countries were understandably fearful that a world of floating currencies could lead to a series of ‘beggar-thy-neighbour’ outcomes, particularly given the heightened opportunity for currency manipulation. With a newly enhanced surveillance role thanks to a Second Amendment agreed to by its Interim Committee in 1976 (whose members decided that Jamaica would be a nice place to meet), the IMF was fast becoming the world’s financial policeman. Third, the quadrupling of oil prices at the end of 1973 – triggered by an oil embargo imposed by Arab nations on Western nations regarded as being overly sympathetic to Israel following the Yom Kippur War of that year – had left the world facing a huge ‘petrodollar’ problem.

Establishment politicians and lawmakers who remain in favour of globalization – Morgenthau’s ‘enlightened statesmen’ – may find themselves increasingly out of touch with the voters who, in turn, will either force the statesmen to change their ways or replace them with populist – and nationalist – politicians at either end of the political spectrum. This is one reason why Hillary Clinton, the Democrats’ nominee in the 2016 US presidential election, made clear – reluctantly, no doubt – her rejection of the Trans-Pacific Partnership ‘as drafted’: she felt she had to bundle up the proposed trade deal with provisions regarding both currency manipulation and intellectual property, which only served to make any ultimate deal a lot less likely. And the ‘spirit of inequality’ – in its broadest possible sense – is most certainly on the rise. Post-war international institutions worked well for a cosy club of like-minded industrialized democracies. Yet, thanks to the effects of globalization, their share of global economic activity has been persistently in decline.


pages: 584 words: 187,436

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

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Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, John Meriwether, Kenneth Rogoff, Long Term Capital Management, margin call, market bubble, market clearing, market fundamentalism, merger arbitrage, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, pattern recognition, Paul Samuelson, pre–internet, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs

High interest rates in Germany coupled with relatively low rates elsewhere caused money to flow into deutsche marks; as a result, the weaker European currencies, notably the Italian lira and the British pound, traded near the bottom of the band permitted by the exchange-rate mechanism—and threatened to break out of it. This presented Europe’s governments with two options. Germany could cut its rates in order to attract less capital, while the Italians and British did the opposite. Or central banks could intervene in the currency markets, selling marks and buying lire and pounds. If both interest-rate adjustment and currency intervention failed, Italy and Britain would be forced into devaluation. In the summer of 1992, Druckenmiller began to ponder these tensions. He was particularly focused on Britain, where a young Quantum portfolio manager, Scott Bessent, had studied the volatile housing sector and shorted several of the stocks in it. Bessent pointed out to Druckenmiller that interest rates on British mortgages were generally not fixed; when the Bank of England raised rates, families felt the pinch immediately in their home payments.

Commentators in the Economist and the Financial Times noted that the central banks’ failure raised doubts about the efficacy of intervention, but they presented these doubts as a novel factor in global finance. “Yesterday’s action raises questions about the credibility of internationally co-ordinated exchange rate policy,” the FT’s Lex Column noted (“D-Day for the Dollar,” Lex Column, Financial Times, August 22, 1992); the failed intervention “has reinforced the lesson that currency intervention works only if it is allowed to affect domestic monetary policy; it cannot do the job on its own,” the Economist noted (“Forever Falling?” Economist, August 29, 1992, p. 65). Writing with the benefit of hindsight, Norman Lamont, the British finance minister, was more definitive in describing the August failure as a telling portent of a changed world. (Lamont, In Office, p. 222.) 26. Italy had devalued the lira previously, most recently in 1987.


pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

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3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, 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, 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, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Kenneth Rogoff, late fees, liberal capitalism, mega-rich, 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, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor, zero-sum game

The Irish will have serious problems, and their export problems would have been crippling if they were not a corporate income tax haven. Italy’s, particularly southern Italy’s, ability to export successfully is dubious.23 If the US dollar tumbles, that hurts China and other countries with fixed exchange rates; they feel pressured to drop their peg or revalue their currencies higher. Countries whose currencies are pegged to the dollar have had to resort to currency interventions and a massive buildup of foreign reserves to stop their currencies from appreciating. This is inflationary for those countries, and is one reason for the housing and equities boom in Asia.24 China’s way of pushing back against a lowering of the dollar’s value is its threat of ceasing to purchase US Treasury debt (which it has in fact partly done). If neither the United States nor the industrializing nations back down, the result could be a final refusal of the latter nations to continue funding deficits in the US.25 As the US dollar has weakened, it has done so only against those currencies that are free-floating.


pages: 358 words: 106,729

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

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

From July 2005, the People’s Bank of China (PBOC) allowed the renminbi to appreciate steadily against the dollar, but with the onset of the financial crisis in October 2008, it halted the appreciation and pegged the currency to the dollar again. Accusations of unfair trade are being heard in Washington corridors, and with U.S. unemployment touching 10 percent and Chinese growth also touching 10 percent, the disparity seems obvious. The momentum for Congress to impose some form of trade barrier is increasing, and even a renewed appreciation of the renminbi may not quell it. Is Chinese currency intervention unfair? And if so, to whom? In one sense, the answer is obvious. Chinese exporters already enjoy subsidies such as cheap capital, land, and energy. With their goods made even cheaper by an undervalued currency, Chinese exporters can outcompete firms in industrial countries. This situation seems blatantly unfair. But this view assumes equivalence between countries in many other respects: the infrastructure in each country, the quality of its legal and contractual system, its regulatory structure, the education of its workers, and so on.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, Bretton Woods, British Empire, 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, 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, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, 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, 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, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, 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 Americans were in charge, but listened to Keynes out of respect for his intellect. A modern agreement would have to get consensus from America, China, the EU, India, Brazil and so on. This would be tricky. But there could be a less formal arrangement than the Bretton Woods regime. In November 2010, Robert Zoellick, a former US Treasury official who runs the World Bank, wrote of a scheme that would see countries agree on structural reforms to boost growth, forswear currency intervention and build a ‘co-operative monetary system’.6 This system ‘should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values’. Some saw this mild suggestion as a call for a return to the gold standard. It is hard to see the standard returning, save in the desperate circumstances of Weimar-style hyperinflation.


pages: 593 words: 189,857

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

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

., and Patterson asked me to come back at 5 a.m. to review the draft answers; when I returned, we couldn’t buy coffee because nothing was open yet. And we did mangle one answer. Several senators asked if I would label China a “currency manipulator,” so I wrote an equivocating reply stating only that we would encourage China to let the yuan appreciate. I believed that using the manipulator label, especially before I was even confirmed, would be counterproductive, offending the Chinese and making them less likely to strengthen the yuan. But Obama had described China as a currency manipulator during the campaign, so in the early-morning confusion, my diplomatic dodge got replaced with his campaign rhetoric. The answer sent a provocative, unintended signal to a wary, ascendant power, complicating my early dealings with my Chinese counterparts.

