liquidationism / Banker’s doctrine / the Treasury view

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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

The tension between these two viewpoints—can’t live with it, can’t live without it—generates a concern with how states should fund themselves, and it is this concern that creates the conditions for the emergence of austerity as a distinct economic doctrine when states become large enough budgetary entities in their own right to warrant cutting: that is, by the 1920s. When that happens, austerity appears in its own right as a distinct economic doctrine. After briefly detailing some nineteenth- and early twentieth-century precursors, I examine the two key austerity doctrines formed in this period: “liquidationism”—sometimes called “the Banker’s doctrine” in the United States—and the “Treasury view” in the United Kingdom. These ideas were, I argue, the original neoliberal ideas in that they drew on the classical liberalism of Locke, Hume, and Smith, and applied themselves anew to the policy issues of the day. I then discuss the responses that these ideas engendered, the most relevant of which are John Maynard Keynes’s refutation of austerity policies and Joseph Schumpeter’s strange abrogation of them.11 By 1942, it seems that the die has been cast and austerity had been sent away to the retirement home for bad economic ideas.

., 168 Sweden as a welfare state, 214 austerity in, 17, 178–180, 191–193, 204, 206 economic recovery in the 1930s in, 126 expansionary contraction in, 209–210, 211 fiscal adjustment in, 173 Swedish Social Democrats, (SAP), 191 thirty-year bond in, 210–211 systemic risk, 44 Tabellini, Guido “Positive Theory of Fiscal Deficits and Government Debt in a Democracy, A”, 167 tail risk, 44 See also systemic risk Takahashi, Korekiyo, 199 Taleb, Nassim Nicolas, 32, 33, 34 “Tales of Fiscal Adjustment” (Alesina and Ardanga), 171, 205, 208, 209 Target Two payments, 91 Taylor, Alan, 73 Tax Justice Network, 244 Thatcher, Margaret, 15 “there is no alternative”, 98, 171–173, 175, 231 ThyssenKrupp, 132 Tilford, Simon, 83 “too big to bail,” 49, 51–93, 74, 82 European banks as, 83, 90, 92 “too big to fail”, 6, 16, 45, 47–50, 82, 231 Tooze, Adam, 196 Trichet, Jean Claude, 60 as president of the ECB, 176 on Greece and Ireland, 235 See also European Central Bank United Kingdom, 1 and the gold standard, 185, 189–191 asset footprint of top banks, 83 austerity in, 17, 122–125, 126, 178–180 and the global economy in the 1920s and 1930s, 184–189, 189–121 banking crisis in, 52 cost of, 45 depression in, 204 Eurozone Ten-Year Government Bond Yields, 80 fig. 3.2 Gordon Brown economics policy, 5, 59 housing bubble, 66–67 Lawson boom, 208 “Memoranda on Certain Proposals Relating to Unemployment” (UK White Paper), 122, 124 New Liberalism, 117–119 “Treasury view”, 101, 163–165 war debts to the United States, 185 United States, 2 AAA credit rating, 1, 2–3 Agricultural Adjustment Act, 188 and current economic conditions, 213 and printing its own money, 11 and recycling foreign savings, 11–12 and the Austrian School of economics, 121, 143–145, 148–152 and the gold standard, 188 assets of large banks in, 6 austerity in, 17, 119–122, 178–180, 187–189 “Banker’s doctrine”, 101 banking system of, 6 cost of crisis, 45, 52 Bush administration economics policy, 5, 58–59 capital-flow cycle in, 11 Congressional Research Service (CRS), 213 debt-ceiling agreement, 3 depression in, 188 Federal Reserve, 6, 157 federal taxes, 242–243 liberalism in, 119–122 liquidationism in, 119–122, 204 National Industrial Recovery Act, 188 repo market, 15–16, 24–25 rise in real estate prices in, 27 Securities and Exchange Commission, 49 Simson-Bowles Commission, 122, 122–125 Social Security Act, 188 stimulus in, 55 stop in capital flow in 1929, 190 Treasury bills, 25 Troubled Asset Relief Program, 58–59, 230 and American politics involvement, 59 Wagner’s Act, 188 Wall Street Crash of 1929, 204, 238 Washington Consensus, 142, 161–162, 165 Value at Risk (VaR) analysis, 34–38 Vienna agreement, 221 Viniar, David, 32 Wade, Robert, 13 Wagner, Richard, 156 Wartin, Christian, 137 Watson Institute for International Studies, ix “We Can Conquer Unemployment” (Lloyd George), 123, 24 “Wealth of Nations, The”, 109, 112 welfare, xi, 58 welfare state foundation for, 117 Wells Fargo, 48 Whyte, Philip, 83 Williamson, John, 161, 162 World Bank, 163, 210, 211 World Economic Outlook, 212

