eurozone crisis

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Unhappy Union by The Economist, La Guardia, Anton, Peet, John

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

A sense of direction towards integration, even if slow and conditional, would help stabilise the euro zone, restore confidence in markets that it is being repaired, provide incentives for reform and give citizens in the most stricken countries a sense of hope for a better future. It could help avoid the next crisis, or at least mitigate its impact. But Europe’s leaders have not proven to be endowed with long-term vision. So the best that can probably be hoped for is that the euro zone lurches from one crisis-induced reform to another. This will be unnecessarily costly and painful, but might somehow lead to a more coherent and workable system. But there is another possibility: that the euro zone, and the EU with it, will stumble from one crisis to the next until, exhausted, one or all of its members lose the will to preserve the single currency, and perhaps the wider project. Europeans like to point out that it took the United States more than two centuries, many crises and a civil war before it fully developed its model of federalism.

The process proved so messy and bitter that, even with hundreds of billions of euros committed to bail-outs, the currency several times came close to breaking up, potentially taking down the single market and perhaps the whole EU with it. The EU’s hope of becoming a global power dissolved as Europe became the world’s basket case. More than once, the United States forcibly pressed its transatlantic allies and economic partners to do more to fix their flawed currency union. At the time of writing, in March 2014, the euro zone has survived the financial crisis – an achievement in itself, but won at too high a price. The euro zone bottomed out of its double-dip recession in 2013. But despite signs of “Europhoria” in markets the danger is far from over. Among Europhiles and Eurosceptics alike, there is a growing belief that the euro has undermined, and may yet destroy, the European Union. Instead of promoting economic integration, euro-zone economies have diverged.

The crisis has also widened the democratic deficit in Europe, which the growing power of the European Parliament has been unable to fill, as explained in Chapter 9. Moreover, it has disrupted the core business of the EU that is often out of the headlines, from the single market to trade negotiations, as set out in Chapter 10, as well as the EU’s hope of exerting greater influence on world affairs, a sorry tale recounted in Chapter 11. The concluding Chapter 12 assesses the damage done by comparing the performance of the euro zone since the beginning of the global financial crisis with that of the United States. It tries to draw lessons from the upheaval and offers recommendations for reform. The main risks to the euro zone, and to the wider European Union, are now predominantly economic and political. The recovery is still weak, making it harder to bring down unacceptably high unemployment and leaving the euro zone vulnerable to a triple-dip recession, if not outright deflation.


pages: 438 words: 109,306

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

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

The powerful forces of international capital that brought the BIS into being, and which granted the bank its power and influence, are again triumphant. The BIS sits at the apex of an international financial system that is falling apart at the seams, but its officials argue that it does not have the power to act as an international financial regulator. Yet the BIS cannot escape its responsibility for the Euro-zone crisis. From the first agreements in the late 1940s on multilateral payments to the establishment of the Europe Central Bank in 1998, the BIS has been at the heart of the European integration project, providing technical expertise and the financial mechanisms for currency harmonization. During the 1950s, it managed the European Payments Union, which internationalized the continent’s payment system.

A common monetary policy, based on a shared currency, demanded a common fiscal policy with shared rules for government taxation and spending, Lamfalussy argued in a memo in January 1989, but there were no plans for this: In short, it would seem to me very strange if we did not insist on the need to make appropriate arrangements that would allow the gradual emergence, and the full operation once the EMU is completed, of a Community-wide macroeconomic fiscal policy which would be the natural complement to the common monetary policy of the Community.15 As Harold James notes, Lamfalussy’s memo was both “apposite and intellectually compelling.”16 It neatly summarized the contradiction of a transnational currency with no transnational fiscal policy—a contradiction that remains unresolved and has both triggered and fueled the Eurozone crisis. The following month, Lamfalussy, during a discussion of the kind of controlling and supervisory budgetary methods needed for EMU, even suggested adding the word “enforceable” to the final draft. His suggestion was not incorporated into the report. Nonetheless, even without a common fiscal policy, Lamfalussy argued that Europe must press ahead with monetary union, if only because the European Monetary System (EMS), which limited exchange rate variations, had fallen victim to the law of unintended consequences.

Central bankers should probably never be allowed to go anywhere in a limousine. They should take the Basel tram.”30 Those central bankers who implement austerity programs do not personally suffer the consequences. Jean-Claude Trichet served as president of the ECB from 2003 to 2011. Europe’s economies have slid into recession in part because of the ECB’s relentless demands to keep inflation below 2 percent. Despite his role in the unfolding Eurozone crisis, Trichet is now a much sought-after speaker on the international conference circuit. In May 2012 Trichet spoke at the Peterson Institute for International Economics in Washington, DC, offering his thoughts on the “Lessons from the Crisis.” To an outsider the scene seemed an extraordinary spectacle: as Spain’s economy began to collapse, neo-Nazis patrolled the streets of Athens, beating immigrants, and an entire generation of young Europeans faced years of unemployment and poverty.


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

PRECIOUS METALS PAPER MONEY BANKING MONEY Chapter 2 - Ignoring Polonius THE FUNCTIONS OF INTEREST BAD KINGS AND BAD DEBTS DEBT AND THE INDUSTRIAL AGE THE MORAL MAZE MONEY AND DEBT Chapter 3 - Going for Gold THE TRILEMMA THE GOLD STANDARD HOW THE STANDARD WORKED LENDERS OF LAST RESORT Chapter 4 - Money and the Depression A WORLD OUT OF IDEAS THE BANKERS’ RAMP THE US EXPERIENCE Chapter 5 - Dancing with the Dollar AVOIDING MISTAKES THE DOLLAR’S ROLE THE DEATH THROES Chapter 6 - Paper Promises THE RISE OF THE MONETARISTS POLICY IN A WORLD OF FLOATING RATES A MIXED SYSTEM EXCHANGE-RATE CHOICES THE EURO Chapter 7 - Blowing Bubbles FORTY YEARS OF BUBBLES THE MINSKY EFFECT THE SUB-PRIME BOOM BUBBLES, PAPER MONEY AND THE END OF BRETTON WOODS WHACK-A-MOLE DISGUISED INFLATION Chapter 8 - Riding the Gravy Train EFFICIENT-MARKET THEORY REGULATION THE BIGGER, THE BETTER A CHANGE OF ATTITUDE Chapter 9 - The Crisis Begins AS UNSAFE AS HOUSES CONSUMER DEBT CORPORATE DEBT Chapter 10 - Not So Risk-free POST-WAR DEBT CRISES THE CURRENT CRISIS THE EURO-ZONE CRISIS BAILOUT TIME THE HIDDEN DEBTS Chapter 11 - Bequeathing Our Debts BABY BUST THE UNRECOGNIZED LIABILITIES A NEW ATTITUDE ENERGY Chapter 12 - Paying the Bill AGGREGATING THE PROBLEM THE LONG VIEW WHERE DO WE GO FROM HERE? THE UNHOLY TRINITY INFLATION STAGNATION DEFAULT Chapter 13 - A New Order OPTIONS FOR CHANGE THE OUTLINES OF A SYSTEM PAPER PROMISES Notes Bibliography Index Copyright Page To Helena and Catherine, with apologies for the debts left by my generation Acknowledgements This book was inspired by my work on the Economist, in particular a special report on debt that was published in the summer of 2010.

As a result, while a fall in the pound might push up UK prices quite quickly, a fall in the dollar is less likely to lead to a rise in American inflation. However, as Martin Wolf has remarked, ‘The very factor that makes borrowing large sums relatively safe for Americans – that they are borrowing in a currency they can create at will – also makes borrowing riskier for their creditors.’8 As we shall discuss later, the US faced huge long-term fiscal challenges. THE EURO-ZONE CRISIS Europe, not the US, has been at the centre of the sovereign debt crisis. As outlined in Chapter 6, the euro had a number of design flaws, including a failure to impose fiscal or current-account discipline on member countries. This was a failure at both the public- and the private-sector level; for many years, investors were willing to buy the sovereign debt of peripheral euro-zone members on similar yields to those prevailing in Germany or the Netherlands regardless of the risk.


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

The economies of the UK and, far more so, Italy were still smaller than they had been prior to the crisis, as was the Eurozone as a whole. The US economy had managed to grow steadily from 2009, if weakly, by its own historic standards. Germany recovered strongly in 2009 and 2010, but grew weakly again after the middle of 2011, as the Eurozone crisis worsened. German policy bears much responsibility for this outcome, as Chapter Two will show. The French economy stagnated after a relatively mild recession in 2008 and 2009, while Italy’s went into a second deep plunge from 2011, as the Eurozone crisis took hold. The UK economy stagnated from the third quarter of 2010 to the beginning of 2013 when recovery started, this hiatus in the recovery being in part due to the coalition government’s ill-timed policy of austerity.54 Finally, the Japanese economy was remarkably volatile.

Largely as a result, the recovery proved weak or even withered away altogether in 2011 and 2012. For this unhappy outcome, the Eurozone crisis was partly responsible. It turned out to be the second act of the global financial crisis. It is, accordingly, the subject of the next chapter. 2 The Crisis in the Eurozone Whatever role the markets have played in catalysing the sovereign debt crisis, it is an indisputable fact that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare. Wolfgang Schäuble, German Finance Minister, 20111 Greece was the Eurozone’s Lehman. While the worst of the post-Lehman crisis was both severe and relatively brief, the aftermath of the Greek crisis was less severe but longer lasting. It triggered what turned out to be a long-running crisis, as fundamental weaknesses in the Eurozone’s economies and institutional structure were laid bare.

Behind the rising imbalances and the associated savings glut lay fundamental shifts in the world economy driven by liberalization, technology and ageing, and revealed in globalization, rising inequality and weak investment in high-income economies. Chapter Five will also look at how the combination of the credit bubble with the savings glut and the underlying design flaws drove the Eurozone into such a deep crisis. It will argue that one must understand the interaction of five elements: errors in design; errors in policymaking among creditor and debtor countries prior to the crisis; the fragility of finance, notably the banking system in Eurozone countries; mistakes of monetary policy; and failures to work out effective ways of dealing with the crisis when it hit. As a result, the risks of breakdown remain significant, with devastating potential effects on the economic stability of the continent.

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

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Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, mass immigration, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

At the beginning of the twentieth century, Max Weber took Enlightenment thinking one stage further with his attempt to explain the unique qualities that had led to such remarkable gains for northern Europe and, by implication, its offshoots in North America, Australia and New Zealand. Weber’s Protestant work ethic12 is an idea that continues to divide north and south Europe to this day. After all, Germany’s view on (largely Catholic) southern Europe’s difficulties – in a nutshell, that the Spanish, Greeks and Italians are lazy, feckless, and need to work harder13 – is one reason why a solution to the eurozone crisis that began in 2010 has proved so elusive. Others have not been afraid to follow in Weber’s path. David Landes discusses both Western economic success and other nations’ failure in his masterly The Wealth and Poverty of Nations. Niall Ferguson talks about ‘six killer apps’ to explain the West’s enduring success, in the process invoking Weber’s ideas.14 26 4099.indd 26 29/03/13 2:23 PM Taking Progress for Granted And it’s certainly true that living standards in the Western industrialized world are mostly very high, underlining the advantages of continued economic gains over many years.

While the UK’s performance was even more miserable, the early 1980s collapse provided a precedent of sorts (although, on that occasion, the recession was followed by a strong recovery, which is more 33 4099.indd 33 29/03/13 2:23 PM When the Money Runs Out than can be said for the UK’s experience following the financial crisis). Even financially conservative countries succumbed to ongoing disappointment. Although Germany’s decline in 2008 and early 2009 was followed by a strong trade-­led recovery, the momentum didn’t last: by 2012, German exporters were being hit by a collapse in demand in southern Europe as a global banking crisis evolved into a eurozone sovereign crisis. Absent a decent recovery, the process of repaying debt – of deleveraging – has been made all the more difficult. Having thought they could grow their way out of their debt difficulties, Western policy-­makers have been forced to rethink their plans. Worse, persistently low levels of economic activity have made it much more difficult to deliver on the promises made before the onset of the financial crisis.

Standard & Poor’s, the ratings agency, downgraded US government debt on 5 August 2011 from triple-­A to AA+, at the same time placing it on negative watch. It was the first such downgrade in the 70-­year history of US government debt ratings. The day before the downgrade, 10-­year Treasuries yielded 2.56 per cent. A year later, despite the downgrade and a blistering attack by S&P on the US Treasury Department’s fiscal plans, yields were a full percentage point lower. Alongside the effects on risk appetite of the eurozone crisis, quantitative easing had worked its magic. In effect, central banks are underwriting government debt, whether or not the public finances are in a healthy state. Investors know that the value of government bonds is guaranteed by central banks, at least in nominal terms. That guarantee makes government bonds even more attractive to risk-­averse investors. They end up following the central bank’s lead.


pages: 475 words: 155,554

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

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

Chapter 8 is the incredible story of Spain’s Gates of Hell, featuring extraordinary house-building, construction corruption and the collapse of the centuries-old caja savings bank system. The ninth chapter reflects on the Bank of England’s record and its experiment in quantitative easing. In Chapter 10 I pick at how Germany got to where it is today, and how that colours its response to the Eurozone crisis. Berlin is the new reluctant and mysterious centre of European power. After that, in Chapter 11, it is natural to turn to Frankfurt, and the home of the powerful European Central Bank, in whose hands the world economy seems disproportionately to rest. Chapter 12 takes us on a global hunt for carbon and the impact on our environment and living standards, from Iraq to Siberia to India and the City.

Greece in and of itself should have been an irrelevance. Greece could have been completely bailed out with minimal impact on the rest of Europe. But Greece was a testing ground. And it had the power to infect market perception of other countries, such as Italy and Spain, which really did matter. Lee Buchheit was present at all these negotiations, advising the Greek government. At first he thought that the pre-PSI 2010 Eurozone approach to Greece reflected a view that the crisis was temporary, that it would eventually ‘evaporate’, and therefore northern Europe’s taxpayers could be put at risk lending money to repay their creditors on time and in full. ‘Initially Greece [and Portugal and Ireland] all got gross bailouts,’ he says. ‘They were given the money to pay their creditors in full and on time. If Greece had been restructured in spring 2010 with a haircut, you might have destabilised some fragile northern European financial institutions, forcing a very embarrassing need to recapitalise them directly.’

Plans were made for flying in money to embassies to distribute to holiday islands, and even for the evacuation of tourists from the Greek islands. German tourists pulled their holiday bookings. In London, the Eurozone Contingency Committee sat at the Treasury, featuring Mervyn King, Adair Turner and cabinet ministers William Hague and Vince Cable, chaired by Chancellor George Osborne. ‘Throughout 2011–12 we were very worried about the Eurozone precipitating a UK financial banking crisis again: we created an emergency committee on Eurozone contingency planning, which for a while was meeting every other week, even every week.’ Strikingly, German politicians and leading members of the ECB popped up in the days after the inconclusive May election to say that a Grexit would be ‘manageable’, as it would ‘do more harm to Greeks than the Eurozone’. But the more Greece’s hard-left parties were attacked from abroad – and by the discredited mainstream parties in Athens – the more popular they became.


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

My agent Jonny Geller and his assistant Kirsten Forster have been very helpful. A big thank you to everyone else at Curtis Brown who has assisted in some way. It has been good working with the dynamic team at Amazon’s createspace who publish books much faster and more flexibly than traditional publishers tend to. I am extremely grateful to George Soros, whose analysis of the political economy of the eurozone crisis has been masterful, for very kindly providing an endorsement for European Spring. Thank you to Heather Grabbe and Kim Forepaugh for their help with that and much else. Over the course of my career, some people have been particularly good to me. I owe Nick Barr, my tutor at the London School of Economics, a huge debt of gratitude. Edward Lucas gave me my first break in journalism, aged seventeen, followed closely by Anthony Robinson at the Financial Times.

At the European Council, I have always been stimulated by Shahin Vallée, who has a fine mind and a good heart. Peter Praet is a force for good at the European Central Bank. I also built good relations with many other policymakers and diplomats; you know who you are. After Dominique Strauss-Kahn resigned and Christine Lagarde replaced him, the International Monetary Fund became more of a voice of reason in the eurozone crisis. Thank you to David Lipton, Min Zhu, Nemat Shafik, Olivier Blanchard, José Viñals, Mahmood Pradhan, Stijn Claessens and many others for our stimulating exchanges. I also worked closely with the World Bank’s Europe and Central Asia team, notably Philippe Le Houérou, Indermit Gill and Dirk Reinermann, together with Kaushik Basu and his predecessor as chief economist, Justin Lin. Dilip Ratha, the Bank’s migration guru, has been particularly supportive.