I would have to clarify in my early calls that no decision had been made, and that we would try to conduct our future diplomacy in private. I ended up developing very good relationships with the Chinese. It probably helped that I spoke some Mandarin, and that many top government officials—including Wang Qishan, my primary counterpart—had met my father during his time in Beijing for the Ford Foundation. I would help bury a bill by Senator Schumer to punish China for currency manipulation; I asked him if he wanted to call his legislation “Schumer-Hawley,” after the protectionist Smoot-Hawley bill that deepened the Great Depression. But behind the scenes, the President and I would put relentless pressure on the Chinese to let their currency rise. And over time, we helped persuade them that a stronger yuan served their own interests, improving the purchasing power of their growing middle class.


pages: 471 words: 124,585

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

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, 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, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, 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, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, 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, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

But there is also a serious political tension now detectable at the very heart of Chimerica. For some time, concern has been mounting in the US Congress about what is seen as unfair competition and currency manipulation by China, and the worse the recession gets in the United States, the louder the complaints are likely to grow. Yet US monetary loosening since August 2007 - the steep cuts in the federal funds and discount rates, the various auction and lending ‘facilities’ that have directed $150 billion to the banking system, the underwriting of JP Morgan’s acquisition of Bear Stearns - has amounted to an American version of currency manipulation.112 Since the onset of the American crisis, the dollar has depreciated roughly 25 per cent against the currencies of its major trading partners, including 9 per cent against the renminbi.


pages: 621 words: 157,263

How to Change the World: Reflections on Marx and Marxism by Eric Hobsbawm

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anti-communist, banking crisis, battle of ideas, Berlin Wall, British Empire, continuation of politics by other means, creative destruction, currency manipulation / currency intervention, deindustrialization, discovery of the americas, experimental subject, Fall of the Berlin Wall, full employment, Gunnar Myrdal, labour market flexibility, liberal capitalism, market fundamentalism, mass immigration, means of production, new economy, Simon Kuznets, Thorstein Veblen, Upton Sinclair, upwardly mobile, Vilfredo Pareto, zero-sum game

On the other hand the British Ricardian socialists are: Marx was, after all, the last and overwhelmingly the greatest of Ricardian socialists himself. Yet if we can pass briefly over what he approved or developed in the left-wing economics of his day, we must also briefly consider what he rejected. He rejected what he saw as ‘bourgeois’ ( Communist Manifesto) and later ‘petty-bourgeois’ or otherwise misguided attempts to deal with the problems of capitalism by such means as credit reform, currency manipulation, rent reform, measures to inhibit capitalist concentration by the abolition of inheritance or other means, even if they were intended to benefit not small individual proprietors but associations of workers operating within, and eventually designed to replace, capitalism. Such proposals were widespread on the left, including parts of the socialist movement. Marx’s hostility to Sismondi, whom he respected as an economist, to Proudhon, whom he did not, as well as his criticism of John Gray derive from this view.