Peden “Keynes, The Treasury and Unemployment in the 1930s,” Oxford Economic Papers 32, 1 (March 1980): 6. 92. Peden, “The ‘Treasury View,’” 173. Interestingly, this is the same argument given today by conservative historian Niall Ferguson for why stimulus policies don’t work. See Niall Ferguson, “It Is the Stupid Economy,” Joe Posner Fire Works and Co., op-video, http://www.joeposner.net/video/niall-ferguson-its-the-stupid-economy. 93. See the discussion of Henderson in Bill Janeway, Doing Cpaitalism in the Innovation Economy (New York: Cambridge University Press, 2012), 246–247. 94. Janeway, Doing Capitalism, 248. 95. See Hopkins’s view in Peden, “The ‘Treasury View,’” 175, 176. 96. Peden, “The ‘Treasury View,’” 176. 97. Ibid. 98. Ibid., 177. 99. Peden, “Keynes, The Treasury,” 9. 100.


pages: 524 words: 143,993

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

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

This was partly for good reason, given the huge primary fiscal deficits and current-account deficits bequeathed initially by the crisis: to be cut off from financing overnight would have imposed huge adjustment costs. Thus, extreme liquidationism failed. The situation in future will not be different. Yet in some ways liquidationism, alas, also succeeded. Crisis-hit members are caught in an extreme demand shortage: their governments have to tighten their fiscal position, while the private sector is dependent on borrowing from banks no longer able to gain ready access to foreign funds. The countries are forced to follow the German model of the early to mid-2000s, by moving towards an external surplus, but in less auspicious external circumstances. This requires a big improvement in competitiveness, driven by wage suppression and rising productivity or, more bluntly, mass unemployment. The standard tools of liquidationism – depressions, mass bankruptcy and mass unemployment – are needed to deliver this outcome.

The Eurozone might even be described as structurally liquidationist. It is easy to understand why people argue that one should let the medicine work, unchecked, however bad the side effects. It is, like chemotherapy, a cure that comes close to killing the patient. But this liquidationism is also tempered, in practice, making its results slower and the treatment not quite as brutal as it would otherwise be. Yet did member countries really bargain for such a ‘liquidationism light’? Might it then be possible to temper the liquidationism, while also avoiding the onerous limits on sovereign discretion of the Eurozone’s new orthodoxy? Yes. The most important requirement of all is a far more symmetrical adjustment – what one might call an ‘adjustment union’. Thus, after a crisis, inflation would rise in the surplus countries, offsetting the falling inflation of countries in external deficit.

The UK’s austerity programme, launched in 2010, removed fiscal support for recovery and, together with the falling output of North Sea oil, adverse shifts in the terms of trade and rising domestic prices of imports, resulted in economic stagnation for a further three years. The outcome was far worse in crisis-hit parts of the Eurozone, where the approach taken was close to liquidationism (on which see further below). In brief, the short-term record of the new orthodoxy was far from a catastrophe. But it could have done far better. In particular, it failed to provide adequate support for demand, partly because of premature fiscal tightening. A widely promoted alternative to the new orthodoxy has been ‘liquidationism’ – reliance on the free market, without fiscal or monetary policy support. This approach has limited support among academic economists, but substantial support among active participants in financial markets, including some successful speculators.


pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

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

When I studied economics, claims like Schumpeter’s were described as characteristic of the “liquidationist” school, which basically asserted that the suffering that takes place in a depression is good and natural, and that nothing should be done to alleviate it. And liquidationism, we were taught, had been decisively refuted by events. Never mind Keynes; Milton Friedman had crusaded against this kind of thinking. Yet in 2010 liquidationist arguments no different from those of Schumpeter (or Hayek) suddenly regained prominence. Rajan’s writings provide the most explicit statement of the new liquidationism, but I have heard similar arguments from many financial officials. No new evidence or careful reasoning was presented to explain why this doctrine should rise from the dead. Why the sudden appeal? At this point, I think we have to turn to the question of motivations.

There are players on the political landscape—important players, with real influence—who don’t believe that it’s possible for the economy as a whole to suffer from inadequate demand. There can be lack of demand for some goods, they say, but there can’t be too little demand across the board. Why? Because, they claim, people have to spend their income on something. This is the fallacy Keynes called “Say’s Law”; it’s also sometimes called the “Treasury view,” a reference not to our Treasury but to His Majesty’s Treasury in the 1930s, an institution that insisted that any government spending would always displace an equal amount of private spending. Just so you know that I’m not describing a straw man, here’s Brian Riedl of the Heritage Foundation (a right-wing think tank) in an early-2009 interview with National Review: The grand Keynesian myth is that you can spend money and thereby increase demand.