European Spring is structured as follows. The first half of the book looks at the ongoing repercussions of the banking and debt crisis. Chapter 1 explains the common causes of the crisis in Britain and the eurozone, how they have made similar mistakes and how they face common longer-term challenges. Chapters 2 to 4 detail why the crisis took a particularly virulent turn in the eurozone. Chapter 5 explains why the crisis is not over and what needs to be done to resolve it, while Chapter 6 sets out how to make the euro succeed longer term. Since the chapters are largely self-standing, British readers who are not overly interested in the eurozone can skip Chapters 4 to 6 (or even Chapters 2 to 6) if they like. Chapter 7 looks at how economies outside the eurozone have fared, points out how poorly Britain has done and explains why its long-delayed recovery is dysfunctional.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

Besides the recent repeat performance of California (Harvey 2012: 32), there is an even stronger resonance in the Eurozone crisis, where citizens in several nation-states—Greece, Ireland, Italy, Portugal, and Spain—have been caught up in a situation that bears close comparison with what Marazzi described as the condition of forced austerity that earlier confronted the residents of New York. What Marazzi described as a crisis of financial circulation in which the city of New York was reduced to a form of “pension fund socialism,” has in Europe taken the form of a crisis in which pensioners—alongside welfare claimants and public sector workers—have been brutally exposed to a broader struggle between creditors and debtors that incorporates states (within and outside the Eurozone) and private financial institutions. The Eurozone crisis needs to be set in the context of the global banking crisis that immediately preceded it, which, in turn, has its own prehistory of global payment imbalances that fueled the supply of cheap credit in the United States.

The immediate political ramifications of this problem are potentially far-reaching. Take, for example, the relationship between “surplus” and “deficit” nations within the Eurozone. Since the crisis began, this relationship has been framed overwhelmingly in terms of the failure of the latter nations to “live within their means.” Not only have these nations borrowed excessively, but also their continuing membership in the Eurozone presents a danger for surplus nations of cross-subsidy: a “transfer union” in which money flows from strong to weak states, lending moral validity to the deficit nations’ prolonged financial profligacy, their lack of fiscal self-control, and their poor work ethic. “Transfer union” became part of the Eurozone’s lexicon only in the teeth of its crisis.37 Jörg Krämer, chief economist at Commerzbank, claimed that the Eurozone “has moved away from a monetary union and towards a transfer union” (New York Times, May 11, 2010), and Columbia University economics professor Jagdish Bhagwati remarked in an interview that monetary union will turn into a transfer union “if the weak countries have problems.”38 The notion of a transfer union is generally used in such instances to describe redistributive functions that (so critics argue) were never intended for the euro.39 This is the language of restricted economy.

Aglietta has recently extended his theory of money as a pacifier in his analysis of the crisis within the Eurozone. The single currency, he argues, is akin to the gold standard: an external currency, beyond the reach of national governments. The euro is therefore incomplete because it has no overarching sovereign that can act as a guarantor (Aglietta 2012: 23)—or pacifier. Fractionnement has overruled centralization since the Eurozone crisis began, amid violent upheavals that pitch citizen against state, and citizen against citizen, within countries that are deemed to be on the “periphery” of a union of states. The single currency continues to bind its member societies together, but mainly through common problems, such as excessive public and private debt, failing banks, and economic stagnation, that are a driving force behind intensifying geopolitical divisions that make its eventual balkanization seem inevitable.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

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bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

Some, like Ireland, should commend themselves on doing better than others, such as Portugal and Greece. But, each, in their own way, except when graded against their other failing peers, are an abject failure. While GDP is the standard measure of economic performance,2 there are other indicators, and in virtually every one, the eurozone’s overall performance is dismal, and that of the crisis countries, disastrous: unemployment is very high; youth unemployment is very, very high; and output per capita is lower than before the crisis for the eurozone as a whole, much lower for some of the crisis countries. If the decline in GDP per capita or work in the crisis countries were equally shared across the population, that would be one thing. But it is not. Certain individuals can’t find a job as the unemployment rate soars, while others hold on to theirs. Not surprisingly, especially in the crisis countries, inequality has also increased.

The fact that the eurozone is doing so much more poorly than countries elsewhere, including countries seemingly similar, suggests that there is common cause for the eurozone’s travails: the euro. Much of the rest of the book attempts to link the eurozone’s poor performance to the euro and the structure of the eurozone itself. The concluding section of this chapter explains succinctly why the eurozone’s poor performance has to be blamed on the euro. THE EUROZONE AND THE CRISIS We begin our analysis by describing the economic conditions in the eurozone today, and what has happened since the onset of the crisis.3 We observed in chapter 1 the widely shared fear that the real test of the euro would occur when the eurozone faced a shock—with the shock affecting different countries differently. The rigidities of the euro and the eurozone’s rules, it was thought, would not enable the region to respond. Those fears proved warranted.

The euro has led to an increase in inequality. A main argument of this book is that the euro has deepened the divide—has resulted in the weaker countries becoming weaker and the stronger countries becoming stronger: for instance, German GDP going from 10.4 times that of Greece in 2007 to 15.0 times that of Greece in 2015. But the divide has also led to an increase in inequality within the countries of the eurozone, especially in those in crisis. And this is so even in those European countries that were making progress in reducing inequality before the start of the euro. This should not come as a surprise: high unemployment hurts those at the bottom, high unemployment puts downward pressure on wages, and the government cutbacks associated with austerity have particularly negative effects on middle- and lower-income individuals that depend on government programs.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Portuguese net debt to GDP increased from 62 percent in 2006 to 108 percent in 2012, while the interest that pays for Portugal’s ten-year bonds went from 4.5 percent in May 2009 to 14.7 percent in January 2012. Ireland’s net debt-to-GDP ratio of 24.8 percent in 2007 rose to 106.4 percent in 2012, while its ten-year bonds went from 4 percent in 2007 to a peak of 14 percent in 2011. The poster child of the Eurozone crisis and austerity policy, Greece saw its debt to GDP rise from 106 percent in 2007 to 170 percent in 2012 despite successive rounds of austerity cuts and bondholders taking a 75 percent loss on their holdings in 2011. Greece’s ten-year bond currently pays 13 percent, down from a high of 18.5 percent in November 2012.5 Austerity clearly is not working if “not working” means reducing the debt and promoting growth.

But it is also a dangerous idea because the way austerity is being represented by both politicians and the media—as the payback for something called the “sovereign debt crisis,” supposedly brought on by states that apparently “spent too much”—is a quite fundamental misrepresentation of the facts. These problems, including the crisis in the bond markets, started with the banks and will end with the banks. The current mess is not a sovereign debt crisis generated by excessive spending for anyone except the Greeks. For everyone else, the problem is the banks that sovereigns have to take responsibility for, especially in the Eurozone. That we call it a “sovereign debt crisis” suggests a very interesting politics of “bait and switch” at play. Before 2008 no one, save for a few fringe conservatives in the United States and elsewhere, were concerned with “excessive” national debts or deficits. Deficit hawks in the United States, for example, pretty much disappeared in embarrassment as, under the banner of fiscal conservativism, the Bush administration pushed both debts and deficits to new heights while inflation remained steady.8 Even in places where fiscal prudence was the mantra, in the United Kingdom under Gordon Brown, or in Spain and Ireland when they were held up as economic models for their dynamic economies—really—deficits and debt did not garner much attention.

Rather, we piece together how the debt increase was generated by the implosion of the US financial sector and how this impacted sovereigns from the United States to the Eurozone and beyond. To explain this I stress how the interaction of the repo (sale and repurchase) markets, complex instruments, tail risks, and faulty thinking combined to give us the problem of too big to fail. It takes us from the origins of the crisis in the run on the US repo market in September 2008 to the transmission of this US-based crisis to the Eurozone, noting along the way how a banking crisis was deftly, and most politically, turned into a public-sector crisis and how much it all cost.34 Chapter 3, “Europe: Too Big to Bail: The Politics of Permanent Austerity,” analyzes how the private debt generated by the US banking sector was rechristened as the “sovereign debt crisis” of profligate European states. If chapter 2 places the origins of the debt in the United States, chapter 3 describes the bait and switch in Europe.


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

In this – imaginary – world there would be free movement of goods, services, capital and people, precisely the ‘Four Freedoms’ enshrined within the European Union. There would also be a single currency and a single central bank: with perfectly functioning markets, there would be no need for currency adjustment. Already, however, we know that the European Union is struggling politically with two of its ‘Four Freedoms’, namely the free movement of capital and of people. The Eurozone crisis, in abeyance at the time of writing, but still unresolved, partly stems from Europe’s inability to cope with the consequences of the free flow of capital across its internal borders. The Syrian conflict, meanwhile, has revealed severe challenges regarding the free movement of people, particularly given the weak points in the Schengen area’s common external border. Yet, relative to historical patterns of migration, the number of Syrian migrants entering the European Union has been tiny.

The Western model of free markets and democracy had been either poorly applied, badly misunderstood or found wanting. Whatever the answer, Latin America hadn’t delivered the goods. DEMOCRACY, IMPERIAL BUREAUCRACY AND RIGHT-WING POPULISM: THE EUROPEAN QUESTIONS In Europe, economic failure has placed extraordinary pressure on liberal democratic values, which, all too frequently, appear to have been undermined to ensure the euro’s future. With the onset of the Eurozone’s financial crisis in 2010, European policymakers had to make up the Eurozone’s rules on an almost daily basis in an attempt to prevent the collapse of the financial system and, perhaps, the euro’s ultimate fragmentation. Largely to protect German and French banks (and, by implication, the entire credit system) it was deemed essential that Southern European governments should not be allowed to default to their Northern European creditors: instead, Southern European citizens would have to accept painful austerity, in some cases on a multi-year basis.

For good measure, he added that ‘Realism maintains that universal moral principles cannot be applied to the actions of states.’19 This creates a seemingly paradoxical situation: a state has to look after the collective interests of its citizens, even if that means that those citizens, individually, might feel a grave injustice had been committed on their behalf.20 Yet the interests of the international statesman may not always align with the ‘national interest’, particularly if the statesman is now also a member of some international organization that provides him with a whole bunch of new incentives.21 At that point, the statesman’s role is in danger of becoming disturbingly ambiguous. Does the new international club provide a convenient scapegoat for the delivery of unpopular measures at home, as happened with the imposition of austerity measures in Southern European countries during the Eurozone crisis that began in 2010? Does the homogeneity of view associated with club membership – for example, adherence to the Washington Consensus or acceptance of inflation-targeting conventions – undermine otherwise legitimate protests at home? Does the new club limit the powers of domestic government through the growth of, for example, a supranational legal authority? And what happens if the views of the international statesman – and the new club he has now joined – are rejected by the nation he is supposed to represent?


Britannia Unchained: Global Lessons for Growth and Prosperity by Kwasi Kwarteng, Priti Patel, Dominic Raab, Chris Skidmore, Elizabeth Truss

Airbnb, banking crisis, Carmen Reinhart, central bank independence, clockwatching, creative destruction, Credit Default Swap, demographic dividend, Edward Glaeser, eurozone crisis, fear of failure, glass ceiling, informal economy, James Dyson, Kenneth Rogoff, knowledge economy, long peace, margin call, Mark Zuckerberg, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, Neil Kinnock, new economy, North Sea oil, oil shock, open economy, pension reform, price stability, profit motive, Ronald Reagan, Sand Hill Road, Silicon Valley, Steve Jobs, Walter Mischel, wealth creators, Winter of Discontent, working-age population, Yom Kippur War

As Macaulay suggested, the growth of debt can only ever really be judged in comparison to the growth of the economy as a whole. Keep either growth or inflation high enough and perhaps a Government can run a deficit for perpetuity, while still seeing its debt shrink. Or can it? If it is really is impossible for countries to go bust, then it is strange that so many countries have failed to pay back their loans. From Edward III defaulting on his loans to Florence financiers in 134039 through to today’s Eurozone crisis, sovereign defaults have been a constant feature throughout history. In their definitive text, This Time is Different, economists Carmen M. Reinhart and Kenneth S. Rogoff list hundreds of examples of default through the last 800 years. Default is not just not unknown, it is endemic. Only a small number of countries – such as Australia, New Zealand, Canada, Denmark, Thailand and the United States40 – have never defaulted.

The latest estimates suggest that 32 Britannia Unchained the UK economy is at least 13 per cent smaller than the authorities believed as recently as 2008.82 Debt is projected to pass 70 per cent of GDP by 2015. In order to return back to any sort of budget balance, the UK faces seven hard years of spending cuts. There were two very different kinds of response to the financial crisis. Some countries like Britain, or the US, or the Eurozone, found their old irresponsibility catching up with them. The financial crisis revealed huge holes in their future spending plans. The lifestyle of both private and public sectors in these countries was simply unsustainable. Then there were others, such as Sweden, Chile, Switzerland – or Canada – who had taken the opportunity of the good years to pay down their debts and reform their economies. Their budgets look set to return to surplus soon, growth has recovered, and the confidence of the markets remains strong.

We recognise that in modern Western societies it is impossible to replicate the conditions which have spurred China’s growth. We are conscious, however, that some lessons can be learnt 113 114 Britannia Unchained and that, indeed, many of those lessons were familiar to us at an earlier stage of our economic development. Yet, in the aftermath of the financial crisis, and particularly in the wake of the Eurozone crisis, it is only in Western Europe, and partially in the United States, that the voices of pessimism are most loudly heard. Britannia Unchained has attempted to confront this phenomenon of increased pessimism. It has been a consistent assumption of the book that many lessons can be learnt from these rising economies. Britain’s recent past has seen different cycles of optimism and pessimism. The immediate postwar years, know as a period of austerity, gave way in the 1950s to an era of rising prosperity.


pages: 193 words: 47,808

The Flat White Economy by Douglas McWilliams

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

Sometimes this emerges through proximity to centres of education, sometimes through proximity to cheap accommodation, preferably both. In the case of London, the availability of skills seems to have benefitted particularly from immigration into the UK (see Chapter 7) and especially from the weakness of the Eurozone economy and the very high levels of youth unemployment in Southern Europe that have resulted from the Eurozone crisis. Indeed, London’s Flat White Economy development has occurred despite relatively expensive accommodation (though rents have been driven up by the very scale of the immigration that has been associated with the Flat White Economy). Of course the analysis in this book shows that it is not purely economic factors that have stimulated the Flat White Economy. People come to London as much for the fun factor as for work and a liberal social environment (It is no coincidence that Bangalore, India’s software capital, also has more pubs per capita34 than any other city in India!).

CHAPTER 6 The UKs Unbalanced Economy One of the themes of this book is that the London economy is doing well – growing much faster than the equivalent cities in Asia (Hong Kong and Singapore) or North America (New York). However the UK economy is – although one of the stronger economies in the Western world – not doing that well and if London’s stellar performance is removed, the performance of the rest of the UK looks decidedly lacklustre, only appearing good in comparison with European economies held back by a range of problems including the Eurozone crisis. My concern in this chapter is about the unbalanced nature of UK economic growth. My argument is that although in an ideal world growth would be spread evenly – like Marmite – in the real world this just does not happen. I argue that the position of the rest of the UK outside London and to some extent the South East would be very much worse if London was not so successful because of the scale of the spillover effects from London’s growth.

There are two serious challenges which might mean that London could fail to compete and lose its position in the global Flat White Economy the first of which is concerns changes to immigration: the threat of a cutting off of the supply of labour. Central to the Flat White Economy has been the remarkable flow into London of high-quality labour through immigration from all around the world but particularly from the Eurozone as Europe has remained mired in economic crisis. The European economic crisis will almost certainly continue, creating a substantial potential supply of the types of young skilled labour that have been so vital for London’s growth. Youth unemployment in most parts of Continental Europe won’t go away and with Europe appearing to enter a triple dip recession the potential supplies could even increase. But will the potential migrants be allowed to come to London to boost the capital’s economy?


pages: 177 words: 50,167

The Populist Explosion: How the Great Recession Transformed American and European Politics by John B. Judis

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, anti-communist, back-to-the-land, Bernie Sanders, Bretton Woods, capital controls, centre right, collapse of Lehman Brothers, deindustrialization, desegregation, Donald Trump, eurozone crisis, financial deregulation, first-past-the-post, fixed income, full employment, ghettoisation, glass ceiling, hiring and firing, illegal immigration, immigration reform, income inequality, invisible hand, laissez-faire capitalism, mass immigration, means of production, neoliberal agenda, obamacare, Occupy movement, open borders, Plutocrats, plutocrats, Post-materialism, post-materialism, rolodex, Ronald Reagan, Silicon Valley, War on Poverty, We are the 99%, white flight, Winter of Discontent

I first became aware that the adoption of the Euro was leading Europe into a cul-de-sac thanks to Paul Krugman’s columns in The New York Times. I became convinced of the special role played by German export surpluses from the “Appendix” to Michael Pettis’s book, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy (Princeton University Press, 2013). Pettis also has an interesting essay on Greece, Spain, and the Eurozone crisis, “Syriza and the French Indemnity of 1871–73,” on his blog (http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/). For other relevant books and articles, see my endnotes. In following European Union politics, I found two websites invaluable: Social Europe (socialeurope.eu) and Open Democracy (opendemocracy.net). Arthur Goldhammer keeps up with “French politics” (artgoldhammer.blogspot.com) and Michael Tangeman with Spain (progressivespain.com).