., 295 Labour Parties, 115, 404 libraries, miners’, 360–1 Labriola, Antonio, 231, 243, 245 Lichtheim, George, 36, 116, 125, 341, Lacan, Jacques, 372 363, 366 463 How to Change the World Liebermann, Max, 247 Marx, Eleanor, 180, 246 Liebknecht, Wilhelm, 71, 103, 188 Marx, Karl Liszt, Franz, 28 biographies, 191–2 Lithuania, 234 and Communist Manifesto, 101–20 Llewellyn-Smith, Hubert, 206–7 contempt for capitalist society, Locke, John, 19 162–3 Lombroso, Cesare, 231 corpus of works, 176–96, 385 London, 98 correspondence, 187–8, 192–3, London School of Economics, 280 378 Loos, Adolf, 230 and early socialism, 16–47, 85 Loria, Achille, 242 and Grundrisse, 121–6 Louis Napoleon, 64 his historical knowledge, 137–42 Loutchisky, Ivan, 244 meeting with Engels, 90 Low Countries, 81, 226, 248 and pre-capitalist formations, Ludwig Feuerbach, 179, 193, 284 127–75 Lukacs, Georg, 229, 257, 263, 265, and the state, 48–88 299, 338, 366, 371 theory of revolution, 54–8, 61–2 Lunacharski, Anatoly, 257 Marx-Engels Archiv, 184, 238 Luppol, Ivan, 288 Marx-Engels Institute, 122, 183–5, 188, Luxemburg, Rosa, 223, 225, 227, 234, 190 255, 320, 345, 371 Marxism Lycurgus, 19 and anti-fascist era, 261–313 Lyons, 40 appeal to intellectuals, 349, 360, Lysenko affair, 296 363–9, 372–4, 382 and the arts, 245–60, 265–6 Mably, Gabriel Bonnot de, 21–2, 41 ‘crisis’ in, 213, 215, 252, 289 Macedonia, 236 and economics, 237, 239–41, Mach, Ernst, 230 372–5, 380, 384, 389 Machado, Antonio, 223 and educated culture, 236–45 Machajski, Jan Wacław, 234 and ‘fellow-travellers’, 297–8 Machiavelli, Niccolò, 316, 318, 321, and history, 242–5 324, 331, 339 influence 1880–1914, 211–60 machine-wrecking, 95 influence 1929–45, 261–313 MacLeish, Archibald, 276 influence 1945–83, 344–84 Maclean, Donald, 279 influence 1983–2000, 385–98 Macmillan, Harold, 406 and labour movements, 399–416 Maeterlinck, Maurice, 251 and natural sciences, 238 Maeztu, Ramiro de, 223 rethinking of, 375–84 Mahler, Gustav, 230, 252 and scientists, 290–6, 381 Malraux, André, 265, 282 and social sciences, 241–3, 349, 365, Manchester, 40, 44, 89, 98–9 380, 390–3 Mann, Heinrich, 298–9 and Soviet orthodoxy, 284–90, 296 Mao Zedong, 14, 125, 338, 345, 351, Western, 288, 291, 300, 337, 339 370 Marxism Today, 174 Maoism and Maoists, 320, 359, 386 ‘Marxists, legal’, 13, 405, 220 Marcuse, Herbert, 338, 366, 371 Masaryk, Tomáš, 228, 401 Mariátegui, José Carlos, 371 Matisse, Henri, 265 Maritain, Jacques, 282 Maupassant, Guy de, 248 Mark, The, 139–40, 167 Maurer, Georg von, 138–40, 162, 167, Marks, Louis, 340 169 Marshall, Alfred, 208–10 May Day, 215 Martov, Julius, 320 Mayer, Gustav, 184, 287 464 Index Mehring, Franz, 182–3, 192, 248, 319, Narodniks, 162–3, 217, 219–20, 228, 400 235, 244, 358, 360, 365 Meillassoux, Claude, 358 national liberation movements, 75 Meitzen, August, 138 ‘national question’, 75, 237, 258, 289, Menger, Carl, 207–8, 229, 239 320, 360 Mensheviks, 234 national separatism, 360 mercantilism, 146 nationalisation, 9–10, 40 Merleau-Ponty, Maurice, 372 nationalism, 7, 73–4, 217, 228, 234–5, Metternich, Klemens von, 107 370, 412, 417 Meunier, Constantin, 249 nations, 54, 73–5 Mexico, 270, 359, 411 nation-states, 11, 111, 413 Micheles, Vera, 319 and labour movements, 409, Michels, Robert, 213, 224, 243 413–14 Middle Ages, 139–40, 142, 150, 152, Natural Law, 18 168 ‘natural philosophy’, 39 Middle East, 137, 142, 272 natural sciences, 238, 264, 284–5, Milan, 232, 279 290–6, 380–1, 389 Mill, John Stuart, 28, 138, 268 naturalism, 247–8, 258–9 Millerand, Alexandre, 400–2 Needham, Joseph, 293 Milner, Alfred, 202 Negri, Antonio, 125 Mises brothers, 229, 240 Nehru, Jawaharlal, 272 Mitterrand, François, 389, 410 Netherlands, 13, 218, 226–7, 271, 287 modernism, 265 Neue Rheinische Zeitung, 50, 60, 102–3 Mommsen, Theodor, 137 New Labour, 415 monasteries, 166 New Left Books, 384 money New Left Review, 124 bullion, 141, 146 New Poor Law, 94 currency manipulations, 36, 47 ‘New Woman’, 223 invention of, 131 New York Daily Tribune, 138, 178 and wages, 170 New Zealand, 221 Mongolia, 357 Newton, Isaac, 263, 294, 347 Montesquieu, 351 Nicaragua, 357 Montherlant, Henry de, 282 Nicolaus, Martin, 124 Moore, G.E., 221 Nietzsche, Friedrich, 254 More, Thomas, 17 Nigeria, 173 Morelly, 21–2, 41 ‘noble savage’, 19, 351 Morgan, Lewis, 140–1, 162, 164 North Korea, 371 Morocco, 412 Northern Ireland, 403 Morozov, Ivan, 257 Norway, 407, 409, 415 Morris, William, 224, 246, 249–50, nuclear weapons, 9, 296, 301–2 258–9 Mosca, Gaetano, 243, 318 October Revolution, 104–5, 194–5, Mouffe, Chantal, 337 305, 319, 329, 336, 387, 394, Munich agreement, 269 406 Munich soviet, 254 Olivier, Sydney, 209 Musil, Robert, 230 Oppenheimer, J.


pages: 499 words: 152,156

Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

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conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, information asymmetry, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, Plutocrats, plutocrats, rolodex, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

Within weeks of his arrival, the planet was hit by the most serious financial crisis since the Great Depression. The crisis posed a conundrum for Lin: Officials from the United States, Europe, and the IMF called on China to raise the value of its currency, to boost the buying power of Chinese consumers and make products from other countries relatively cheaper. Sen. Charles Schumer, Democrat from New York, told reporters, “China’s currency manipulation is like a boot to the throat of our recovery.” But Lin saw the issue very differently. Forcing China to raise its currency “won’t help this imbalance and can deter the global recovery,” he told an audience in Hong Kong, arguing that such a move would only depress U.S. consumer demand, because raising the value of the currency would make Chinese exports more expensive, and it would not help the U.S. economy, because Americans don’t produce many of the things they buy from China.

Cafferty, Jack Caijing; government approval required for; growth of; investors in; management buyout plan of Cao, Henry Cao, Leo Caochangdi Cao family Cao Haili Cao Qifeng Carrefour Carter, Jimmy Catholicism Célestin Monga cell phones censorship Central Intelligence Agency (CIA) Central Japan Railway Central Publicity (Propaganda) Department; Caijing and; on train crash century of national humiliation Charter 08 Charter 77 Chen Chen Danqing Chen Guangcheng; escape of; house arrest of; in prison; release of Chen Guangfu Chen Guojun Cheng Yizhong Chen Jieren Chen Kegui Chen Xianmei Chen Yun Chen Yunying Cheung Chi-tai Cheung Yan Chicago Tribune Chim Pui-chung China: alleged currency manipulation of; anti-Japanese protests in; average income in; billionaires in; bloggers in; capitalist reforms in; censorship in; central bank of; civil war in; constitution of; creative class in; economic growth in; food in; happiness in; history studies in; housing prices in; inequality in; intergenerational mobility in; Internet use in; investment in; Japanese occupation of; Japan’s Diaoyu Islands dispute with; Jasmine protests in; labor migration in; land reform in; life expectancy in; literacy rates in; luxury goods in; popular approval of; press in; real estate boom in; revolution in; special economic zones in; spiritual awakening in; stereotypes of; stimulus plan in; stock markets in; tax system in; Tibet protests in; travel from; Uighur-Han riot in; urban growth in; Western culture as perceived by China, U.S. relationship with; Belgrade embassy bombing and; and Chinese crackdown on Internet; Mao’s establishment of; U.S. recognition of ChinaAid China Business Times China Can Say No China Center for Economic Research China Central Television China Daily China eCapital China Entrepeneur ChinaGeeks China Miracle, The (Lin, Cai and Li) China Mobile China Newsweek China Railway Signal and Communication Corporation China Stand Up!


pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

A chronically undervalued currency was probably a symptom of the failure to get industrial policy right. The cheap currency, however, was unable to change the fact that by the 1980s the quality and value-added of Korean exports were exceeding Taiwan’s, while Korea caught up with and surpassed Taiwan in GNI per capita in the next decade.37 In the late 1980s and 1990s Taiwan succumbed to intense international pressure over its currency manipulation and began to deregulate its financial system. As in Korea, the state lost a good part of its capacity to impose industrial policy via the banks. Fifteen new private banks were licensed in 1991, compared with a total of twenty banks in existence to that point. The new owners of private institutions were not responsive to state direction on lending and the central bank did not seek to influence them through rediscounting and overloaning, while the market share of government-linked banks declined steadily from a peak of around 95 per cent in 1980.

The Chinese central bank pays interest on the renminbi bonds it issues, and reserves it sequesters, in order to reduce the inflationary impact of China’s foreign exchange surplus.66 In the 1980s, many people said Taiwan’s extraordinary reserves were a symbol of its success as a developing economy. Still more is said of China’s foreign exchange pile today. But if Taiwan is a guide, China will come to be seen as further proof that acute and chronic currency manipulation is not a useful long-term addition to the industrial policy tool cupboard.67 In fairness to China, however, it should be said that the country’s undervaluation of its currency has not been as rigid as Taiwan’s was and the renminbi has been allowed to appreciate modestly since 2007. Good dragon, bad dragon Overall, China’s government has lined up most of the ducks necessary to enable rapid economic development.


pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

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Asian financial crisis, banking crisis, Bernie Sanders, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Silicon Valley, too big to fail, transaction costs

Few recognize that lowering the value of the dollar will almost certainly have more impact than all the other items on the list put together. In addition to understanding the economic impact of an overvalued dollar, the public should also recognize how interests divide on this issue. It is standard practice for politicians to treat dollar policy as something outside of the control of the U.S. government. Consider, for example, what we have read about the need for the U.S. to confront China over its currency “manipulation,” that is, its practice of deliberately depressing the value of its currency against the dollar. There are several aspects of this framing of the issue that are inaccurate. First, China has an explicit policy of pegging its currency to the dollar. This is not something it is doing in the dark when no one is looking, so the use of the term “manipulation” is not really appropriate. It is also worth noting that China is hardly the only country that pegs its currency to the dollar; many other developing countries do so as well.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, call centre, carried interest, centre right, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, Plutocrats, plutocrats, precariat, purchasing power parity, reserve currency, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, TaskRabbit, telepresence, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

America’s forty-fifth president has called for other members of the European Union to follow Britain’s lead. After taking office, Trump publicly enquired which European country would be the next to make an exit. Trump has also continued to cast doubt on the future of Nato. Finally Germany is rising, but Trump wants to cut it down. He described Angela Merkel’s decision to allow in Syrian refugees as a disaster. Peter Navarro declared Germany a currency manipulator and an unfair trader.21 Merkel is now the only European leader with any serious presence on the global stage. The spirit of Western internationalism rests on her shoulders. It is asking a lot of a fourth-term German leader to carry such a torch. As Russia steps up its interference in Europe, Germany will be tempted to re-emerge as a military power. That would sure terrify the ghosts of history.


pages: 296 words: 78,112

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

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

Trump himself has rejected this view (in no small part, one suspects, because accepting it would involve an un-Trumpian admission that he had indeed been humiliated). “It’s such a false narrative,” he complained in 2016. He added, less convincingly, “I had a phenomenal time. I had a great evening.” Trump also could have pointed out that he had long ago developed many of the themes that became hallmarks of his eventual campaign—everything from the evils of Chinese currency manipulation to the economic damage that NAFTA inflicted on a broad swath of U.S. workers. What is clear in hindsight, however, is that Trump’s interest in politics intensified right after the dinner, instead of quickly melting away, as it had after each of his presidential flirtations in the past. “I realized,” he said, “that unless I actually ran, I wouldn’t be taken seriously.” For years, Trump had sought political advice from Roger Stone, a junior Richard Nixon henchman turned lobbyist and a notorious self-promoter, whose carefully cultivated image as a master of the political dark arts often seduced wealthy naïfs like Trump (The New Republic once dubbed Stone a “state-of-the-art Washington sleaze ball” for his ability to fleece credulous newcomers).


pages: 586 words: 159,901

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

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, 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, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, Plutocrats, plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market 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

(Freddie Mac), 91-92 Federal National Mortgage Association (Fannie Mae), 91-92 Federal Reserve, 92-98 beige book, 131-132 Board of Governors, 96 chair's dominance, 96 concern with strength of labor, 219 Congressional posturing over, 132 democratizing, 307-309 dollar activities during trading week, 130 and dollar policy, 44 Federal Open Market Committee, 97, 132 minutes, 218 Fed-watching, 97 flow of funds accounts, 56-58; see also specific sectors history, 92-96 monetary policy, 25-26 deliberations, 97 policy, and endogenous money, 220 profits on currency intervention, 44, 54, 136 protection of bondholder interests, 123 secretiveness, 97 self-financing, 96 structure, 95-96 Survey of Consumer Finances, 64,69,79,114,115 Wall Street pressures on, 308-309 Federal Reserve Bank of New York, 96 Federal Savings and Loan Insurance Corp., 87 Federal Trade Commission, 279 fees, investment banking, for M&A, 273, 281, 299 bad structure in LBOs, 284 high even in failed deals, 299 Rohatyn's inspiration to Perella, 285 Ferenczi, Sandor, 226 feudalism, usury as killer of, 237 fictitious capital, 13 finance blending with industry, 135, 262 how it matters, 153-161 vs. money, 183 finance capital. 5ee Hilferding, Rudolf finance-industry split, absence of, 95, 123-124 financial capacity (Gurley and Shaw), 153, 158 financial engineering, 52 financial reform, difficulty of, 302 financial slack, 298 financial structures, social aspects institutional differences between debt and equity, 247 stockholder-bondholder conflicts, 248 financial system costs of, 76-77 employees, demographics, 78 institutional overview, 76-86 borders, 56 "output", 76 profits and taxes, 78 salaries, 78-79 systemic risk, 40-41, 85, 86 see also flow of funds accounts financial theory, assumptions, 138 Finland, 235 firm.


pages: 444 words: 151,136

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

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

There are none, despite what managements in this sector or stress testers will tell you. They all clustered at the edge of employing extraordinary leverage, both on and off their balance sheets, and they exposed themselves to nearly unquantifiable counterparty risk. They did so because government stepped in to insure deposits, and it preempted the role of safekeeping. The elastic nature of fiat currency intervention at the bottom of economic cycles transmitted a message that systemic risk did not exist any longer. Yet at exactly this moment, government became least able to provide a backstop to deposits and counterparty failure, because it had leveraged its own balance sheet, whose debts are those of the people (the upper-middle class to be specific—since they are nearly exclusively called upon to fund government).