pages: 306 words: 78,893

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

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, Y2K, zero-sum game

., where social democratic politics has a historically weak presence. Many countries protected their industries and regulated finance and other sectors, cross-border capital flows were often restricted, and currencies weren't always easily convertible into other currencies.^ The nineteenth-century economics of Hght regulation, tight budgets free prices, and self-equilibrating markets—^what Keynes derided during the Depression as "the Treasury view"—seemed deeply buried. You needn't take the word of a long-dead Marxist Hke Kalecki for it, though; there's supporting testimony from Alan Greenspan. Several times Finance 207 during the late 1990s, Greenspan worried publicly that, as unemployment drifted steadily lower the "pool of available workers" was running dry.'' The dryer it ran, the greater the risk of "wage inflation," meaning anything more than minimal increases.


pages: 273 words: 34,920

Free Market Missionaries: The Corporate Manipulation of Community Values by Sharon Beder

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anti-communist, battle of ideas, business climate, corporate governance, en.wikipedia.org, full employment, income inequality, invisible hand, liquidationism / Banker’s doctrine / the Treasury view, minimum wage unemployment, Mont Pelerin Society, new economy, old-boy network, popular capitalism, Powell Memorandum, price mechanism, profit motive, Ralph Nader, rent control, risk/return, road to serfdom, Ronald Reagan, school vouchers, shareholder value, spread of share-ownership, structural adjustment programs, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Torches of Freedom, trade liberalization, traveling salesman, trickle-down economics, Upton Sinclair, Washington Consensus, wealth creators, young professional

Hawke and Keating forged a consensus between business and organized labour based on the premise that improved economic performance depended on greater reliance on the market and less government.65 . . . the issue at the centre of Australia’s politics ceased to be: how can government intervene in economic life to create desirable social outcomes? By the 1990s it had been reformulated as: how can governments create competitive market situations to ensure world-best practice is pursued and international standards are achieved? 66 The shift in the ALP government approach was such that, although elected in 1983 on promises of an expanded budget ‘to increase demand and commence the arduous task of sustained economic recovery’, the Treasury view prevailed and by 1984 the prime minister was promising not to raise taxes nor increase the deficit as a proportion of GDP. In fact, over the following seven years, the deficit fell from 28.9 per cent to 23.7 per cent of GDP. Similarly, prior to the election, Labor had been critical of a proposal for deregulation of the financial sector. However, once in government it accepted advice from a committee of economists from the financial sector, the Treasury and the Reserve Bank, which recommended financial deregulation.


pages: 372 words: 109,536

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money by Frederik Obermaier

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banking crisis, blood diamonds, credit crunch, crony capitalism, Deng Xiaoping, Edward Snowden, family office, high net worth, income inequality, liquidationism / Banker’s doctrine / the Treasury view, mega-rich, Mikhail Gorbachev, mortgage debt, offshore financial centre, optical character recognition, out of africa, race to the bottom, We are the 99%, WikiLeaks

We find accomplices of African dictators, Central American drug barons, convicted sex offenders, each with an offshore company. There are so many of them that we soon lose track. We draw up lists and compare the details in our files with information from the EU, the UN and the USA. Below is a selection. Bredenkamp, John Arnold This South African-born arms dealer was subject to EU sanctions from 2009 to 2012 due to his ‘close links to the Zimbabwean government’. The US Department of the Treasury views him as an associate of Mugabe’s regime and imposed sanctions on Bredenkamp and twenty of his firms in 2008.5 Makhlouf, Ihab Syrian president Bashar al-Assad’s cousin was sanctioned by the EU in May 2011 because he ‘funds the regime and helps to suppress demonstrations’. Makhlouf, Iyab Bashar al-Assad’s cousin and a Syrian intelligence officer was put on the EU sanctions list because he was allegedly involved in putting down protests.

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

His deficit is due in the main to an increase in current expenditure which shows no signs of abating: nor is there any solid reason whatever for supposing that any such marked recovery as he anticipates is likely to take place during the next twelve months. However deplorable any increase in taxation may be, there is at least one thing more deplorable still, and that is increased expenditure uncovered by current revenue. Today, Snowden’s Budget and the ‘Treasury View’ that underpinned it are roundly condemned. As Ed Balls, the Shadow Chancellor of the Exchequer, argued in 2010: ‘And the result [of Snowden’s Budget]? The promised private sector recovery failed to materialise as companies themselves sought to retrench. Unemployment soared. The Great Depression soured world politics and divided societies.’3 This is, if you like, the new conventional wisdom.


pages: 586 words: 159,901

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

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

His second term coincided with the great collapse, which drove unemployment from 7% to 30% in a matter of three years. As the collapse unfolded, Hilferding again advocated austerity — budget cuts and tax increases, while resisting ail "inflationary" schemes (Darity and Horn 1985). While Hilferding obviously can't be blamed for the collapse, his loyalty to capitalist financial orthodoxy — what Keynes derided in Britain as "the Treasury view" — is inexcusable in a socialist, and further proof that in practical matters, Marxians can be as blinkered as the most austere Chicagoan. money and power Several aspects of Marx's theorizing on money and credit are worth savoring: the inseparability of money and commerce, the political nature of money (and the inseparability of market and state), and the role of credit in breaking capital's own barriers to accumulation.