Hall, “Varieties of Capitalism and the Eurocrisis,” West European Politics, August 2014; Heiner Flassback and Kostas Lapavitsas, Against the Troika: Crisis and Austerity in the Eurozone, Verso, 2015; Engelbert Stockhammer, “The Euro Crisis and the Contradictions of Neoliberalism in Europe,” Post Keynesian Economics Study Group, Working Paper 1401; Mark Copelovtich, Jeffry Frieden, and Stefanie Walter, “The Political Economy of the Euro Crisis,” Comparative Political Studies, 2016; Servaas Storm and C. W. Naastepad, “Myths, Mixups, and Mishandlings: Understanding the Eurozone Crisis,” International Journal of Political Economy 45, 2016; and Pettis, op. cit., Appendix. For a narrative of the events, see Stathis Kouvelakis, “The Greek Cauldron,” New Left Review, November–December 2011. 112“treasonous”: Ibid. 113Greece will be massively limited: http://globalcomment.com/loansharking-greece-Syriza-the-troika-and-the-end-of-greek-sovereignty/. 114member of the European community: For this history of Syriza, see Yanis Varoufakis, “Can Greece’s Syriza Change Europe’s Economy,” Boston Review, December 3, 2013. 115rural voters: Yiannis Mavris, “Greece’s Austerity Election,” New Left Review, July–August 2012. 116“the Greece of Democracy”: Yannis Stavrakakis and Giorgos Katsambakis, “Leftwing Populism in the European Periphery: the case of Syriza,” Journal of Political Ideologies, 2014.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Myth 5: Europe’s Problem is all about Commercialization It is often assumed that Europe’s main disadvantage in innovation as compared to the US is its lack of capability for ‘commercialization’ (see Figure 2) which stems from problems with the ‘transfer’ of knowledge. In fact, EU problems don’t come from poor flow of knowledge from research but from the EU firms’ smaller stock of knowledge. This is due to the great differences in public and private spending on R&D. While in the US R&D/GDP is 2.6 per cent, it is only 1.3 per cent in the UK. In Italy, Greece and Portugal – the countries experiencing the worst effects of the eurozone crisis – R&D/GDP spending is less than 0.5 per cent (Mazzucato 2012b). If the US is better at innovation, it isn’t because university–industry links are better (they aren’t), or because US universities produce more spinouts (they don’t). It simply reflects more research being done in more institutions, which generates better technical skills in the workforce (Salter et al. 2000). Furthermore, US funding is split between research in universities and early stage technology development in firms.

In July 2010 the South Korean government announced that it would double its spending on green research to the equivalent of $2.9 billion by 2013 (almost 2 per cent of its annual GDP), which means that between 2009 and 2013 it will have spent £59 billion on this type of research in total. Figure 14 shows that Europe, the US and China have dominated global new investment in renewable energy between 2004 and 2011. In Europe, investments are led by Germany. How the ensuing eurozone crisis will affect investments over the next five years is unknown, but the recent trend has been of increasing overall investments. Figure 15. Government energy R&D spend as % GDP in 13 countries, 2007 Source: UK Committee on Climate Change (2010, 22). Figure 15 further shows that, within Europe, government investments in energy R&D differ greatly, with the UK, Spain and Ireland spending less than the US and many other Asian and European countries.

And, as discussed above, this has created a self-fulfilling prophecy, where the smartest young graduates think that it will be more exciting and fun to work at Goldman Sachs or Google rather than a State investment bank or a ministry for innovation. The only way to rebalance this problem is to upgrade, not downgrade, the status of government – and the words and the images used to describe it. There are important implications for the eurozone crisis. The conditions being imposed on the weakest countries, via the ‘fiscal compact’, should be conditions not about reducing the public sector across the board, but conditions that increase the incentives for governments to spend on key areas like education and R&D, and also to transform the public sector from within so that it is more strategic, meritocratic and dynamic. While this might sound difficult, it is no less difficult than imposing the austerity that is undermining the weaker countries’ socioeconomic structure and future competitiveness.


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

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accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

Under the auspices of the emerging consolidation state, politicization is migrating to the right side of the political spectrum where anti-establishment parties are getting better and better at organizing discontented citizens dependent upon public services and insisting on political protection from international markets. CHAPTER FIVE Markets and Peoples: Democratic Capitalism and European Integration Hopes that the resolutions of European heads of state would stabilize the financial markets and solve the Eurozone debt crisis, once and for all, have risen with each new summit over the past two years, only to be dashed again once the fine print comes to light.1 Would investors really join in on the ‘voluntary haircut’? Was the bazooka, after all, not more of a water pistol? No one could say with any degree of certainty what should be done to repair the crashed global financial system. Some demand strict austerity, others growth; everybody knows that both are necessary, but cannot be had at the same time.

As integration advanced into core areas of the nation states and their social orders it became commensurately ‘politicized’ and ground to a halt. New steps towards integration became more difficult and could only be achieved, if at all, through the European Court of Justice. A spectre was haunting Brussels’ Europe: would the disempowerment of the nation states henceforth have to depend upon the ‘European consciousness’ of its peoples – or even upon the mobilization of a democratic European consciousness? The Eurozone crisis has resolved this question by once again sundering the integration process from the will of the people. Monetary union, initially conceived as a technocratic exercise – therefore excluding the fundamental questions of national sovereignty and democracy that political union would entail – is now rapidly transforming the EU into a federal entity, in which the sovereignty and thereby democracy of the nation states, above all in the Mediterranean, exists only on paper.

The Northern hope of escaping from the current predicament with a one-off payment – or even a one-off deflation to bring about structural reform in the South – will evaporate, as surely as Southern hopes for long-term support for social structures ill-suited to a hard-currency regime. Meanwhile, the notion that a pan-European democracy might spring up out of the European Parliament and somehow ride to the rescue will turn out to be an illusion – and the longer the wait, the greater the disillusionment.34 Less feasible still is the dream of achieving such a democracy by dint of letting the Eurozone crisis drag on until ‘the pain’ becomes too great – not so much the economic pain in the South as the moral and political anguish in the North, above all in Germany. More likely than a headlong rush into pan-European democracy is that the national polities will fall prey to aggressively nationalist parties. The only remaining supporters of euro-led integration, apart from politicians fearful of losing their seats, will be the middle classes of the South, who dream of achieving a social-democratic consumer paradise on the coat-tails of Northern capitalism, even as this implodes; and the Northern export industries, which want to preserve the credit-financed consumption of the Southerners as long as possible, together with the competitive advantages of an undervalued pan-European currency.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

The economic recovery continuously undershot their expectations, compounding concerns not only about effectiveness but also about the eventual exit process itself—including the management of market expectations, the persistence of large central bank balance sheets, and how to coordinate all this with other government agencies (particularly the fiscal agencies).3 These concerns were summarized bluntly in the 2014 Annual Report of the Bank for International Settlements (known as the central bank of central banks) when it referred to prospects for a “bumpy exit” as central banks found it “difficult to ensure a smooth normalization.”4 And it was confirmed a few months later with the messy exit in January 2015 of the Swiss National Bank from a currency peg arrangement designed to reduce the exposure of Switzerland to the Eurozone crisis. Rather than pivot from financial normalization to full recovery, the Eurozone stalled in a multiple 1 percent zone—a low economic growth of 1 percent, “low-flation” of 1 percent, and the more generalized problem within the advanced world of the top 1 percent of the population capturing the vast majority of the income and wealth gains. For those recognizing how close the region had gotten to severe financial fragmentation and economic implosion, this 1 percent zone did not seem that bad.

KENNEDY Issue 1: Repeatedly inadequate and unbalanced economic expansion, reflecting cyclical/secular/structural headwinds, highlights the extent to which many advanced economies still lack proper growth models. As shown in Figure 5, advanced economies have had enormous difficulties growing since the global financial crisis, and without growth, it has been hard for them to improve living standards, reduce poverty, and invest in the future. Gross domestic product (GDP) levels in the Eurozone and Japan have struggled mightily to regain their pre-2008-crisis growth levels. The United Kingdom and the United States have done better, growing more robustly as they have taken advantage of more favorable national and geopolitical circumstances—be it, for example, the entrepreneurial nature of America’s more flexible and optimistic system, the ability of Britain to attract disproportionately large investments from certain parts of the world, or lower exposure to the effects of geopolitical tensions over Ukraine and parts of the Middle East.

Caruana noted that especially when the situation is made more complex by macro-prudential and monetary policies pulling in opposite directions, as has been the case in recent years, “gauging the effectiveness of macroprudential policies is another big challenge, especially when more than one tool is deployed.”14 Then there is the IMF’s important reminder, which, interestingly enough, comes from a comprehensive staff guidance note that looks at design and implementation issues, including the balance of benefits and risks as well as how to take into account individual country circumstances: “For macroprudential policy to be effective it needs to look beyond banks.”15 Finally there is the issue of how, when the time comes to do so, central banks will be able to exit from experimental policies in an orderly and calm manner. The difficulties were illustrated well in January 2015 by the messy way in which the Swiss National Bank removed an exchange rate floor that it had implemented three years earlier to minimize the damage to Switzerland from the Eurozone crisis. The move came as a complete surprise to markets, triggering the sorts of immediate price moves (including 40 percent in the currency and 10 percent in stocks) that would be notable in developing economies let alone a mature economy like Switzerland known for its stability and predictability. While highlighting a range of things and leaving several questions unanswered, Switzerland’s bumpy exit is indicative of something that we will develop at greater length in the next two parts of this book and that should be of interest to us all—namely, that the destiny of central banks is increasingly slipping out of their own hands.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

Now obviously, in a benign economic climate you would expect loan losses to come down. There’s nothing in principle strange about seeing loss provisions rise and fall. But we are not in a benign economic climate. To pick just a few issues: (a) borrowers are currently experiencing bizarrely and unsustainably low interest rates; (b) the real economy is weak, joblessness high, and the outlook deteriorating; (c) the eurozone crisis is impairing countless European financial institutions, many of which do business with Bank of America; and (d) under any deficit reduction plan at all, the fiscal stimulus is about to be ripped away from the American economy and replaced with fiscal tightening of unprecedented severity, while (e) the scope for further economic support from the Fed is minimal. Under these circumstances, I personally would consider beefing up my loan loss provisions.

Indeed, one of Berlusconi’s most toxic legacies has been the way he chose to infantilise politics, the way he made it seem less important than the next bunga bunga party. All this matters because countries need leadership in times of danger, and the danger facing Italy is now acute. By mid November 2011, interest rates on Italian ten-year bonds were pushing towards 8%, nudged upwards by worries of an economic slowdown and insufficient government zeal in tackling the country’s excessive debt, and exacerbated by the uncertainties of the eurozone’s stumbling response to crisis.9 These are times of almost breathless risk for the world economy. To understand those risks, you need, once again, to see things through the eyes of the bond market. Italy has a decaying economy. Some of its best industries are located in segments, notably shoes and clothing, where production is shifting remorselessly to lower-wage economies. Italian firms will do fine. They’ll simply offshore their production to the degree required‌—‌indeed, typically alert and nimble, they are already doing so.

She knew what was right, did it, and was prepared to reap the consequences, good and bad. By contrast, the political leaders of today seem to lack almost any desire to lead. That’s been comically obvious in Italy and saddeningly so in Japan. But Chancellor Merkel, who is neither a buffoon nor an incompetent, presents another version of the same basic deficiency. Her timidly evasive approach to the eurozone crisis has done nothing but exacerbate the problems. She hasn’t even had the courage to kick the can down the road; she’s insisted on nudging it, a centimeter or two at a time‌—‌and you can imagine for yourself how much the financial markets love that approach. A bolder leader would, two years ago, have propelled Greece into formal default, ring-fenced Italy and Spain, and placed Portugal and Ireland on probation.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

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3D printing, bank run, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, 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, Tobin tax, too big to fail, women in the workforce

In a globalized world, even the nation-state is not an autonomous borrower which can dictate its terms. The holders of the debt may be spread worldwide. Even if the debt is held by nationals, they do have the freedom to invest their money elsewhere. Since some of the rentiers may be pension funds, there is an intertemporal aspect to the necessity for the borrower to maintain a good credit rating. The Crisis in the Eurozone This has been shown in the eurozone crisis, which began in 2010 – the second leg of the crisis that had started with the collapse of Lehman Brothers. The European search for stability in exchange rates had climaxed in the decision to have a single currency, the euro, to which the first countries signed up in 1999.10 The European Central Bank (ECB) was set up in the image of the German Bundesbank. It has a mandate to keep inflation low, using an explicitly monetarist strategy.

Despite a deep recession, it found the control of inflation difficult. It joined the ERM in 1989, but exited in 1992 as the pressure to maintain parity within the ERM became too costly in terms of high interest rates. The rest of the members of the ERM moved on to set up the eurozone after 2001, when the EEC had expanded and had become the EU. Nineteen countries as of now are members of the eurozone. Their woes are part of the story of the crisis as it entered its second phase. In the first few years, the euro seemed to work fine, although the rules of fiscal discipline were not strictly adhered to, even by Germany and France. But there was a boom and countries managed to grow. They were also able to borrow on the commercial market and interest rates on sovereign debt converged to the low favorable rate Germany was paying.