How I Became a Quant: Insights From 25 of Wall Street's Elite by Richard R. Lindsey, Barry Schachter

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Albert Einstein, algorithmic trading, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, asset allocation, asset-backed security, backtesting, bank run, banking crisis, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, Brownian motion, business process, buy low sell high, capital asset pricing model, centre right, collateralized debt obligation, commoditize, computerized markets, corporate governance, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, discounted cash flows, disintermediation, diversification, Donald Knuth, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, full employment, George Akerlof, Gordon Gekko, hiring and firing, implied volatility, index fund, interest rate derivative, interest rate swap, John von Neumann, linear programming, Loma Prieta earthquake, Long Term Capital Management, margin call, market friction, market microstructure, martingale, merger arbitrage, Myron Scholes, Nick Leeson, P = NP, pattern recognition, Paul Samuelson, pensions crisis, performance metric, prediction markets, profit maximization, purchasing power parity, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Richard Feynman, Richard Feynman, Richard Stallman, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, sorting algorithm, statistical arbitrage, statistical model, stem cell, Steven Levy, stochastic process, systematic trading, technology bubble, The Great Moderation, the scientific method, too big to fail, trade route, transaction costs, transfer pricing, value at risk, volatility smile, Wiener process, yield curve, young professional

I personally know several people who discovered it. I continued to meet my new objectives of acquainting myself with modern finance and my old one of procrastinating on my dissertation. A new opportunity for delay arose in the New York Fed’s foreign exchange department, which had decided that economists might make good foreign exchange traders. The New York Fed’s FX desk is responsible for carrying out currency intervention operations on behalf of the U.S. Treasury and the Federal Reserve System; the Treasury owns the policy, the Fed the machinery. Most of the Fed’s FX transactions are essentially commercial, executed on behalf of central banks that deposit reserves with it. By volume, however, the sporadic but large policy-driven FX market interventions predominate. JWPR007-Lindsey May 7, 2007 17:27 Allan Malz 299 I had the good fortune of arriving on the desk in mid-1992, in time for a sustained bout of intervention in support of the dollar that lasted until early 1995—in fact, the last such sustained sequence to date.


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

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business process, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, 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, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, labour market flexibility, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, Plutocrats, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Cohen explained what happened: “The pressure put on the Japanese was absolutely critical for them to agree to export restraints.”41 Leaders of the family capitalism countries and President Obama need to apply this history today. They certainly have a target-rich environment. For example, Chinese currency undervaluation has become a chronic irritant, equivalent to a tax on GE or Daimler imports being sold there as well as a hidden subsidy to Chinese exports, such as giant wind generators. The Obama administration hopes to include prohibitions on currency manipulation in trade agreements, beginning with the Trans-Pacific talks in spring 2013. And aggressive steps are needed to neutralize other illegal trade practices, a difficult challenge as Beattie notes. A poster child for the ineffectiveness of policies to neutralize such illegal trade practices is the predicament dramatized by Maurice Taylor, CEO of the US tire firm Titan International. Titan had limited success in enlisting Washington to help preserve US jobs in the face of Chinese export subsidies.

(former Council of Economic Advisors), 186 Nixon, Richard (President) enlarged social safety net, 98 gold standard, abandoned the, 42, 200, 219–20 subprime mortgages, 221 increased tax rates on capital above wages 98 Nocera, Joe (reporter) 56, 104 Nohria, Nitin (Harvard Dean), 104, 445 Norris, Floyd, 185 (chart), 185, 409, 411 (chart), 421 (chart) North American Free Trade Agreement (NAFTA), 345–46 Norton, Michael, 433 Notten, Geranda, 403–06 O Obama, Barack (President), 32-3, 235–6, “budget, spending” 185–6, 207 2009–11, 338 Bush administration’s monopoly guidelines, scrapped, 87 Dodd-Frank financial reform legislation, 35 inherited economic challenges, 41, 184, 211 Labor Department standards, 115–16 minimum wage proposal, 337, 447 offshore wealth, pursuing Americans with, 456 prohibitions on currency manipulation in trade agreements, 452 stimulus bill (2009), 222 unemployment compensation, 332–33 Varney, Christine (antitrust chief), 87–8 Offshoring, 235, 319, 345–9, 351–3, 358, 362, 374, 394–7, The Apple Problem and, 344–53, 397 European vs. US firms, 362 Ok, Wooseok (economist), 331 Okun, Arthur M. (Johnson’s Council of Economic Advisors), 106, 232 Equality and Efficiency: The Big Trade-off, 232 Okun’s Law, 106, 150, 353, 373, 421 Oler, Derek K.


pages: 364 words: 99,613

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

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back-to-the-land, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, call centre, centre right, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, falling living standards, financial deregulation, financial innovation, full employment, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, Long Term Capital Management, market fundamentalism, Martin Wolf, McMansion, medical malpractice, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, Paul Samuelson, Plutocrats, plutocrats, price mechanism, price stability, private military company, Ralph Nader, reserve currency, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, school vouchers, Silicon Valley, single-payer health, South China Sea, statistical model, Steve Jobs, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War