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

* * * While thinkers in the national security community have expressed concerns about financial war, officials at the U.S. Treasury and Federal Reserve routinely pour cold water on the threat analysis. Their rejoinder begins with estimates of the market impact of financial war, then concludes that the Chinese or other major powers would never engage in it because it would produce massive losses on their own portfolios. This view reflects a dangerous official naïveté. The Treasury view supposes that the purpose of financial war is financial gain. It is not. The purpose of financial war is to degrade an enemy’s capabilities and subdue the enemy while seeking geopolitical advantage in targeted areas. Making a portfolio profit has nothing to do with a financial attack. If the attacker can bring an opponent to a state of near collapse and paralysis through a financial catastrophe while advancing on other fronts, then the financial war will be judged a success, even if the attacker incurs large costs.


pages: 494 words: 132,975

Keynes Hayek: The Clash That Defined Modern Economics by Nicholas Wapshott

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airport security, banking crisis, Bretton Woods, British Empire, collective bargaining, complexity theory, creative destruction, cuban missile crisis, Francis Fukuyama: the end of history, full employment, Gordon Gekko, greed is good, Gunnar Myrdal, if you build it, they will come, Isaac Newton, Joseph Schumpeter, liquidationism / Banker’s doctrine / the Treasury view, means of production, Mont Pelerin Society, mortgage debt, New Journalism, Northern Rock, Paul Samuelson, Philip Mirowski, price mechanism, pushing on a string, road to serfdom, Robert Bork, Ronald Reagan, Simon Kuznets, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, trickle-down economics, War on Poverty, Yom Kippur War

“The Governor [of the Bank of England] allows himself to be perfectly happy in the spectacle of Britain possessing the finest credit in the world simultaneously with a million and a quarter unemployed.”25 The following month Churchill invited Keynes and leading lights of the financial world to dinner at his official residence at 11 Downing Street. Keynes and Reginald McKenna, the former wartime Liberal chancellor, argued that reducing wages by 10 percent would have to be imposed on the coal miners and that prolonged strikes and a contraction (slowing down of activity) in key industries would follow. Three days later, after persistent pressure from his more orthodox colleagues, Churchill abandoned his instinctive opposition to the Treasury view and agreed to restore fixing the pound sterling to the price of gold—“the gold standard”—at its prewar parity. Churchill’s decision led Keynes to write a series of articles for The Nation that were collected in a best-selling book, The Economic Consequences of Mr. Churchill, whose title echoed his Economic Consequences of the Peace. Keynes argued that setting the value of the pound at 10 percent higher than the floating (or market) rate amounted to “a policy of reducing everyone’s wages by two shillings [10 percent] in the pound.”26 As there was no mechanism to ensure that this would be imposed on workers across the board, those with weak bargaining power or timid trade unions would suffer disproportionately.


pages: 1,744 words: 458,385

The Defence of the Realm by Christopher Andrew

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active measures, anti-communist, Ayatollah Khomeini, Berlin Wall, British Empire, Clive Stafford Smith, collective bargaining, credit crunch, cuban missile crisis, Desert Island Discs, Etonian, Fall of the Berlin Wall, glass ceiling, illegal immigration, job satisfaction, large denomination, liquidationism / Banker’s doctrine / the Treasury view, Mahatma Gandhi, Mikhail Gorbachev, Neil Kinnock, North Sea oil, Red Clydeside, Robert Hanssen: Double agent, Ronald Reagan, sexual politics, strikebreaker, Torches of Freedom, traveling salesman, union organizing, uranium enrichment, V2 rocket, Vladimir Vetrov: Farewell Dossier, Winter of Discontent

This transposing of the sexes, and the use of other homosexual slang, at times made for difficulties of interpretation.’113 The Security Service, however, saw no reason to follow the Canadian example: ‘It was concluded that the present criterion was right, i.e. that homosexuality raises a presumption of unfitness to hold a P.V. post but the presumption can be disregarded by the Head of the Department if he is satisfied in all the circumstances that this can be done without prejudice to national security.’ In 1965 the Security Service successfully resisted the Treasury view that it might be necessary to treat homosexuality as an absolute bar against holding any post which required positive vetting.114 Though its criteria were never fully spelt out, the Service seems to have been relatively unconcerned during positive vetting by the presence of gays in the government service, provided that they did not actually identify themselves as homosexual and remained discreet about their sexual liaisons (which, until 1967, remained illegal).