(i) Elizabeth II (i) emerging economies (i) benefits of capital flows (i) capital inflows (i) saving and investment (i) empires, end of (i) empirical analysis of asset prices (i) employment and fiscal policy (i) role of government spending (i) energy-intensive technology (i) Engels, Friedrich (i) The Communist Manifesto (with Karl Marx) (i) The Condition of the Working Class in England (i) entrepreneurs (i) equation of exchange (i) equilibrium (i) assuming (i) flow (i) Keynesian (i) market economy (i) as naturally determined (i), (ii) possible states of (i) rabbits and foxes game (i) theory of (i), (ii), (iii) Walras’ view of (i) see also flow equilibrium; general equilibrium theory; partial equilibrium theory; disequilibrium, stock equilibrium tradition (i) equities (i) equity bundles (i) Essay on Population (Malthus) (i) Europe, political upheaval (i) European Central Bank (ECB) (i), (ii) European Economic Community (EEC) (i) European Monetary System (i) Eurozone (i), (ii) crisis (i) excess credit (i) Exchange Rate Mechanism (ERM) (i) exchange rate policy, role of (i) exchange rates Bretton Woods system (i) fixed (i) flexibility (i), (ii) setting level of (i) expectation of distribution (i) expectations adaptive (i), (ii) rational (i), (ii), (iii) role of (i) statistical definition (i) exploration, effects of (i) externality (i) fallacy of aggregation (i) Fama, Eugene (i), (ii), (iii) Fannie Mae (i) Federal Reserve, reaction to Great Depression (i) feudalism (i) financial crisis, definition (i) financial innovations (i) financial instruments (i), (ii), (iii) financial markets (i), (ii), (iii), (iv) financial revolution (i) financial service providers, insolvency and illiquidity (i) Financial Services Authority, UK, regulatory approach (i) financial services, availability (i) First Socialist International (i) fiscal crisis (i) fiscal policy (i), (ii) Fisher, Irving (i) fixed costs (i) flexible exchange rates (i) food prices (i) foreign aid (i) foreign exchange Asian countries (i) dealing (i), (ii) levels of transactions (i) theory of rates (i) foreign investment, liquidation (i) forward trading (i) France Keynesian experiment (i) occupation of Germany (i) FRB-MIT-PENN model (i) Freddie Mac (i) free movement, capital and labor (i) free trade (i), (ii) French Revolution (i) Friedman, Milton (i), (ii), (iii), (iv) A Monetary History of the United States (with Anna Schwartz) (i) A Theory of the Consumption Function (i) Frisch, Ragnar (i), (ii) full employment (i), (ii), (iii) future developments, optimism/pessimism (i) Gaitskell, Hugh (i) Galbraith, John Kenneth (i) The Affluent Society (i) Garicano, Luis (i) Gates, Bill (i) Geddes Axe (i) Geithner, Timothy (i), (ii), (iii) general equilibrium theory (i), (ii) Germany, post-World War I (i), (ii) Glass-Steagall Act (i) global economy, growth poles (i) global imbalances (i) global interdependence (i) globalization (i) acceleration (i) effect on interest rates (i) effects of (i) events (i) inapplicability of Keynesian models (i) market economy (i) nineteenth-century (i) glut, possibility of (i) Glyn, Andrew (i), (ii) God, as clockmaker (i) Godwin, William (i) An Enquiry Concerning Political Justice and Its Influence on General Virtue and Happiness (i) gold flows (i) Gold Standard (i), (ii), (iii), (iv), (v) Bretton Woods system (i) leadership of (i) return to (i), (ii), (iii) suspension (i), (ii), (iii) UK exit (i), (ii) Goldberger, Arthur (i) goodness of fit (i) goods, production and supply (i) Goodwin, Richard (i) Goodwin cycle (i) rabbits and foxes game (i) government debt, grading (i) government spending attitudes to (i) benefit (i) post-World War I (i) governments influence over behavior (i) interference and corruption (i) role of (i) Grapes of Wrath, The (John Steinbeck) (i) Great Depression (i), (ii), (iii) monetary policy (i) reactions of economists (i) role of Keynesian model in recovery (i) Great Moderation (i), (ii), (iii), (iv), (v) Great Recession banks (i) as economic crisis or crisis of economics (i) effects of (i) events of (i) failure to anticipate (i) overview (i) prospect of recovery (i) responses to (i), (ii) Great War see World War I Greece, Great Recession (i) Greenspan, Alan (i), (ii), (iii), (iv) The Age of Turbulence (i) gross domestic product (GDP) (i) growth poles, proliferation (i) Hamilton, Alexander (i) Hansen, Alvin (i), (ii) Hansen, Lars Peter (i) Harris, Seymour (i) Harrod, Roy (i) Harvey, William (i) Hatry, Clarence (i) Hayek, Friedrich (i), (ii), (iii) development from Wicksell (i) return to favor (i) heterodoxies (i) heterogeneity, of total output (i) Hicks, John (i) high yields (i) home ownership (i) house prices (i), (ii) household debt, rise in (i) houses as appreciating assets (i) depreciation (i) Hume, David (i), (ii) A Treatise on Human Nature (i) hydraulic analogue model (i) hyperinflation, Germany (i) ideological capture (i) ideological pressure (i) immigrants, scapegoating of (i) imperfect competition (i) theory of (i) imperialism (i) income (i) growth: Harrod’s theory (i); long boom (i) inequality (i) levels (i); influence of money supply (i); new classical model (i); per capita (i) incomes policies (i) indentured labor (i) India (i) individual volition, within overall pattern (i) Industrial Revolution (i), (ii) industrial unrest (i) industrialization effects of (i) less-developed countries (i) industry, working conditions (i) inequality income and wealth (i) long-run trends (i) inflation determining factors (i) eighteenth century (i) house prices (i) Hume’s theory (i) Keynesian models (i) Locke’s theory (i) and manufacturing supply (i) as permanent (i) post-World War I (i) and price rises (i) as priority (i) Smith’s theory (i) as target of public policy (i) and unemployment (i) inflation rates, developed countries (i) information, as public (i) infrastructure development (i) initiative, opportunities for (i) injecting liquidity (i), (ii), (iii) see also quantitative easing innovations clusters (i), (ii), (iii) need for (i) role in boom and bust (i) Institute for Konjunktur (i) interconnectedness (i), (ii) interdependence (i), (ii), (iii) interest attitudes to (i) long-/short-run rates (i) market rate vs. natural rate (i) vs. profit (i) regulation (i) interest rates effect on recovery (i) global effects (i) Keynes’ view (i) rise in (i) setting (i) US (i) interference and corruption (i) interlinking, developed and emerging economies (i) international economics, interdependence (i) International Gold Standard (i) International Monetary Fund (IMF) purpose (i) warnings of crisis (i) international trade (i), (ii), (iii) invention, and globalization (i) investment and aggregate effective demand (i) and bank credit (i) in business (i) expectations (i) as future-oriented (i) high yields (i) theory of (Keynes) (i) invisible hand (i), (ii), (iii), (iv) involuntary unemployment (i) iron law of wages (Ricardo) (i), (ii) irrational exuberance (i), (ii) IS-LM model (i), (ii), (iii) Is the Business Cycle Obsolete?


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

‘Real wages in Germany: numerous years of decline’, DIW Weekly Report, 23 October 2009. 8.Gordon Brown, Mansion House speech, 20 June 2007. 9.K.-M. Yi, ‘The Collapse of Global Trade: The Role of Vertical Specialisation’, in Richard Baldwin and Simon Evenett (eds), The Collapse of Global Trade, Murky Protectionism, and the Crisis: Recommendations for the G20, London 2009; and Barry Eichengreen and Kevin O’Rourke, voxeu.org. 10.Costas Lapavitsas et al., ‘Eurozone crisis: beggar thyself and thy neighbour’, Research on Money and Finance Report, March 2010. 11.Ewald Engelen et al., ‘After the Great Complacence’, Oxford 2011, p. 209. 12.Andrew Haldane, speech, November 2010, op cit. 13.Child and Working Tax Credit Statistics, HMRC, hmrc.gov.uk/stats, April 2010. 14.BBC News, ‘Labour attacks Nick Clegg over social mobility plan’, 5 April 2011. 15.Stephanie Flanders, ‘Have British jobs gone to British workers?’

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: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

The answer lies in the preceding pages, but it is perhaps time to spell it out. If the euro crisis were to be resolved quickly and painlessly, Germany (and the other surplus eurozone countries) would forfeit the immense bargaining power that the simmering crisis hands the German government vis-à-vis France and the deficit countries. To put the same point differently, the surplus countries now have one foot inside the eurozone and one foot outside it. On the one hand, they have bound the rest of the eurozone to them by means of a common currency, thus securing large intra-eurozone surpluses. On the other hand, they know that the ongoing crisis affects the deficit countries disproportionately and, so long as the surplus countries retain the option of getting out of the eurozone, their bargaining power in Europe’s forums is immense.

Concise and accessible, the books bring a fresh, unorthodox approach to a variety of controversial subjects. Also available in the Economic Controversies series: Lorenzo Fioramonti, Gross Domestic Problem: The Politics behind the World’s Most Powerful Number Robert R. Locke and J.-C. Spender, Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance Heikki Patomäki, The Great Eurozone Disaster: From Crisis to Global New Deal ABOUT THE AUTHOR YANIS VAROUFAKIS is Professor of Economics at the University of Athens, Visiting Professor at the University of Texas, and Economist-in-Residence for Valve Corporation. Born in Athens, 1961, Varoufakis completed his secondary education in Greece before moving to England where he read mathematics and economics at the universities of Essex and Birmingham.

In a never-ending circle, the imposed austerity worsens the recession afflicting these deficit states, and thus inflames the bankers’ already grave doubts about whether they will ever be paid back by Greece, Ireland, etc. And so the crisis reproduces itself. Tumbling mountaineers and the euro crisis The domino effect, with one deficit-stricken country falling upon the next, until none is left standing, is the common metaphor used to describe the eurozone crisis. I think there is a better one: a group of disparate mountaineers, perched on a steep cliff face, tied to one another by a single rope. Some are more agile, others less fit, but all are bound together in a forced state of solidarity. Suddenly an earthquake hits (the Crash of 2008) and one of them (let’s call her Helen) is dislodged, her fall arrested only by the shared rope. Under the strain of the stricken member’s weight as she dangles in mid-air, and with loosened rocks falling from above, the next weakest (or ‘marginal’) mountaineer struggles to hang on; eventually, Paddy has to let go, too.


pages: 182 words: 53,802

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

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

As this goes to press, almost nine years have passed since the ‘credit crunch’ of August 2007. Yet the global economy struggled to recover from that crisis and the easy (unregulated) credit-fuelled bubbles that were violently burst by rising real rates of interest. Instead of recovery, the crisis simply rolled around the global economy. It was at its most intense at the core – the US and the UK – but subsequently moved across to Europe and in particular the Eurozone. Then the crisis moved to emerging markets, and China in particular. Western economies experienced the longest period of economic failure in peacetime history. Only during periods of war was economic failure so prolonged. And yet, far from trying to correct imbalances by re-regulating the financial system, governments stood idly by as the global credit bubble – never fully deflated after 2008 – was reinflated by central bank operations such as quantitative easing.

verbatim report in the Washington Times, 24 October 2008, washingtontimes.com, accessed 6 June 2016. 8Gillian Tett, ‘Silos and Silences – Why So Few People Spotted the Problems in Complex Credit and What This Implies for the Future’, Financial Stability Review, No. 14, Paris: Banque de France, July 2010, banque-france.fr, accessed 3 October 2013. 9Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press, 1957, p. 217. 2. The Creation of Money 1Polanyi, The Great Transformation, p. 132. 2Joseph Schumpeter, A History of Economic Analysis, Oxford: Oxford University Press, 1954, pp. 114–15. 3John Law, Money and Trade Considered with a Proposal for Supplying the Nation with Money, 1705, avalon.law.yale.edu, accessed 6 June 2016. 4Andrea Terzi, ‘The Eurozone Crisis: A Debt Shortage as the Final Cause’, INET Annual Conference, New Economic Thinking: Liberté, Égalité, Fragilité, Paris, 8–11 April 2015. Emphases mine. 5John Maynard Keynes, ‘National Self-Sufficiency’, The Yale Review, Vol. 22(4), June 1933, pp. 755–69, mtholyoke.edu, accessed 6 June 2016. 6Michael McLeay, Amar Radia and Ryland Thomas, ‘Money in the Modern Economy: An Introduction and Money Creation in the Modern Economy’, Bank of England Quarterly Bulletin, Vol. 54(1), 2014, bankofengland.co.uk, accessed 6 June 2016. 7John Maynard Keynes, The Collected Writings, A Treatise on Money: The Pure Theory of Money, Vol. 5, Cambridge: Cambridge University Press, 2012 (1930). 8Andy Haldane speech, ‘The $100 Billion Question’, Bank of England, March 2010, bankofengland.co.uk, 7 June 2016. 9Laura E.


pages: 411 words: 114,717

Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma

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3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, labour market flexibility, land reform, M-Pesa, Mahatma Gandhi, Marc Andreessen, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population, zero-sum game

As soon as the crisis started gathering momentum in 2008, the Polish zloty and the Czech koruna were free to fall. Exports picked up immediately, dampening rather than magnifying the suddenness and severity of the downturn. Where Hayek Lives Not all of the neighbors were so well positioned. Among the nations of the Baltics, the Balkans, and the smaller economies of Central Europe, only Slovenia had joined the Eurozone by the time the crisis hit in 2008. But many of these countries had deep ties to the euro anyway: like Hungary they had borrowed heavily in euros or Swiss francs, or they had pegged the value of their currencies to the euro. Because of their foreign debts they did not have the option of borrowing even more to spend their way out of recession, which was the route John Maynard Keynes had recommended as the answer to the Great Depression, and the route virtually every rich country has followed in hard times since the 1930s.

The Rest of the West Just as it makes no sense to analyze emerging markets in terms of generic rubrics like BRICS, developed markets also need to be analyzed as individual stories, and compared to rivals in the same income class. This is particularly true today in Europe, where nations of vastly different sizes and circumstances are often lumped together as interchangeable pieces of the troubled Eurozone. One of the interesting differences between the Eurozone crisis and earlier regional debt crises is that money is fleeing within the region, not out of it, as investors seek safe haven in the two largest European economies, Germany and France. Germany’s economic performance is the positive opposite of the troubles in some smaller Eurozone countries, because capital inflows are driving down borrowing costs in Germany, feeding a boomlet in the housing market, while the gradual decline of the euro is helping to push exports.

In retrospect, 1998 offered investors a rare opportunity to buy into those markets. In all of the regional financial crises going back to the Mexican Tequila Crisis of 1994, the country where the crisis started saw its stock market drop 85 percent on average (for example, Thailand in 1997–1998), while all of the markets in the region fell by an average of 65 percent. Europe is at a similar point today. The Eurozone crisis started in Greece, where the market is up slightly from a maximum decline of 90 percent, and the rest of peripheral Europe—Portugal, Italy, Ireland, and Spain—hit maximum declines that averaged 70 percent. Europe’s crisis echoes Asia’s circumstances circa 1997 in other crucial ways. In both regions, the smaller economies went into crisis embracing what they thought was a tool of stability, the fixed exchange rate.


pages: 262 words: 83,548

The End of Growth by Jeff Rubin

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Ayatollah Khomeini, Bakken shale, banking crisis, Berlin Wall, British Empire, call centre, carbon footprint, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, decarbonisation, deglobalization, energy security, eurozone crisis, Exxon Valdez, Fall of the Berlin Wall, fiat currency, flex fuel, full employment, ghettoisation, global supply chain, Hans Island, happiness index / gross national happiness, housing crisis, hydraulic fracturing, illegal immigration, income per capita, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, labour mobility, McMansion, Monroe Doctrine, moral hazard, new economy, Occupy movement, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, quantitative easing, race to the bottom, reserve currency, Ronald Reagan, South China Sea, sovereign wealth fund, The Chicago School, The Death and Life of Great American Cities, Thomas Malthus, Thorstein Veblen, too big to fail, uranium enrichment, urban planning, urban sprawl, women in the workforce, working poor, Yom Kippur War, zero-sum game

Its expulsion from the monetary union would trigger a domino effect among its fellow PIIGS. Economists call this contagion—just like a virus spreading from one person to another. Contagion is the real reason the EU is so worried about Greece. It’s also the reason Draghi has pledged to do whatever it takes to keep Greece in the monetary union and preserve the euro. The ECB has managed to staunch the worst of the bleeding for now, but the eurozone debt crisis remains far from resolved. Much like Greece, Portugal depends heavily on tourism to make its economy go. And also like its Hellenic neighbor, Portugal is getting billions of euros from bailout packages funded by its EU partners. But if Greece dumps the euro and brings back the drachma, Portugal’s tourism industry will be at a huge disadvantage. If the price of a holiday in Santorini is cut in half due to a devalued drachma, can the beaches of the Algarve compete when tourists are still being charged prices in expensive euros?

For Americans, it means oil gets more expensive. If you live in a country with a currency that goes up against the greenback, then oil becomes cheaper. If the greenback were to plunge against the yuan, the decline would effectively transfer millions of barrels of oil consumption from the United States to China. So what is the likelihood that the US dollar falls against other major currencies? With the eurozone debt crisis still in the middle innings, it’s understandably hard to envision how the greenback might suffer a significant drop as well. After all, currency markets are also a zero-sum game. If one major currency is going down, another major currency must be going up. If Europe’s currency union eventually breaks apart, though, a realigned euro would rally against the US dollar. A currency backed by the strong northern European economies of Germany and France would quickly attract global capital flows.

In the United States, the twin stimulus of zero interest rates and trillion-dollar budget deficits is allowing the country’s GDP to eke out a 2 percent gain. The future toll of this muted growth, meanwhile, remains to be tallied. In the eurozone, a pledge by ECB president Mario Draghi to backstop the short-term debt of the shakiest countries helped calm the financial crisis and hold together the European Monetary Union. The eurozone debt crisis, though, remains far from over. What’s still missing from the equation is economic growth. Without it, the eurozone’s debt load is no more sustainable now than it was at the height of the crisis. China’s economic growth, meanwhile, is advancing at its slowest pace in more than a decade. Even Beijing admits its days of double-digit growth are over. China’s GDP is still growing faster than that of OECD economies, but revisions to forecasts keep grinding expectations lower.


pages: 370 words: 102,823

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

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

Implications for the euro zone: the re-integration of money and fiscal policy The region of the world which has experienced perhaps the most damaging outcomes from the application of the orthodox theory of money to macroeconomic policy-making is the euro zone. In many ways the design of the European single currency was based on the orthodox theory, and it has severely limited the ability of euro-zone countries to deal with the aftermath of the financial crisis. It is crucial to recognise here that the emergence of sovereign debt problems within the euro zone after the crisis broke in 2008 cannot be simply put down to ‘profligate spending’ by irresponsible governments. Notwithstanding legitimate concerns about Greek accounting practices and tax collection, most economies on Europe’s periphery (Greece, Italy, Spain, Portugal and Ireland) only experienced debt problems once their economies had entered into recession after the crash. But from that point on, they were severely hampered in their attempts to respond.