The phenomenon of exchange-rate protectionism was well known to the Republican and Democratic negotiators of the rules of the World Trade Organization and the other free-trade adjustments of the past twenty years. Nevertheless, pressured by their multinational “American” corporate financiers who were eager to partner with the Chinese, they deliberately excluded from the agreements any prohibition on currency manipulation. This was no oversight. It was repeated in agreement after agreement. And like most political folly, the reason for it lies in the special interests of the rich and powerful. Both Wall Street and the Pentagon favor a highly valued dollar because it enables them to buy assets around the world more cheaply. In Wall Street’s case, this means foreign business assets. In the Pentagon’s, a higher valued dollar makes it less costly to maintain its bases, its foreign missions, and its wars.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, 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, 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, labour market flexibility, labour mobility, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, 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

The country stands as the premier example of how the global economy can be leveraged for economic growth and poverty reduction—by combining exports with a domestically tailored strategy of economic diversification and institutional innovation. But the picture is not all pretty. China and its trade partners have become embroiled in a growing number of trade disputes in recent years on product safety, patent and copyright infringement, government subsidies, dumping, currency manipulation, and market-access restrictions of various kinds. Imports from China have become a leading scapegoat for the stagnant median wages in the United States. China’s huge trade surplus has led even sober economists such as Paul Krugman to complain that the country’s “mercantilist” policies are costing the U.S. economy more than a million jobs.28 And China is widely blamed for running roughshod over human rights and good governance in Africa in its quest for natural resources.


pages: 391 words: 97,018

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy by Daniel Gross

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, BRICs, British Empire, business process, business process outsourcing, call centre, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, Frederick Winslow Taylor, high net worth, 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 skilled workers, Mark Zuckerberg, Martin Wolf, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, 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

In recent years China’s economic mandarins have realized that the best way to fight inflation and improve the lot of your people isn’t to pay them a little more to make cheap junk that they can send elsewhere. Rather it’s a good idea to let your currency appreciate so that the cost of things people and companies need to import, like food and oil and coal, doesn’t gobble up such a huge chunk of disposable income. Despite all the complaints about China’s currency manipulation, the renminbi has appreciated in value against the dollar in recent years, rising from 8.27 per dollar in October 2005 to 6.38 per dollar in October 2011, a 23 percent increase. In 2011 a dollar simply bought much less of a Chinese worker’s time than it did in 2006, but more than it will buy in 2016. The per-hour cost of labor is just one component of labor costs to consider. When wages are high, companies invest in training and equipment that make better use of employees’ time.


pages: 291 words: 90,200

Networks of Outrage and Hope: Social Movements in the Internet Age by Manuel Castells

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access to a mobile phone, banking crisis, call centre, centre right, citizen journalism, cognitive dissonance, collective bargaining, conceptual framework, crowdsourcing, currency manipulation / currency intervention, disintermediation, en.wikipedia.org, housing crisis, income inequality, microcredit, Mohammed Bouazizi, Occupy movement, offshore financial centre, Port of Oakland, social software, statistical model, We are the 99%, web application, WikiLeaks, World Values Survey, young professional, zero-sum game

There were multiple proposals of various natures, voted on in the General Assemblies, but little effort to translate them into a policy campaign going beyond combating the effects of mortgage foreclosures or financial abuses on borrowers and consumers. The list of most frequently mentioned demands debated in various occupations hints at the extraordinary diversity of the movement’s targets: controlling financial speculation, particularly high frequency trading; auditing the Federal Reserve; addressing the housing crisis; regulating overdraft fees; controlling currency manipulation; opposing the outsourcing of jobs; defending collective bargaining and union rights; reducing income inequality; reforming tax law; reforming political campaign finance; reversing the Supreme Court’s decision allowing unlimited campaign contributions from corporations; banning bailouts of companies; controlling the military-industrial complex; improving the care of veterans; limiting terms for elected politicians; defending freedom on the Internet; assuring privacy on the Internet and in the media; combating economic exploitation; reforming the prison system; reforming health care; combating racism, sexism, and xenophobia; improving student loans; opposing the Keystone pipeline and other environmentally predatory projects; enacting policies against global warming; fining and controlling BP and similar oil spillers; enforcing animal rights; supporting alternative energy sources; critiquing personal leadership and vertical authority, beginning with a new democratic culture in the camps; and watching out for co-optation in the political system (as happened with the Tea Party).


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional, zero-sum game

In 1985 the United States browbeat Japan at the Plaza Accord meetings into letting the yen rise. But the subsequent 50 percent increase did little to make American goods more competitive. Yale University’s Stephen Roach points out that since 2002 the U.S. dollar has fallen in value by 23 percent against all our trading partners, and yet American exports are not booming. The United States imports more than it exports from ninety countries around the world. Is this because of currency manipulation by those countries, or is it more likely a result of fundamental choices we have made as a country to favor consumption over investment and manufacturing? Our fears extend well beyond terrorism and economics. Lou Dobbs, the former CNN commentator, became the spokesman of a paranoid and angry segment of the country, railing against the sinister forces that are overwhelming us. For many on the right, illegal immigrants have become an obsession.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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

In 2014, the US dollar began to rise at its fastest rate in decades, increasing in value by over 20 percent in a year, including a jump of 10 percent in the first three months of 2015. With 40 percent of sales and around a quarter of profits coming from abroad, US exporters were affected, issuing warnings of lower revenues and earnings. US legislators now complained about the effect of overseas central bank actions on the currency, threatening to classify Europe, Japan, and China as currency manipulators. The Fed indicated that the increase in the value of the dollar and its effects on the American economy were now impinging on their policies. The difference between legitimate policies of low or negative interest rates and unfair devaluation depends on one's point of view. Despite the evidence, European Central Bank president Mario Draghi has repeatedly stated that talk of a currency war was “really excessive,” favoring denial: “I urge all parties to exercise very, very strong verbal discipline.