Strategies that try to circumvent this central problem, seeking to revive demand largely by increasing consumer debt, as observed in the UK, or to increase profit margins by indiscriminately cutting labour costs, are not going to work in the medium run. It is not only the size, but also the timing, of a major boost in investment which is key. The acute phase of the financial part of the euro zone sovereign debt crisis is hopefully over, though the Greek situation remains precarious and may reignite uncertainty in the future. This gives renewed urgency for a less austere and more expansionary fiscal policy, particularly to increase public investment levels and to facilitate private investment. One of the justifications for fiscal austerity has been the orthodox economic view that public investment does not ultimately boost demand because it merely ‘crowds out’ private investment, as government borrowing leads to higher interest rates and taxation.

Table 2: Projected average GDP growth (%) Scenario Actual Projected 2000–2008 2009–2014 2015–2020 European Union Business as usual Investment-led 2.3 0.1 1.5 3.0 North euro zone Business as usual Investment-led 1.8 0.6 1.5 2.9 South euro zone Business as usual Investment-led 2.3 –1.3 1.2 3.3 Table 3: Unemployed workers (millions of people) Scenario Actual Projected 2000 2008 2014 2015 2020 European Union Business as usual Investment-led 21.7 17.9 27.3 26.7 26.3 24.3 22.1 North euro zone Business as usual Investment-led 3.9 4.0 3.4 3.5 3.4 3.8 3.4 South euro zone Business as usual Investment-led 5.9 5.3 12.0 11.6 11.4 9.5 8.5 Despite these important reductions, the level of unemployment in the European Union and in the euro zone does not decline to pre-crisis levels. To further reduce the level of unemployment in Europe, an investment-led strategy would have to be complemented by other policies, such as better educational programmes, training and research. The investment-led scenario also leads to more favourable results in terms of debt-to-GDP ratios compared to the business-as-usual scenario. While debt levels for both scenarios are projected to remain above the 60 per cent level prescribed by the Stability and Growth Pact, the important gains achieved in terms of GDP growth in the investment-led scenario lead to lower debt-to-GDP ratios.


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

The new crisis has confirmed more generally the continuing significance of states in global capitalism. Although the institutions of the European Union have more constitutional authority than other international organizations, their inability to intervene so as to resolve the debt crisis of their smaller member-states is largely due to the internal political dynamics within other member-states, above all Germany. The eurozone crisis also confirms a basic fact about the nature of both globalization and informal empire: state sovereignty is not effaced within it. This can be seen in the difficulties the American state has continually had to confront in getting the German state—from the time of the Herstaat banking crisis in the 1970s to the Mexican crisis in the 1990s to the crisis of the euro today—to overcome its obsession with inflation and “moral hazard,” and to take its share of responsibility for containing crises.

Also confirmed was the US Treasury and Fed’s central role in global crisis-management—from currency swaps to provide other states with much needed dollars, to overseeing policy cooperation among the G20 as well as G7 central banks and finance ministries. It was the formerly highly touted supranational system of European governance—exposed in the crisis for its lack of central authority over taxation, bond issuance, and budget approval—which now appeared most dysfunctional for the management of global capitalism. The eurozone crisis was not something that cheered the American state. The Fed’s provision of liquidity to US financial institutions was undertaken with one eye to their passing that liquidity to Europe through the interbank market. The Treasury was intimately involved in policy discussions, directly as well as through the IMF, with Geithner discretely “pressing Europe to take more decisive action” at the regular conference calls of the G7 finance ministers now taking place almost weekly.

An already marked democratic deficit in Europe was further expanded, as the crisis in Greece and Italy ushered in “national unity” governments headed by central bank technocrats, whose mettle was supposed to be tested by whether they could calm German anxieties about “moral hazard”—which would itself largely depend on whether they could “get tough enough with the unions.”18 The real danger the eurozone crisis poses to global capitalism is that states that had sworn off capital controls forever may be forced by domestic class struggles into adopting them, not least as a way of coping with electoral outcomes that effectively narrow the democratic deficit while expanding economic contradictions. Against this, similar external pressures to those that led most developing states to abjure capital controls for pragmatic rather than ideological reasons in the wake of the Asian crisis (see Chapter 11) are being felt by states in Europe today.


pages: 363 words: 101,082

Earth Wars: The Battle for Global Resources by Geoff Hiscock

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Admiral Zheng, Asian financial crisis, Bakken shale, Bernie Madoff, BRICs, butterfly effect, clean water, cleantech, corporate governance, demographic dividend, Deng Xiaoping, Edward Lorenz: Chaos theory, energy security, energy transition, eurozone crisis, Exxon Valdez, flex fuel, global rebalancing, global supply chain, hydraulic fracturing, Long Term Capital Management, Malacca Straits, Masdar, mass immigration, megacity, Menlo Park, Mohammed Bouazizi, new economy, oil shale / tar sands, oil shock, Panamax, Pearl River Delta, purchasing power parity, Ralph Waldo Emerson, RAND corporation, Shenzhen was a fishing village, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, spice trade, trade route, uranium enrichment, urban decay, working-age population, Yom Kippur War

“This climb is a permanent, irreversible change,” he wrote in 2011.15 All of this amounts to what the Australian analyst Michael Wesley calls a global environment of “rivalrous interdependence,” where the name of the game is endless manoeuvring and competitive cooperation.16 Events such as the eurozone’s financial crisis, or the chaos that attends the remaking of Arab nations across North Africa and the Middle East attest to how quickly the international situation can change. London-based Jan du Plessis, chairman of Rio Tinto, the mining group that has the most globally dispersed set of assets, found his view of Europe “almost unreservedly negative” as the eurozone crisis unfolded near the end of 2011. But he was more positive about the United States, calling it “a pragmatic nation that doesn’t give up easily, and has the determination and the optimism to keep trying new things until it solves a problem.”


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

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

.” ■ ■ ■ By the summer of 2012, Libor was front-page news. In June, Barclays became the first bank to reach a settlement with authorities around the world, admitting to rigging the rate and agreeing to pay a then-record £290 million ($355 million) in fines. The British lender avoided criminal charges thanks to its extensive cooperation with the investigation, but the fallout was devastating. The scandal coincided with the eurozone debt crisis and a renewed period of seething disdain for the banking sector. News bulletins cut from riots in Athens and Occupy Wall Street protests in New York to transcripts of traders calling each other “big boy” and agreeing to defraud the public for a “bottle of Bollinger”. Within a week, Barclays’s charismatic chief executive officer, Bob Diamond, had been forced to resign, and the reputation of the Bank of England, which was accused of being directly involved in the U.K. lender’s behavior, was in shreds.

(Bob) xi, 90–1, 92, 94, 96–9, 134, 136, 137, 139–46, 170 Diamond, Robert Edward, Sr. 90, 93, 94 Dimon, Jamie 137 DKB Financial Products 17 Dole, Bob 127 Ducrot, Yvan 81, 82, 85, 86, 126 Dudley, William 51 Dynegy 41 easyJet 144 Engel, Marcy 17 Enrich, David 151 Enron 42, 70, 101, 116, 154 ESL Investments 72 Euribor 135–6 euro 54 eurodollar futures 17 European Banking Federation 135 European Central Bank (ECB) 99, 118 European Commission 118 eurozone debt crisis xi Ewan, John 50, 51–2, 161–2, 163 exchange-rate mechanism (EU) 54 Fannie Mae 103 Farallon Capital Management 72 197 Farmanfarmaian, Khodadad 13, 15, 18 Farr, Terry 30–2, 33, 37, 63, 64, 65, 68, 79, 85, 117, 148, 168, 169 Federal Bureau of Investigation (FBI) 125, 129 Federal Energy Regulatory Commission 41 Federal Reserve 45, 55, 167 Term Auction Facility (TAF) 55 Federal Reserve Bank 51 Financial Conduct Authority (FCA) 129, 168, 173 Financial Services Authority (FSA) 54, 56–60, 75, 105–8, 133, 137, 140–3, 148, 152, 159, 163 Financial Times 73, 141, 146 Finma 109, 110 fixed income,currencies and commodities (FICC) 91 floating-rate note 15 Flowers, Chris 72 Foreign Exchange and Money Markets Committee (FXMMC) 50–1, 56, 115, 163 forward rate agreements 10 Fraser, Simon 144 Freshfield Bruckhaus Deringer 107 FTSE 171 Fulcrum Chambers 148, 155 Galbraith, Evan 15 Garstangs Burrows Bussin 155 Geithner, Tim 54–5, 69, 70 Gensler, Francesca 70, 135 Gensler, Gary 69–75, 89, 91, 135, 136, 169 Great Mutual Fund Trap, The 72 Gensler, Robert 71–2 Ghosh, Dr.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

When a boom period reaches a manic stage, a high concentration of wealth at the top can encourage the rich to take a portion of their bulging fortunes and indulge in risky forms of financial speculation, in the kinds of conspicuous consumption that whip up social resentment, and then to ship a large share of the national wealth offshore when the inevitable crisis arrives. Once a crisis starts, politicians must decide who will suffer the brunt of the losses, and the festering anger can make it much harder for creditors and debtors to reach agreement. As the Eurozone nations struggled to resolve the debt crisis in Greece, one of the basic hurdles was that neither Greece’s creditors nor its own citizens were eager to help bail out the government of a deeply unequal society in which the rich have barely paid taxes in decades. By 2015, the backlash was palpable, and fear bloomed in the Greek economy. Leaving a hotel in the island of Santorini that summer, the general manager and his staff repeatedly warned me to carry my bill and credit card slip; customs officials were now randomly checking travelers for proof that hotels were not accepting cash, the preferred payment method of tax dodgers.

Many of these companies are still run by the founders, who tell similar stories of setting up shop after the collapse of Communism in the late 1980s, then fighting their way through hard times before reaching a critical mass—many of them have annual sales of nearly one billion dollars—where they feel comfortable enough to break out of Poland and start moving into Germany, next door. These companies range from manufacturers in fast fashion and shoes to providers of novel services like debt collection, a profession still undeveloped in western Europe. In late 2014 a Wroclaw entrepreneur said that with bad loans rising across the Eurozone in the wake of the region’s debt crisis, the continent’s secretive banks had started looking for a discreet partner to help retire the problem quietly. That’s why he set up a Polish agency to collect debts in Germany. The Polish CEO said his agency takes a “soft approach” to this abrasive profession, which he expects will ease his move across the border. The firm has been opening offices in Germany and hiring German-speaking Poles to collect debts by phone.

The scale of the Asian currency collapse was hardly unusual. Examining again the major currency crises in the emerging world going back to 1990, I found that stock prices in the country at the epicenter of the crisis—such as in Mexico in ’94 or in Thailand in ’97—typically saw a currency-fueled drop of 85 percent in dollar terms, while the average decline in stock prices across the affected region was 65 percent. The way the Eurozone crisis played out in the region’s peripheral economies also exhibited this basic pattern: The stock market fell by up to 90 percent in Greece—the country where the crisis started—and spread across peripheral Europe, including Portugal, Ireland, Italy, and Spain, where the average drop was 70 percent. When the crisis reached its nadir in 2012, the total value of the stock markets of these five European countries was less than the market cap of Apple.


pages: 385 words: 111,807

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

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

Mexicans, seen as the archetypal ‘lazy Latinos’ in the US, actually work longer than the ‘worker ant’ Koreans. Recall that the Latin American countries are very strongly represented in the above-mentioned list of countries with longest working weeks (five out of twelve). It is simply not true that the Latin Americans are laid-back people who do not work hard, as the stereotype goes. In the ongoing Eurozone crisis, the Greeks have been vilified as lazy ‘spongers’ living off hard-working Northerners. But they have longer working hours than every country in the rich world apart from South Korea. The Greeks actually work 1.4 and 1.5 times longer than the supposedly workaholic Germans and Dutch. Italians also defy the myth of ‘lazy Mediterranean types’ by working as long as the Americans and 1.25 times longer than their German neighbours.

In the US, the UK and Sweden it rose quite substantially: from around 6 per cent to around 9–10 per cent. Five years after the crisis, their unemployment rates are still around 7–8 per cent. Some people claim that the ‘real’ rate of unemployment in the US could easily be 15 per cent, if we include the discouraged workers and those in time-related under-employment. In the ‘periphery’ countries of the Eurozone, which were particularly hard hit by the 2008 crisis, the unemployment situation ranges from catastrophic to grim. In Greece and Spain the unemployment rate has risen from around 8 per cent before the crisis to 28 per cent and 26 per cent respectively, with youth (aged fifteen to twenty-four)unemployment rates over 55 per cent. The unemployment problem is also serious in Portugal (18 per cent) and Ireland (14 per cent).


pages: 478 words: 126,416

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

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

All experienced spiralling debt service costs. With each mini-crisis, the scale and scope of European Central Bank intervention increased. In 2012 the new Governor of the European Central Bank, Mario Draghi, promised to do ‘whatever it takes’ to preserve the Eurozone.26 Given the potential resource available to an institution empowered to print Europe’s money, that commitment stabilised the Eurozone crisis. For the time being. The proximate causes of these successive crises are very different – emerging market debt problems, the new economy bubble, defaults on asset-backed securities, the political strains within the Eurozone – yet the basic mechanism of all these crises is the same. They originate in some genuine change in the economic environment: the success of emerging economies, the development of the internet, innovation in financial instruments, the adoption of a common currency across Europe.

Yet the crisis was not over. New ‘rogue traders’ were escorted from their desks by security guards. Various rate-fixing scandals demonstrated that the origins of the crisis in fact lay deep within the culture of the finance industry. Monetary policies boosted asset prices, rewarding those who enjoyed accumulated wealth at the expense of those who derived their income from employment. The Eurozone muddle muddled on. When the global financial crisis hit in 2008, politicians of all parties and officials were essentially at sea. ‘Never allow a crisis to go to waste,’ said President Obama’s chief of staff, Rahm Emanuel, but the crisis did go to waste.3 Emanuel’s cynical remark exemplifies the pragmatic realism characteristic of modern political life; but, as in this case, ‘realism’ often has no outcome because pragmatism devoid of analysis or intellectual content permits no more than ineffectual tinkering.