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

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3D printing, Airbnb, 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, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, 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, labour market flexibility, labour mobility, liquidity trap, 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: Great Stagnation, working-age population, Zipcar

It is in Germans’ own interest to pay themselves wages commensurate with their productivity, invest more in future growth (not least in their often dilapidated infrastructure) and stop squandering their savings on bad loans abroad.345 But if Germany’s mercantilist policymakers refuse to do what’s right for Germans, the European Commission must use its new powers to tackle dangerously excessive imbalances to force Berlin to act.346 If the EU is a community of equals, not an instrument for imposing the writ of powerful creditor countries on debtors, its rules must apply to Germany too. American pressure could also make a difference. The US Treasury has criticised Germany’s surplus, which could also become an issue in ongoing talks on an EU-US trade and investment deal. Since there are demands in the US Congress to tackle currency manipulation in future US trade deals, it is only a small step to requiring that Germany address its current-account surplus. After all, artificially holding wages below productivity is a manipulation of Germany’s real exchange rate. Promote competition, not competitiveness Provided they are combined with bank restructuring to restore credit to businesses and investment to support demand, the right reforms can unblock hidebound economies and open up future growth.


pages: 514 words: 153,092

The Forgotten Man by Amity Shlaes

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anti-communist, bank run, banking crisis, collective bargaining, currency manipulation / currency intervention, Frederick Winslow Taylor, invisible hand, jobless men, Mahatma Gandhi, Plutocrats, plutocrats, short selling, Upton Sinclair, wage slave, Works Progress Administration

After all, Congress had the power to regulate the currency, and it, in turn, had given Roosevelt the authority to manage the money. Roosevelt was satisfied, writing to Joe Kennedy, “With you I think Monday, February eighteenth was a historic day. As a lawyer, it seems to me that the Supreme Court has at last definitely put human values ahead of the ‘pound of flesh’ called for by a contract.” But Justice James McReynolds delivered a soliloquy: the New Deal’s “flippant approach to currency manipulation” was dangerous. Congress had no power to destroy the gold-clause commitment. Roosevelt was like a tyrant. “This is Nero at his worst. As for the Constitution, it does not seem too much to say that it is gone.” The meaning of the news was something the country found hard to grasp. Clearly it affected all private contracts. The Christian Science Monitor noted that it cut the value of “$75,000,000,000” in contracts—nine consecutive zeros being, at that time, something Americans were not accustomed to seeing.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

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affirmative action, Amazon Mechanical Turk, banks create money, big-box store, Bretton Woods, car-free, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, global village, Google Earth, greed is good, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, moral hazard, mutually assured destruction, Naomi Klein, negative equity, new economy, New Urbanism, Norbert Wiener, peak oil, peer-to-peer, place-making, placebo effect, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, 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, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional, zero-sum game

His heavy and repeated taxation did not go over well, however, so he hired a few Italian economics experts who offered him more innovative ideas on how to drain his people’s resources. Philip’s new, more opaque tactic, made possible by his centralization of money, was to debase his own currency—removing some portion of the gold and recoining it with less precious metal. Philip forced his people to use and value money from which he could extract worth at any time. For these repeated debasements, Dante later pictured Philip in Hell. Philip’s wanton currency manipulation led to attacks on royal officials and widespread rioting. By 1306, violence got so bad in Paris that Philip had to take refuge in the house of the Knights Templar and temporarily restore “good money” for his people to use. Philip had done far worse than simply debase a currency. Taken alone, all that would have done is made it harder for him to purchase foreign goods. His people could still have accepted gold florins for their exports, and used local currencies for their daily transactions.

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

If a country has large reserves, investors are less likely to panic; and if they do panic, it is more likely that the country will be able to meet its debt obligations. Today, prudence requires countries to maintain reserves at least equal to their short-term dollar debts or debts denominated in other hard currencies, such as the yen or euro.3 Reserves can also be used to manage the exchange rate; without reserves, the exchange rate can fall, often quite dramatically, as fickle investors or profit-seeking speculators or currency manipulators sell a country's currency. Instability in exchange rates can lead to enormous economic instability. By countervailing these moves—buying the country's currency when others are selling or selling the country's currency when others are buying—governments can stabilize the exchange rate, and thereby stabilize the economy. But they can only sell dollars to buy the local currency if they have a reserve of dollars to se11.4 While countries have always held reserves, the amount they hold has been soaring.

Killing Hope: Us Military and Cia Interventions Since World War 2 by William Blum

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anti-communist, Berlin Wall, Bolshevik threat, centre right, collective bargaining, colonial rule, cuban missile crisis, currency manipulation / currency intervention, deindustrialization, kremlinology, land reform, liberation theology, Mikhail Gorbachev, Monroe Doctrine, nuremberg principles, Ronald Reagan, South China Sea, trickle-down economics, union organizing

The left was now altogether excluded from the government, and the elections scheduled for December were canceled.8 If this wasn't enough to disenchant the Pathet Lao or anyone else with the Laotian political process, there was, in the late 1950s and eariy 1960s, the spectacle of a continuous parade of coups and counter-coups, of men overthrown winding up in the new government, and regimes headed by men who had sided with the French in their war against Indochinese independence, while the Pathet Lao had fought against the colonialists.9 There were as well government-rigged elections, with the CIA stuffing ballot boxes;10 different regimes-cum-warlords governing simultaneously from different "capitals", their armies fighting each other, switching allies and enemies when it suited them; hundreds of millions of US dollars pouring into a tiny kingdom which was 99 percent agricultural, with an economy based more on barter than money, the result being "unimaginable bribery, graft, currency manipulation and waste".11 The CIA and the State Department alone could take credit for engineering coups, through force, bribery or other pressures, at least once in each of the years 1958, 1959 and 1960, if not in others.12 "By merely withholding the monthly payment to the troops," wrote Roger Hilsman (whose career encompassed both agencies, perhaps covertly simultaneously), "the United States could create the conditions for toppling any Lao government whose policies it opposed.


pages: 1,773 words: 486,685

Global Crisis: War, Climate Change and Catastrophe in the Seventeenth Century by Geoffrey Parker

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agricultural Revolution, British Empire, Climatic Research Unit, colonial rule, creative destruction, currency manipulation / currency intervention, Defenestration of Prague, Edmond Halley, en.wikipedia.org, European colonialism, failed state, Fellow of the Royal Society, financial independence, friendly fire, Google Earth, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Joseph Schumpeter, Khyber Pass, mass immigration, Mercator projection, moral hazard, mortgage debt, Peace of Westphalia, Peter Thiel, Republic of Letters, sexual politics, South China Sea, the market place, trade route, transatlantic slave trade, transatlantic slave trade, unemployed young men, University of East Anglia, World Values Survey, zero-sum game

Not surprisingly, Bordeaux supported the Fronde revolt that year and before long considered secession as an independent republic (see chapter 10). Apart from imposing excise duties and increasing direct taxes, early modern governments at war frequently exploited and extended state monopolies (often known as ‘regalian rights’), such as extracting minerals obtained from the sea or under the ground (including salt and coal, silver and copper), or maximizing the profits from minting coins. Currency manipulation became particularly common in the seventeenth century, with governments from Spain, through Russia, to China either adulterating silver coins with base metals, or issuing copper or paper money with little or no intrinsic value. Forcible devaluation could ruin whole societies. In 1634 in exile Pavel Stránský recalled the devaluation in Bohemia a decade earlier as the most traumatic experience of his life: ‘Neither plague, nor war, nor hostile foreign incursions into our land, neither pillage nor fire however atrocious, could do so much harm to good people as frequent changes and reductions in the value of money’.

Many went bankrupt, some fled and a few committed suicide in order to escape their creditors.38 Everyone involved in the Sino-Japanese silk trade thus experienced serious losses, some of it terminal, because of a political decision over which they had no control and against which they had no defence.39 Those living in the macro-regions were also defenceless against other government initiatives. For example, since they normally used cash to settle commercial transactions, currency manipulation affected them far more than communities which continued to rely on barter. Currency in the early modern world came in two forms. One, used by merchants, monarchs and others who engaged in high-value transactions, consisted of silver and gold coins that had an intrinsic value like any other commodity. Therefore, by changing the amount of precious metal contained in each coin, governments could manipulate its exchange value against the coins of other states that contained precious metal.

Thus, in his lectures to the Statistical Society of London in 1878 on ‘The famines of the world: past and present’, Cornelius Walford proposed 13 distinct causes for just one of Bacon's categories: ‘dearths’. Walford discerned six natural precipitants of harvest failure, including excessive rain, frosts, droughts, ‘plagues of insects and vermin’ and sunspot cycles, and seven more ‘artificial’ (read: human) precipitants, including war, ‘defective agriculture’, insufficient transport, legislative interference, currency manipulation, hoarding, and diverting grain from making bread to other purposes (such as brewing or distilling).19 Nevertheless although Walford relied mostly on nineteenth-century data from England and British India, the same combination of ‘natural’ and ‘artificial causes’ he identified also prevailed in the seventeenth century. Famines caused by unfavourable weather were often exacerbated by ‘defective agriculture’ (farmers who refused to cultivate maize and other crops more resistant to a harsher climate); by a shortage of vessels and carts to transport food from areas with a surplus to those in deficit; by grain merchants who withheld or diverted supplies in order to increase their profits while people around them starved; and by governments that promoted economic chaos by tampering with the currency, squandered resources that might have fed the starving, and refused to make peace in order to reduce demands for troops and taxes.


pages: 708 words: 196,859

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

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

Both brought about a higher value of gold within the credit system and both would therefore stimulate higher commodity prices. It sounded simple, but to most of Roosevelt’s economic advisers, talk of devaluation was plain blasphemy, smacking of the worst forms of repudiation. How was this different from the practice of clipping and debasing coins adopted by insolvent monarchs in the Middle Ages? Given its vast gold reserves, the United States had little reason to resort to this currency manipulation, which might threaten confidence in the credit standing of the U.S. government and even endanger rather than promote recovery. During the first few weeks of the administration, following the proclamation suspending gold exports on Roosevelt’s first day in office, the currency situation remained in limbo. Secretary Woodin tried to reassure everyone that the United States had not left the gold standard, but the president was not so unequivocal.


pages: 740 words: 217,139

The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, endogenous growth, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Right to Buy, Scramble for Africa, selective serotonin reuptake inhibitor (SSRI), spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus, zero-sum game

Already by the time of the French Revolution, however, certain features of Russian governance distinguished it sharply from both the weak absolutisms of France and Spain on the one hand, and the Chinese and Ottoman states on the other. The Russian state was stronger than its French or Spanish counterparts in several respects. The latter felt bound by respect for a rule of law, at least with regard to elites, which simply didn’t exist in Russia. The French and Spanish governments nibbled away at property rights through debt defaults, currency manipulation, and trumped-up charges through court proceedings designed to extort money from their target. But at least they felt compelled to work through the existing legal system. The Russian government, by contrast, expropriated private property outright with no pretense of legality, forced the entire nobility into government service, and did away with enemies and traitors without attention to due process.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

Above all, it contributed not just to the geographical but also to the technological and organizational restructuring of US industry discussed in the previous chapter. Meanwhile, US exports resumed a rate of growth even more impressive than in the 1970s: in the decade after 1985 they grew at an average of over 10 percent a year. The fact that US trade deficits persisted after Plaza only showed the futility of trying to correct them through currency manipulations, and this reinforced the case for instead promoting US exports through a “free trade” offensive (see Chapter 9), which was consistent with the making of global capitalism. During the 1980s, urban land prices in Japan almost tripled, while the value of the stock market quadrupled. The bubble that developed was further inflated with the aid of US derivatives traders who had been welcomed to Japan throughout the decade.


pages: 710 words: 164,527

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

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activist fund / activist shareholder / activist investor, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, capital controls, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, margin call, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, The Great Moderation, the market place, trade liberalization, Works Progress Administration

In the 1940s, the United States pivoted from a stance of doggedly defending its creditor prerogatives under Morgenthau and White to one of cashing them in to revive global growth under Marshall and Clayton, partly because of a change in management, but mainly because of a rational recalibration of its interests in a changed geopolitical environment. In the here and now, the United States insists that the fault lies with its largest creditor, China, which continues to fix its exchange rate at an artificially low level. A practice praised by the U.S. Treasury Secretary in 1998, when the Chinese government was resisting downward market pressure on the renminbi, is now widely condemned as currency manipulation—as it was by Treasury Secretary nominee Timothy Geithner in 2009, when the Chinese government was resisting upward market pressure on its currency. Senators Charles Schumer and Lindsey Graham attacked the Chinese practice, declaring that “one of the fundamental tenets of free trade is that currencies should float.” This contradicted not only the intellectual history of economics, but the tenet that guided the United States at Bretton Woods.34 There is a common thread running through White’s blueprint for Bretton Woods in 1944, Nixon’s closing of the gold window in 1971, Rubin’s hailing of the Chinese currency peg in 1998, and Geithner’s condemnation of it in 2009: whether the United States supports fixed or floating exchange rates at any given point in time is determined by which will give it a more competitive dollar.