Gerald 242 Countrywide Financial 150, 152, 293 Craig, James 26 credit cards companies 27, 210 debt 54 origin of 185–6 profitability 113 credit default swaps 41, 60, 61, 64, 73, 100, 101, 119, 120, 121, 139, 152, 153, 223 credit expansion 54, 98 Crédit Lyonnais 33 credit ratings 21, 101, 248 credit risk 42, 75, 177, 192 Crédit Suisse First Boston 167, 292 credit-scoring 84, 87, 290, 291 Crosby, James 125 crowd-funding 81 D Dad’s Army (television series) 12 Dahinden, Vincent 124 Daschle, Tom 230 debit cards 186 debt reduction 241 debt securities 101, 107 debt-to-value ratio 149 democracy 4, 52, 308 deposit channel 25–6, 147–8, 173–94 activities of 188–94, 189, 192 directed by retail banks 291 household wealth 173–80, 175, 179 the payment system 181–8 ring-fencing 194, 287 simplification needed 213 deposit insurance 25, 121 deposit protection schemes 135 Derbyshire Building Society 90 deregulation 13, 28, 31, 149–50, 151, 246–7, 292 derivative contracts 191, 192, 323n11 derivatives market 2, 19, 35, 38, 110 portfolios 98 regulation 57, 234 securities 2, 15, 17, 41, 71, 131 Detroit, Michigan 254 Deutsche Bank 33, 104, 136–8, 166, 169, 191–2, 192, 193, 200, 219, 222, 266, 282, 286, 303, 323n11 Diamond, Bob 34, 35, 261, 267, 295, 300 Dickens, Charles: Martin Chuzzlewit 201 Dimon, Jamie 14–15, 35, 231 Dirks, Ray 228 Disney, Walt 70, 71 diversification 21, 27, 28, 29, 32, 33, 45, 95–9, 153 ‘alternative assets’ 98 building societies 151 buying all available stocks 99 coin-tossing game 96 correlation 96, 97–8 Exchange Traded Funds 99 hedge funds 98–9 passive funds 99 diversification divorce 74 DLJ 313n15 Dodd-Frank regulatory regime 236–7, 271 Doerr, John 167 dollar devaluation (1971) 14, 36 Donoghue, Mrs 283 dot.com boom 40 Draghi, Mario 42, 139 Dreamworks 21 Drexel Burnham Lambert 46 drug use 22 ‘Dutch book’ 68, 116 E eBay 187 economic policy 240–69 the British dilemma 262–9 consumer protection 259–62 financial markets and economic policy 248–52 Maestro 240–48 pensions and inter-generational equity 252–9 Economist, The 115 ‘Edge, the’ 114–18, 288 Edinburgh Britain’s second financial centre 11, 263 investment trusts in 26 Edison, Thomas 196 education 253, 259 efficient market hypothesis (EMH) 69–70, 99 Einstein, Albert 129 El Paso oil business 117–18, 232 electricity 245–6, 278 eligible counterparty 282–3 Elizabeth II, Queen 161 Emanuel, Rahm 301 embezzlement 127 emerging markets 39, 42 Emerson, Ralph Waldo: The Conduct of Life 181 emperor’s guard’s new clothes, the 309–10 empire, decline of 13 Enron 123, 124, 126, 127, 158, 176–7, 197, 246, 317n5 Equitas 107 Equity Funding 228 equity markets 23, 85, 168–9, 249, 288 Ericsson 108 Espirito Santo 271 Eurodollar market 13, 20, 120, 121 European Central Bank 42, 98, 138, 139, 183, 243, 244 European Commission 184, 289 European Monetary System 184 European Parliament 184, 328n6 European Union (EU) 194, 220, 226, 228, 273, 287 Eurostat 250 Eurozone 158, 183, 243, 250 creation of 129 crisis 41–2, 139, 301 indebtedness in 184 exchange rates fixed 18 flexible 18 forward 73 Exchange Traded Funds (ETFs) 99 synthetic 99 exchange-traded funds 280 Exchequer Partnerships 158, 159 extended family 78 Exxon Mobil 96, 101, 120, 134, 161, 163, 164, 189, 196 F Facebook 81, 162–3, 166, 167, 185, 196 ‘fair value’ 125–6, 191 fallacy of composition 89 Fama, Eugene 69 family support 79 Fannie Mae 75, 91, 135, 152, 230, 317–18n5 Farkas, Lee 152, 293 FBI 131 febezzle (‘functionally equivalent bezzle’) 127, 128, 132, 136, 176, 177, 190 Federal Deposit Insurance Corporation (FDIC) 25, 135, 247 Federal Reserve Bank of Kansas City symposium (Jackson Hole, Wyoming, 2005) 56–7, 58, 73, 79, 102, 181, 236, 256, 280 Federal Reserve Bank of New York 57, 183, 232, 242, 243 Federal Reserve Board 5, 41, 56, 57, 58, 134, 183, 231, 240, 243, 245, 247 Federal Reserve System 13, 40, 90, 98, 150, 183, 245 Federated Department Stores 204 fee structures 204 Ferguson, Charles 236 Feynman, Richard P. 276, 327n3 Fidelity 109, 199, 200, 213 finance sector a bias to action 203–8 control of risk 6, 7 economic significance 6 excess in the industry 6 export contribution 265 greedy individualism 24 growth of 1–2, 33 heavy criticism of 233 as just another business 5 labour force 263 lack of sanction application 7 lobbying 230, 302, 306 major role in politics 4 management of household financial affairs 6 matching of borrowers and lenders 6, 7 past and current attitudes in 23–4 payments system 6, 7, 25, 281 profitability 132–40, 134 qualitative assessment 265 recurrent crises 35, 307 regarded as having unique status 4–5 remuneration 54, 112 role of 143 search 144 sense of personal entitlement 24, 300 share in GDP 264–5 skills 15 stewardship 144 structural reform 7 taxation 266–7 work incentives 7 workers in finance 6–7, 125 finance theory 5 Finance Watch 328n6 financial advisers 197, 199, 291 Financial Conduct Authority 230, 237, 261 Financial Products Group 293 financial sector, regulation of see regulation Financial Services Authority 243, 247, 303 Financial Services Compensation Scheme 260 Financial Times 68, 115 financialisation 4–7, 36, 45, 72, 163, 165, 172, 259 and complexity 276, 278 conflation of roles of agent and trader 198 and the conglomeration 133 direct impact of 176 effect on corporate behaviour 78 and emergence of large asset management companies 200 emphasis on monetary policy 241 in Germany 169 and hedge funds 289 and housing 149 national and international 39 and risk 55 and secondary markets 170 and social security 255 Summers supports 57 transition from agency to trading 84 two main componenents of 16 Fink, Larry 200 First Boston 200 First Data Corporation 186 First World War 221 fiscal arbitrage 122, 123, 223 FISIM (financial services indirectly measured) 264 Fitch rating agency 313n6 Fitzgerald, Scott: The Great Gatsby 17, 297 FitzPatrick, Sean 156, 293–4 Five Star Movement 306 fixed commissions 29 fixed interest, currency and commodities (FICC) 22, 107, 110, 111, 118, 125, 160, 191, 194, 288 fixed-interest securities 190, 193 Flaubert, Gustave: Sentimental Education 80 Florida land boom (1920s) 201 Forbes magazine 204, 231 Ford, Henry 45, 70, 71 foreign exchange transactions speculators in 18–19 value of 2 Fortune magazine 23 ‘four horsemen’ 167, 168 Fox, Justin 70 fractional reserve banking 88 France corporatism 303–4 defeat of Sarkozy 248, 249 downgraded bonds 248, 249, 250 housing 149, 174 ‘trente glorieuses’ 36 Frankfurt financial centre 26 Freddie Mac 75, 135 free market 18, 59, 238, 247, 302 Frick, Henry Clay 44 Friedman, Milton 60, 63 Free to Choose 56 front running 28 FrontNational 306 Frost, Robert: ‘Provide, Provide’ 252 FT Alphaville 16 Fuld, Dick 24, 32, 72–3, 75, 231, 293 full employment 241 fund managers 66, 86, 108, 115, 206, 209, 212 future of finance 297–308 futures 19 G G8 and G20 economic summits 220 Galbraith, J.K. 127, 201 Galton, Francis xi gambling 130–31, 289 close regulation of 71, 72 Lloyd’s coffee house 71–2 lottery 65, 66, 68, 72 Gates, Bill 174, 268 Gaussian copula 22 GEC 48, 51 GEICO 107 Geithner, Timothy 57–8, 73, 75–6, 92, 104, 183, 230, 232, 239, 276, 306, 307 Geithner doctrine 271 Gemeinschaft 17, 61, 255 General Electric 46, 196 General Motors 45, 49 general share price indexes 98 Generali 27 Generally Accepted Accounting Principles (GAAP) 193 Gensler, Gary 288 Germany corporatism 303, 304 ‘economic miracle’ 36 housing 149, 174 indebtedness to 183–4 Landesbanken 169 Mittelstand 52, 168, 169, 170, 171, 172 role of Bundesbank 243 social market economy 219 state pensions 253 Gesellschaft 17, 61, 255 Gingrich, Newt 230 Glass-Steagall Act (1933) 25, 28, 33 Glaxo 96 global financial crisis (2007–9) and bank assets 91 bankers’ cognitive dissonance 102 begins in the USA 41 causes of 194, 220, 271 collapse of asset-backed securities market 21 collapse of sub-prime mortgages 109 costs of 285 and derivative contracts 192 and diversification 32 emergency measures 285–6 Gaussian copula 22 and liquidity 188, 278, 286 misallocation of housing finance 148 most culpable figures 293 unprecedented public intervention 41 the worst financial crisis since the Great Depression 15 globalisation 13 of capital flows 176, 180 of financial markets 17 and income inequality 53–4 pressure on regulatory structures 14 ‘gnomes of Zurich’ 18 gold standard 13, 18, 36, 181, 241 Golden Dawn 306 Goldman Sachs 1, 14, 31, 55, 57, 59, 63, 104–5, 114, 115, 117, 118, 120, 135, 143, 158, 160, 164, 232, 233, 250, 258, 266, 282, 283, 284, 288, 294, 300, 306 Code of Business and Ethics 118 Goldsmith, Oliver: The Deserted Village 49 goodwill 31, 258–9 Goodwin, Fred 14, 34, 149, 156, 169, 231, 293 Google 80, 83, 162, 167, 196 Gould, Jay 44 government assets and liabilities 000 government bonds 17, 42, 86, 155, 178, 208, 222, 290 government debt 128, 178, 190, 203, 245, 250, 251 government spending 253 Graham, Ben 176 Grasso, Dick 49 Great Depression 12, 15, 25, 36, 57, 218, 221, 225, 258, 308 ‘Great Moderation, the’ 40, 57, 104 Greece accounting manipulation 158, 250 adoption of a common currency 41 government debt 42, 128 refinancing of Greek credit 42 Greenspan, Alan 57, 63, 104, 119, 181, 245, 276 and Ayn Rand 79, 240 and ‘Black Monday’ 242 chairman of the Federal Reserve Board 56, 58, 181, 240–41, 242 and Fed priorities 247–8 and the Markowitz model 68–9 and mortgage defaults 97 and risk 73 testimony to Congress 67–8, 240 ‘Greenspan doctrine’ 56, 60, 67, 68, 71, 87, 101, 249 ‘Greenspan put, the’ 242, 249 Grillo, Bepep 306 Grimaldis of Monaco 123 gross domestic product (GDP) 251, 256, 264–5, 265, 266 gross national income (GNI) 265–6 gross value added (GVA) 265 group insurance 76–7 Grubman, Jack 293 H Haldane, Andrew 139, 264 Halifax Building Society 31, 32, 140, 164, 258–9 becomes a public company 124 competition for the ‘talent’ 193–4 ‘the Edge’ established in wholesale financial markets 114 and fixed-interest securities 190, 193 Group Treasury 106, 107, 111, 129 origins 106 rescued by the British government 124 response to changing times (1990s) 129 takes over the Bank of Scotland 124, 125 the world’s largest mortgage lender 106 worthless windfall shares 127–8 Hamamatsu Photonics 168 Hambrecht & Quist 167 Hambros Bank 158 Hanson 45, 46–7 ‘hard’ commodities 17 Harding, David 111–12, 124 Hartlepool nuclear power station, northeast England 158 Harvard University 5, 14–15 Harvey-Jones, Sir John 51 Hawkins, Sir Henry 61, 64, 116 Hayek, Friedrich 225 HBoS 32, 91, 124, 125, 135 healthcare 77, 78, 79, 253, 257–8 hedge fund managers 23, 99, 109, 282 Hedge Fund Research 323n9 hedge funds 27, 98–9, 110, 191, 194, 284, 289, 323n9 hedge fund centre, Mayfair, London 263 Helyar, John 46, 164 Henderson, David 58 ‘hidden champions’ 168 high-frequency trading 2, 111, 280, 305 Hill, Lord 322n14 Hope, Bob 160 Hornby, Andy 14 horse-racing 72, 116 House of Commons library 115 House of Lords 283 House of Morgan 25, 35 Household International 34–5 housing 148–54, 290 causes of crisis in housing finance 153 collapse of thrifts 150 equity release 54 house prices (US) 41, 43, 174, 259 houses as physical assets 146–7 low-cost 79 mortgage defaults 97 owner-occupied housing stock 53, 149, 151 specialist lenders 150 HSBC 1, 24, 34–5, 286, 328n22 Hubler, ‘Howie’ 130 Hurricane Katrina (2005) 79, 256 I Ibsen, Henrik: An Enemy of the People 285 Iceland: bank and compensation scheme collapse 260 ICI 45, 46–8, 51, 78 Iksil, Bruno 35, 130 ‘I’ll be gone, you’ll be gone’ culture 125, 128, 129, 131, 133, 152, 156, 204, 273 imperialism 13, 218 income distribution 52–4, 53 Independent Commission on Banking 139, 287 India, economic growth in 53 inflation 36, 54, 178, 241–2, 258 information asymmetry 60, 74, 76, 251, 317n2 information technology 18, 19–20, 31, 168, 185 infrastructure, property and 154–60 initial public offering (IPO) 113 Inside Job (film) 236 insurance companies 16, 27, 29, 120, 197, 199, 208, 213, 264 Intel 29, 167 interest rates and inflation 241, 242 long-term 251 intergenerational accounting 258 intermediation 80–105 bad intermediaries 81–2 competition 271 direct/indirect 82, 83 and diversification 96 facilitating 7 and the internet 81 leverage 100–105 managed 83, 201, 212–13 the role of the middleman 80–99 total costs of 207 transparent 83, 84, 201–2, 203 International Financial Reporting Standards (IFRS) 193 International Labour Organization (ILO) 263 International Monetary Fund (IMF) 13–14, 38, 39, 56, 58, 139, 220, 302 international reply coupons 131 International Swaps and Derivatives Association (ISDA) 61, 119, 193 internet 182, 183, 185 connectedness 81, 83 and intermediation 81 Interstate Commerce Commission 233, 237 investment banking FICC trading 107 global expansion of American banks 33 investment trusts 26, 27 relationships 16 within commercial banks 22 investment banks boutique 205 ‘dark pools’ 29 economists in 248–9 legal partnerships 30 modern objectives 197 and rating agencies 249 and search 197 investment channel 26, 148, 174, 175, 195–213 a bias to action 203–8 fails to meet the needs of businesses and households 213 investable assets 202–3, 203 the role of the asset manager 208–13 simplification needed 213 and sovereign wealth funds 253 stewardship 195–203, 203 investment companies 26, 27, 96, 177, 197, 199, 200, 201, 202 investment funds closed-end (managed) 212 open-ended (transparent) 212 Investor B 108 investors allocation of risk 57, 60, 73 and credit ratings 21 foreign 39 institutional 23, 28, 46 large 98 and leverage 101 long-term 94 losses of 43 private 28 property 99 retail 66 small 30, 99 sophisticated 23 Ireland bank workers’ strike (1970) 182 collapse of banking system (2008) 42, 138, 182 Isaacson, Walter 71 Ishmael, Stacy-Marie 16 Israel defence forces 171 high-technology start-up sector 117 It’s a Wonderful Life (film) 12–13 ITT 45 J Japan credit expansion 98 economic growth 36, 39 imagined competitive threat from 221 and quantitative easing 245 speculative bubble (late 1980s) 38–9, 280 jobbers 25, 28, 29–30 Jobs, Steve 70, 71, 162, 196 Johnson, Simon 302 Jordan Marsh department store 46, 90 J.P.


pages: 831 words: 98,409

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

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

Technologization, financialization, and globalization have created an intricate web of interconnections within the financial world itself and between the financial world and other sectors such as the economy and politics. While new linkages are formed at an unprecedented speed, our capacity to fully grasp the resulting complexity has not quite caught up with the new system we have created—as was evident in the miscalculation of the impact of Lehman Brothers’ failure or the challenges of dealing with the eurozone crisis. Introduction: Meet the “Superhubs” Davos epitomizes the principles of network science as they apply to human beings. These meetings tangibly demonstrate that similar people attract each other—and that those who already have the most connections attract even more. The Davos success formula? The resort is hard to reach, isolated, and difficult to navigate. Deprived of their usual environments, infrastructure, and privileges, leaders are crammed into a vacuum with nowhere else to go.


pages: 466 words: 127,728

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

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Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, labour mobility, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, uranium enrichment, Washington Consensus, working-age population, yield curve

pagewanted=all; Angeline Benoit, Manuel Baigorri, and Emma Ross-Thomas, “Rajoy Drives Spanish Revolution with Low-Cost Manufacture,” Bloomberg, December 19, 2012, http://www.bloomberg.com/news/2012-12-19/rajoy-drives-spanish-revolution-with-low-cost-manufacture.html. adverse demographics as a major hurdle . . . : Buttonwood, “The Euro Zone Crisis: Growth Problem,” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis. a €60 billion bailout fund . . . : Matina Stevis, “Euro Zone Closes In on Bank Plans,” Wall Street Journal, June 13, 2013, http://online.wsj.com/article/SB10001424127887323734304578542941134353614.html. Chapter 6: BELLs, BRICS, and Beyond The original term BRIC was created . . . : Jim O’Neill, “Building Better Global Economic BRICs,” Goldman Sachs, Global Economics Paper no. 66, November 30, 2001, http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf.

New York Times, December 14, 2001, http://www.nytimes.com/2001/12/14/world/nation-challenged-video-bin-laden-tape-boasts-trade-center-attacks-us-says-it.html. Buttonwood. “The Real Deal—Low Real Interest Rates Are Usually Bad New for Equity Markets.” Economist, October 20, 2012, http://www.economist.com/news/finance-and-economics/21564845-low-real-interest-rates-are-usually-bad-news-equity-markets. ———. “The Euro Zone Crisis: Growth Problem.” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis. “Cargo Plane with 1.5 Tons of Gold Held in Istanbul.” Hurriyet Daily News, January 5, 2013, http://www.hurriyetdailynews.com/cargo-plane-with-15-tons-of-gold-held-in-istanbul-.aspx?pageID=238&nid=38427. Cendrowicz, Leo. “Switzerland Celebrates World’s Longest Rail Tunnel.” Time, October 20, 2010, http://www.time.com/time/business/article/0,8599,2026369,00.html.


pages: 401 words: 112,784

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

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

While ‘important-looking foreigners’ chased investors’ debts, a traditionally poor population that never quite believed in boom-time riches laboured under impossible retrenchment ‘with scarcely a peep of protest’.16 Irish resignation may be less frightening than Greek rage, but it is hardly healthy either. Our aim in this book is to identify the distinctive social maladies that flow from economic stagnation away from the peculiarities of the eurozone crisis, in Britain and the United States. Before the storm hit, the thing that marked out these two societies was the steady opening-up of a vast economic gap. Indeed, the world's leading authorities on the distribution of income have published a book that draws on decades of evidence, with the subtitle: A contrast between continental European and English-speaking countries.17 All rich societies levelled out over most of the twentieth century; the great contrast emerged after the 1970s.


pages: 280 words: 79,029

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

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

One HSBC veteran happily recounted stories of the financial crisis that gripped Asia in the late 1990s, when tellers were instructed to bring piles of cash into view to reassure people that banks were overflowing with money. Tales of improvisation from Asia were not supposed to be relevant to the West’s ultrasophisticated financial system. But far worse was to come. A chain of events was under way that would lead in time to the collapse of Lehman Brothers, a huge US investment bank, state takeovers of swaths of the rich world’s banking systems, a deep global recession, and the Eurozone debt crisis. I observed these later phases of the crisis from the position of the Economist’s finance editor, a post that I held from July 2009 until October 2013. The crisis would lead to a complete reversal in public attitudes toward the financial industry. The decade leading up to the crisis was one in which finance was lionized. Policy makers applauded the march of new techniques, such as securitization, that appeared to send risk away from the banks and spread it more evenly throughout the financial system.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, commoditize, complexity theory, continuation of politics by other means, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, digital map, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

(Harcourt, Brace and Howe, 1920), Chapter II.4. 2. Peter Nolan, Is China Buying the World? (Polity, 2013). 3. “Flow Dynamics,” The Economist, Sept. 19, 2015. 4. Financial flows (such as global banking, foreign investment, and portfolio capital) surged from $470 billion (4 percent of GDP) in 1980 to $12 trillion (21 percent of a much larger GDP) in 2007. After the financial crisis, the eurozone banking crisis and higher reserve requirements pushed capital flows back below 10 percent of GDP. 5. Turkey’s Ayka Tekstil and Sweden’s H&M are other major apparel manufacturers and brands that have expanded operations in Ethiopia. 6. See DHL’s Global Connectedness Index 2014, http://www.​dhl.​com/​en/. 7. Tiny Belgium’s banks serve as custodial financial institutions holding $400 billion in U.S. Treasuries (almost 70 percent of its GDP) for major foreign purchasers such as China. 8.


pages: 743 words: 201,651

Free Speech: Ten Principles for a Connected World by Timothy Garton Ash

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A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, Andrew Keen, Apple II, Ayatollah Khomeini, battle of ideas, Berlin Wall, bitcoin, British Empire, Cass Sunstein, Chelsea Manning, citizen journalism, Clapham omnibus, colonial rule, crowdsourcing, David Attenborough, don't be evil, Donald Davies, Douglas Engelbart, Edward Snowden, Etonian, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, Ferguson, Missouri, Filter Bubble, financial independence, Firefox, Galaxy Zoo, George Santayana, global village, index card, Internet Archive, invention of movable type, invention of writing, Jaron Lanier, jimmy wales, John Markoff, Julian Assange, Mark Zuckerberg, Marshall McLuhan, mass immigration, megacity, mutually assured destruction, national security letter, Netflix Prize, Nicholas Carr, obamacare, Peace of Westphalia, Peter Thiel, pre–internet, profit motive, RAND corporation, Ray Kurzweil, Ronald Reagan, semantic web, Silicon Valley, Simon Singh, Snapchat, social graph, Stephen Hawking, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Wisdom of Crowds, Turing test, We are Anonymous. We are Legion, WikiLeaks, World Values Survey, Yom Kippur War

This should not be achieved by giving jobs to people not competent to do them, nor should the two kinds of representation be confused. Precisely because the suspicion will be that ‘she’s only there because she’s black/Muslim/female/whatever . . .’, we should not ask Muslim journalists only to report on Muslims, any more than we expect Christians only to report on Christian matters, or women only on women. At the height of the Eurozone crisis, I got my daily update from the economics correspondent of Britain’s Channel 4 News. His name was Faisal Islam, but I was not turning to him for news about Islam. As for the representation of diversity by the media, this is a vital component of media pluralism. Part of the state’s expressive function can be to support public service media in minority languages, or covering minority communities.


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 Greek government had handy accomplices in carrying out this statistical legerdemain. In return for hundreds of millions of dollars in fees, Wall Street firms such as Goldman Sachs engineered the financial derivatives that helped hide the scale of Greece’s budget woes.16 When the full scale of the government’s bankruptcy came to light in early 2010, it threw not only Greece but the entire Eurozone into crisis. Germany and France were confronted by a cruel choice: either bail out Greece, thereby rewarding misbehavior and flouting EU rules, or let Greece (and possibly other weaker nations as well) drop out of the euro, dealing a potentially fatal flow to the currency union. External finance is a fair-weather friend: there when it is least needed, and absent when it could do some good. This is not news.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, distributed ledger, Edward Snowden, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial exclusion, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

Bernanke and Greenspan are right that the hikes did not spare the United Kingdom the financial crisis, but it is hard to know whether they helped mitigate the costs. Cross-country comparisons are inherently difficult. The financial sector accounts for a larger share of output in the United Kingdom than in the United States (in 2008, it was 10% and 8%, respectively).6 The United Kingdom was also far more exposed to the Eurozone debt crisis than the United States was through its links in banking and trade. In contrast, the housing bubble never burst in the United Kingdom the way it did in the United States, given land use restrictions, especially around London, that create a chronic housing shortage. Thus one cannot be sure that the modest pre-crisis interest rate hikes didn’t help; it is difficult to disentangle cause and effect.


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

After the euro was formally created in January 1999, the European Central Bank acquired the same freedom of action in monetary policy that the Fed enjoyed. Initially, the ECB clung firmly to the monetarist traditions of the German Bundesbank. But over time, its policies became increasingly pragmatic, with France, Italy, and Spain gradually gaining influence over the euro project, while German banks and export industries became increasingly exposed to financial conditions in the rest of the euro zone. By the outbreak of the subprime crisis, the ECB had become even more generous than the Fed or the Bank of England in supporting economic activity and lending without limit to crippled financial institutions. In the period after the Annus Mirabilis of 1989, therefore, the governments and central banks in every major economy gradually shifted from the exclusive focus on inflation demanded by the monetarist counterrevolution.

Convergence between the United States and Europe Even if liberal democracy remains the most plausible and attractive model for long-term political and economic development, surely the collapse of financially oriented capitalism has surely discredited the Anglo-Saxon model in comparison with the more consensual European approach? This view was certainly widespread in the immediate aftermath of the crisis, but the opposite is true. Assuming that the United States recovers from the recession much faster than continental Europe and that Britain also emerges from the recession with less permanent damage than many of the countries in the eurozone—both of which are likely events—the crisis will reaffirm the relative resilience of Anglo-Saxon financial capitalism, provided Anglo-Saxon capitalism is not confused with the exaggerated market fundamentalism of Capitalism 3.3. Many vestiges of Capitalism 2’s bureaucratic state-led system survived in continental Europe (as well as in Japan) well after they were swept away in Britain and America by the Thatcher-Reagan revolutions.

Yet a diminution in the international role of the dollar, or a return to the fixed currencies of the postwar period, are extremely unlikely in the decades ahead. One thing the crisis beyond doubt proved was the value of floating currencies. Exchange rate flexibility gave governments around the world the freedom to cut interest rates and to support their economies with fiscal stimulus that could never have been imagined in the days of Bretton Woods. Conversely, the financial turmoil that engulfed the eurozone after the worst of the banking crisis was over in other countries reminded the world of the dangers of long-term commitments to fixed exchange rates and of the immense costs of defending currencies in a system disturbingly reminiscent of the gold standard of the 1930s. Any reversion to fixed exchange rates, still less to a gold-based system such as Bretton Woods, therefore seems out of the question. Since 1971, the world has lived without any monetary standard for the first time in history, and this is not about to change.


pages: 291 words: 81,703

Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen

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Amazon Mechanical Turk, Black Swan, brain emulation, Brownian motion, Cass Sunstein, choice architecture, complexity theory, computer age, computer vision, computerized trading, cosmological constant, crowdsourcing, dark matter, David Brooks, David Ricardo: comparative advantage, deliberate practice, Drosophila, en.wikipedia.org, endowment effect, epigenetics, Erik Brynjolfsson, eurozone crisis, experimental economics, Flynn Effect, Freestyle chess, full employment, future of work, game design, income inequality, industrial robot, informal economy, Isaac Newton, John Markoff, Khan Academy, labor-force participation, Loebner Prize, low skilled workers, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, microcredit, Myron Scholes, Narrative Science, Netflix Prize, Nicholas Carr, pattern recognition, Peter Thiel, randomized controlled trial, Ray Kurzweil, reshoring, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, Skype, statistical model, stem cell, Steve Jobs, Turing test, Tyler Cowen: Great Stagnation, upwardly mobile, Yogi Berra

There will be lots of “hollowing out” of various regions—at least in terms of well-educated high earners—and not everyone will be on the winning side of this process. More areas will specialize in being locations for tourists, retirees, and individuals living off family assistance or government assistance. This point suggests a broader perspective on the economic crisis in the Eurozone. Most current discussions of the crisis focus on debts, failing banks, capital-flight deflationary pressures, self-defeating austerity, and so on. That’s all relevant, but there is a deeper backdrop to these problems. Europe really is integrating economically, however imperfectly, and we are learning that there are big winners and big losers to this process. The debt problems and the high bond yields and the other signs of crisis can be read—in this account—as our financial markets heralding the future arrival of major changes in economic geography.


pages: 388 words: 125,472

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

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

As the then BBC journalist Paul Mason put it at the time, ‘By enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the Eurozone has outlawed expansionary fiscal policies.’ Eurozone budgets had to be submitted to the Commission for approval. It effectively abolished Keynesian, interventionist economics, forbidding a fiscal stimulus during periods of economic disaster. Meanwhile, the European Central Bank was an engine of Continent-wide austerity, but it was so unaccountable it did not even publish its minutes. The Eurozone economy had been plunged into crisis by the financial collapse, fuelled by the recklessness of often German banks lending to countries like Greece. The policies imposed in European countries such as Spain, Portugal and particularly Greece left vast swathes of young people out of work – in some cases, over 50 per cent; public services imploding; and poverty soaring. No wonder the EU promotes such a conflict within the Establishment.


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

André Sapir at the Brussels-based consultancy Bruegel explained: “Everything we feared about the Mediterranean model has proven right—only it was worse. In Holland, Germany, and the Nordic countries there was more of a longer-term view of the challenges that societies were facing.”5 Reporters Ralph Atkins and Matt Steinglass of the Financial Times elaborated in August 2011: “Germany, the Netherlands, and a few other northern European counties tell another story, however. Their success is the flip side of the Eurozone debt crisis. While the economic models of some in the 12-year-old monetary union have been blown apart—in Greece unemployment has hit 15 percent—others have turned out to be surprisingly efficient.”6 Productivity Growth in Northern Europe Outpaced America It was just another in the long line of reports about auto firms establishing new assembly plants abroad to supply the American market, and always in places like Mexico.


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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


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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

For, while banks used to act as lenders to the state, the state has now become the chief financier of the banks. This is because governments have to stand behind central banks when they are forced to act as lenders of last resort if credit markets seize up or systemically important banks collapse. Never has the bill been greater than after the colossal last-resort lending operation that took place in the US and Europe from 2007 onwards. Intervention to support US, UK and eurozone financial institutions in the crisis amounted to more than $14 trillion, which is almost a quarter of global gross domestic product. And that does not include the much bigger bill arising from lost economic output. Andrew Haldane and Piergiorgio Alessandri of the Bank of England explain the turning of the tables like this: As in the Middle Ages, perceived risks from lending to the state are larger than in some corporations.


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

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

Continued market skepticism forced the EU to go nuclear—a €750-billion stabilization fund to support eurozone countries. Journalists spoke of financial ‘shock and awe’. ‘Panic’ better summed up the actions. Initially, stock markets rose sharply, especially shares of banks exposed to Greece who would benefit from the rescue. The interest rates on Greek, Irish, Italian, Portuguese, and Spanish bonds fell sharply. President Nicolas Sarkozy turned the eurozone’s sovereign-debt crisis into a personal triumph, letting it be known that the rescue was 95 percent French. Le Figaro reported Sarkozy’s comment that ‘in Greece they call me ‘the savior’.” Karl Dunninger, a trader, captured the madness: The most amusing part of this is that nations seriously in debt and without a pot to piss in will be ‘contributing’ some of the money to fund the debt. Spain, for instance, has pledged to do so.


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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

No Safe Havens Compounding our problem is the fact that the investor class—the minority of the population with stock portfolios of any size—has become traumatized by the events of 2008 and has largely fled the market or gone into wait-andsee mode. That leaves only professional investors, institutional fund managers, and hedge funds, that have to be in the market. The whole market shifts to risk-on when it seems safe to buy equities, and then gallops over to risk-off when equities seem overbought. Sovereign debt (government bonds) used to be safe harbor, but with the euro zone in chronic debt crisis and the United States downgraded on its inability to address its runaway deficit spending, even that refuge seems questionable. The markets truly are broken. In the following two chapters I will drill down on two key issues that are widely misunderstood by both commentators and the general public. Chapter 2 explains why banking lost its way and became (and in crucial respects remains) dangerous to the general economy, and how many steps taken in the wake of the crisis not only fail to address the core problems but add to them in unintended ways.


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The WikiLeaks Files: The World According to US Empire by Wikileaks

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affirmative action, anti-communist, banking crisis, battle of ideas, Boycotts of Israel, Bretton Woods, British Empire, capital controls, central bank independence, Chelsea Manning, colonial exploitation, colonial rule, corporate social responsibility, credit crunch, cuban missile crisis, Deng Xiaoping, drone strike, Edward Snowden, energy security, energy transition, European colonialism, eurozone crisis, experimental subject, F. W. de Klerk, facts on the ground, failed state, financial innovation, Food sovereignty, Francis Fukuyama: the end of history, full employment, future of journalism, high net worth, invisible hand, Julian Assange, liberal world order, Mikhail Gorbachev, millennium bug, Mohammed Bouazizi, Monroe Doctrine, Naomi Klein, Northern Rock, Philip Mirowski, RAND corporation, Ronald Reagan, Silicon Valley, South China Sea, statistical model, structural adjustment programs, too big to fail, trade liberalization, trade route, UNCLOS, UNCLOS, uranium enrichment, Washington Consensus, WikiLeaks, zero-sum game, éminence grise

W. 479–80 Delare, Thomas 189–90 democracy promotion 28–9, 39–40, 46–7, 60, 162, 176, 312, 374, 493–4, 496, 518–22 Deng Xiaoping 444, 451 Deniau, Jean-François 341 Denmark 245 Derham, James 535–7, 542–3 Dermer, Ron 271, 274, 283 Der Spiegel (newspaper) 197 De Sutter, Paula 222–3 Detainee Treatment Act (DTA) 386 Diaz, Dave 86 Dictatorships, American relationship to 23–31 Digital Millennium Copyright Act 135 Digital Rights Management technology (DRM) 133–4, 135 Diskin, Yuval 273, 276–7, 285 documents: classification level 6–8, 149, 150–1; numbers published 1–2 dollar diplomacy 44, 126 dollar, the, importance of 121 Dominican Republic 56 Dostum, Ahmad Rashid 393–4 drone strikes 88–89 Duddy, Patrick 531 Duvalier, François “Papa Doc” 53, 62 Duvalier, Jean-Claude “Baby Doc” 53, 58, 62–3, 63, 64 economic liberalization 47–9, 122, 137–40 economic power 112, 112–41, 352–3; capital flight 131, 138; dominance of Wall Street 139–41; exchange rates 120; exercise of 123–32; exposing 113–17; free trade imperialism 117–23, 132–6; importance of the dollar 121; and market-dependency 125–32; money flows 120, 137–8 Economic Support Funds (ESF) 162 Economist 83, 113 Ecuador 18, 497–503, 516; Article 98 agreements 173–6; CIA involvement 501–2; Constituent Assembly 500–1; Correa presidency 498–503; corruption 174–5; democracy promotion 176; ICC-related sanctions 173–7; International Visitor program 174; market-dependency 125–32; oil revenue 127, 128; pharmaceutical licenses 502–3; public spending 130; trade liberalization 127; US ambassador expelled, 2011 503 Edelman, Eric 253–4, 258–9, 261 Egypt 27, 45, 46, 299; coup, 1952 42, 44; coup against the Muslim Brotherhood 41, 48; democracy assistance 30; economic crisis 45; economic reform 47–9; fall of Mubarak 32, 36–40; nationalization of Suez Canal 43; patronage 38; poverty 37; strategic importance 237–8; US aid 30 Eisenhower Doctrine, 44 ElBaradei, Mohamed 248, 339–48, 459–60 Ellsberg, Daniel 18–19 el-Masri, Khaled 201–6 El Salvador 18, 29, 30, 57, 58, 485, 486–92, 537, 538 el-Sisi, Abdel Fattah 48 embassies 3–4 empires 2–3 Erdoğan, Recep Tayyip 17, 31, 244–5, 250, 253–4, 258–9, 260–1, 262 Espionage Act, 1917 7 EU Council, and Article 98 agreements 163 European cables 181–211; and GMOs 187–95; Plan 2015 185–7; and trade relations 184–5, 187–95 European Commission 194 European Court of Justice 206 European Food Safety Authority 195 European Phased Adaptive Approach 331 European Union: collusion with CIA 14; court dealings 200–210; and GMOs 188, 189–90, 194, 194–5; Independent International Fact-Finding Mission on the Conflict in Georgia 220; resistance to American power 210; and the Ukraine crisis 210; and the war on terror 195–200 Europe, US missile defense 219, 223–30, 330–4 Eurozone, sovereign debt crisis 141 extraordinary rendition 75, 239–40, 261 Fackler, Martin 424–5 Facussé Barjum, Miguel 70, 71 Fallows, James 439 Farabundo Martí National Liberation Front (FMLN) 486–7, 490–2 FARC 125 Fatah 276–7, 278, 280–1, 293 Fayyad, Salam 271, 272 FBI 4 Federal Reserve 120, 127, 139 Fein, Ashden 9 Feith, Douglas 207–10 Fernández, Leopoldo 508–9 Fidan, Hakan 259 Financial Crisis Inquiry Commission 139 financial regulation 136–41 Financial Services Agreement 137 Financial Times 218 Flores, Javier 508 Flourney, Michelle 409–11, 412 Foltz, William J. 27 Forbes magazine 114, 187 Ford, Charles 536, 537 Ford, Robert Stephen 166 Foreign Affairs 217–18 Foreign Military Financing assistance program 166 Foreign Policy 226 Foreign Terrorist Organization list 464 Forgeard, Noel 185 FRAGO 242 protocol 76, 104–5 Fraker, Ford 301–2 France 27, 42, 194–6, 251–2 Frattini, Franco 329 Freedom Agenda 39–40 free market, the 83, 116–17 free trade 12, 40, 73; imperialism 11–12, 117–23, 132–6 Free Trade Area of the Americas (FTAA) 73, 125, 127, 175 French, Philip 521 Friedman, Milton 69, 122 Friedman, Thomas 112 Fukushima nuclear crisis 425, 427 Fukuyama, Francis 444 Funes, Mauricio 490–2 G8, summit, 2011 47 Gaddafi, Muammar 31, 44, 178 Gaidar, Yegor 218 Galant, Yoav 285 Gangotena, Raul 173 Gantz, Benny 272–3, 295–6 Garlasco, Marc 86 Garzón, Baltazar 209–10 Gates, Robert 41, 206–7, 213, 328–9, 331 GATT negotiations, the Uruguay Round 121 Gaza Strip 39, 180, 266, 276–85, 293 General Agreement on Tariffs and Services 137, 140 genetically modified agricultural products (GMOs) 187–95, 210 Geneva conventions 108–9, 270, 385, 393 Georgia: Rose Revolution 212, 220; and South Ossetia 219–22 Germany: ANA Trust Fund contributions 196–7; and the el-Masri case 202–3, 204–6; and the invasion of Iraq 195–6; reunification 212 Ghani, Ashraf 394 Gilad, Amos 274–5, 276, 279, 295–6 Gitmo Files, the 75, 80, 94, 97–101 Giuliani, Rudy 311 Glazer, Charles 489–90 global financial crisis, 2008 113, 136–41, 447, 452, 453 globalization 46, 83, 118, 123, 133 Global Policy Forum 92 Godec, Robert 33–4, 35 Goldberg, Philip 509 Goldstone Report 179, 274–5, 281–3, 285 Goldstone, Richard 281–2 Gonzales, Alberto R. 108, 207–10 Good Neighbor doctrine 50, 53, 54–8 Google Maps 222–3 Gorbachev, Mikhail 212, 223–4, 231 Gordon, Philip 248–51 Gottemoeller, Rose E. 232, 233 Gramsci, Antonio 440 Grandin, Greg 96, 484 Great Britain 182–3, 188; loss of empire 27, 28, 42, 44, 433 Greenlee, David 505–6, 541 Greenwald, Glenn 159–60, 178 Grenada 57, 123 Guam 417 Guam International Agreement 409–10 Guantánamo Bay 75, 75–6, 97–101; military prison opened 99; prisoner numbers 99; prisoner releases 100; use of torture 96, 99; validation 101 Guardian (newspaper) 105, 115, 179, 250 Guatemala 55, 164, 484, 535–6, 542–3 Gülen, Fethullah 17, 254–5, 259–60 Gülen schools 254–8 Gulf War, 1991 45, 46 Guriev, Sergey 214 Gutiérrez, Lucio 174, 175, 497, 498 Hague, William 183 Haiti 18, 26, 30, 49, 50, 58, 486; American involvement 60–5, 510–14; CIA involvement 64; coup, 2004 512; Group of 184 64–5; human rights 64; Lavalas movement 63–4; military intervention 62–3; neoliberal reform 59, 64; occupation, 1915 52–3; Petrocaribe program in 533–4; repression 61–2; UN occupation 65; wages 61, 64 al-Hajj, Sami 75–6, 79 al-Hakim, Muhammad Baqir 84 Hamada, Yasukazu 407 Hamas 265, 266, 276–8, 279–80, 281, 282–3, 284–5, 293 al-Hasani, Muhanad 318 Hatoyama, Yukio 398, 425–6 Hebb, Donald 101 Heinonen, Olli 346–7 Heleno, Augusto 514 Helms, Richard 66 Hersh, Seymour 76 Hezbollah 284 Hill, James 541 Hinchey Report 66 Ho Chi Minh 27 Hodges, Heather 501, 502, 503 Holbrooke, Richard 337–8 Honduras 49, 52, 57, 536–7, 543–4; Article 98 agreements 162; constitution 72; coup, 2009 70–3, 537, 544; US aid 71, 72 Hudson, William 34, 35 Hu Jintao 453–4 human rights 29, 30, 58, 74–111, 475; Afghanistan 78; brutality 76–7; Chile 68–9; Haiti 64; and labeling 78–81; Syria 297–8, 314; and torture 94–111; Tunisia 33–4; US abuses 74–8 Human Rights Watch 282, 357, 364, 366–7 Hurlburt, Heather 216–17 Hussein, Abbas Ali 358 Inamine, Susumu 428–30 India 27 Indochina 27 Indonesia 27, 28, 446, 450, 451–2, 453, 458–9, 463 Institute of International Finance 47 intellectual property 133–4, 135, 467–8 Intermediate-Range Nuclear Forces Treaty 224 International Atomic Energy Agency (IAEA) 291–2, 323, 339–48, 459–60 International Centre for Settlement of Investment Disputes 130 International Court of Justice 263, 270 International Criminal Court (ICC) 13, 281; engagement with 177–80; establishment 160; jurisdiction 160–1; related sanctions 169–77; US avoidance of sanctions 162–9; US opposition to 161–2 International Development Bank (IDB) 504, 505–6 International Military Education Training (IMET) program 166 International Monetary Fund 45, 48, 50, 51, 59, 118, 121, 123, 129, 130, 504 International Republican Institute (IRI) 29, 40, 519–20 International Security Assistance Force for Afghanistan” (ISAF) 385 International Studies Association (ISA), 10–11 10 International Studies Quarterly (ISQ) 10 International Trade Union Confederation 136 Iran 23, 28, 238, 321, 322–49, 458; armed confrontation threat 337–9; demonization of 248–51; and France 251–2; ICBM development 225, 226, 229, 230, 330–4; and Israel 251, 286–93, 323–9, 337–9, 348; nuclear program 15, 248–9, 281, 286–93, 294–5, 323, 335–6, 339–48, 348–9, 458–60; and Saudi Arabia 301–2; and Syria 299, 301–2; and Turkey 245–6, 246–53, 329–30; Venezuela’s relationship with 522 Iran-Contra scandal 492 Iraq 28, 42, 44, 350–67; economic warfare 352–3; embargo of 242; invasion of Kuwait 45; sectarianism 84, 85–6, 353–60, 361–3 Iraq Body Count 159 Iraqi Army (IA) 358–9 Iraq, invasion and occupation of 12, 23, 46, 83–6, 239, 288, 300, 369; Baghdad massacre 86–7; civilian casualties 88; collateral murder 350–2; counterinsurgency 84–6, 355; death squads 354–5; drone strikes 88–9; Europe and 195–6; Fallujah siege 88, 90–3, 254, 354, 357–60; human rights abuses 76; Iraqi insurgency 76–8, 362; Operation Phantom Fury 91–2; paramilitary strategy 84–5; reconnaissance by fire policy 353; resistance to 354–5; Sahwa movement 15, 360–3; sectarian divisions 15; Special Police Commandos (SPC) 84–5, 105, 110; use of torture 85, 103–5, 352, 363–7; US surge 360; US terrorism 82; war crimes prosecutions 159–60; war logs 15, 82, 103–4, 363–4 Ireland, Republic of 197–200 Ishak, Bassam 313 ISIS.


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Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, Vilfredo Pareto, We are the 99%, zero-sum game


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

If the world were made up only of economic forces, this outcome would be OK: low or stagnant growth in the deficit countries, a gradual rise in the value of the Chinese RMB against the dollar, a gradual erosion of the US debt by inflation – and a smaller trade deficit for the USA because fracking reduces its dependency on foreign oil. But the world is made up of classes, religions and nations. The 2014 Euro elections saw parties pledged to rip up the global system win 25 per cent or more – in Denmark, France, Greece and Britain. In 2015, as I write, the far left victory in Greece has thrown the cohesion of the Eurozone into doubt. 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.


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, creative destruction, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, intangible asset, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, Marc Andreessen, mass immigration, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Future of Employment, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

Lehman’s bankruptcy created havoc in money markets – a key part of the country’s financial infrastructure that large corporations often use to fund themselves – pushing the economy towards a frightening situation in which corporate giants such as General Electric might have been unable to pay their workers. Only massive intervention by the federal government and the Federal Reserve prevented an economic catastrophe. Even so, the world economy shrank in 2009. Millions of people were tossed out of work. Lives were destroyed. The Great Recession pushed the eurozone into its own existential financial crisis. Now, years later, labour markets remain scarred, and voters are falling into the arms of fringe politicians. Such severe economic crises are rare. They require a perfect storm of enabling circumstances: lax financial regulation, large-scale capital flows and major policy mistakes, among other factors. But the Great Recession would not have occurred without large economic imbalances, which made management of rich economies difficult for policy-makers.


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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


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

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

Others who had waxed lyrically about the wonders of free markets, and who had been at the heart of the crash, were put in charge of clearing up and paid handsomely to do so. The USA set the lead, doling out billions to Wall Street. From 2008 to 2012, $4.6 trillion was spent in bailing out nearly 1,000 banks, insurance companies and other financial institutions, while guarantees from the Treasury, Federal Reserve and other agencies totalled $16.9 trillion. Europe followed. In 2012–13, the ECB lent €1 trillion to Eurozone banks to avert a funding crisis. At its peak, UK government support to prop up ailing banks totalled £133 billion in cash and £1 trillion in guarantees and indemnities. Bernie Sanders, the Vermont senator who campaigned for the presidential nomination in 2016, listed twenty profitable corporations that had received taxpayer bailouts while operating subsidiaries in tax havens to avoid taxes and even receiving tax rebates.


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

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

Recovery Has Outperformed the Developed World GDP Levels in Major Advanced Economies Because of the aggressive fiscal, monetary, and financial force we deployed, the U.S. economy has grown faster than other major advanced economies since the financial crisis. Source: Organisation for Economic Co-operation and Development (Q1 2008 = 100). They did not explode. And the U.S. economy escaped its death spiral. It started growing again within six months. By the end of 2013, our GDP was 6 percent higher than before the crisis; Japan, the U.K., and the eurozone were still below their pre-crisis output levels. After declining by $15 trillion, U.S. household wealth was also higher than the pre-crisis peak. As I write this in March 2014, we have enjoyed forty-eight consecutive months of private-sector job growth, with 8.7 million private-sector jobs created. Our 6.7 percent unemployment rate is still high, but it is a lot lower than our peak of 10 percent, or the current eurozone rate of 12 percent.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, Bretton Woods, business climate, capital controls, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, transaction costs, universal basic income, urban sprawl, working-age population


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Finance and the Good Society by Robert J. Shiller

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Alvin Roth, bank run, banking crisis, barriers to entry, Bernie Madoff, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, income inequality, information asymmetry, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, Steven Pinker, telemarketer, The Market for Lemons, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

By the spring of 2009 the crisis was so severe that it was described as the biggest nancial calamity since the Great Depression of the 1930s—bigger than the Asian nancial crisis of the 1990s and bigger than the oil-price-induced crises of 1974–75 and 1981–82. Beginning in 2010 it was complicated by a European sovereign debt and banking crisis, which by 2012 resulted in many downgrades of governments’ debt, and even of the Eurozone’s bailout fund, the European Financial Stability Facility. This crisis continues to have repercussions around the world. Despite the problems in the mortgage business and many large nancial institutions —some based simply on overenthusiasm and naïveté, others on outright e orts to manipulate and to defraud—I never felt, as did so many, that these problems were a damning indictment of our entire nancial system. Imperfect as our nancial system is, I still find myself admiring it for what it does, and imagining how much more impressive it can be in the future.


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A Classless Society: Britain in the 1990s by Alwyn W. Turner

Berlin Wall, Bob Geldof, British Empire, call centre, centre right, deindustrialization, demand response, Desert Island Discs, endogenous growth, Etonian, eurozone crisis, facts on the ground, Fall of the Berlin Wall, falling living standards, first-past-the-post, Francis Fukuyama: the end of history, friendly fire, full employment, global village, greed is good, inflation targeting, means of production, millennium bug, minimum wage unemployment, moral panic, negative equity, Neil Kinnock, offshore financial centre, old-boy network, period drama, Ronald Reagan, sexual politics, South Sea Bubble, Stephen Hawking, upwardly mobile, Winter of Discontent, women in the workforce

In that first flush of enthusiasm, when he had sufficient support that he could be forgiven for the Bernie Ecclestone scandal, it might have been possible to win a referendum on the single currency, but the moment passed. ‘Blair is mad not to have already made a clear sign that he wants to go into the euro,’ observed former chancellor Geoffrey Howe in 1999. ‘He is wasting his big majority. After the election, it may be even more difficult.’ Blunkett was right that the question of whether to join the euro was the biggest decision of the parliament. When the eurozone plunged into a sovereign debt crisis in 2009, and Blair’s forebodings about the austerity measures implicit in EMU proved all too real, many expressed their relief that Britain had not signed up to the single currency. The reality, though, was that a prime minister who boasted of his ability to make tough choices had flunked this one, and that he had ultimately adopted little more than the policy referred to by John Major as ‘procrastinating on principle’.