reserve currency

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pages: 561 words: 87,892

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

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

Arguably, then, major emerging nations have no alternative other than to challenge the dollar’s pre-eminent reserve currency role. It’s not just a case of switching out of dollars into, for example, euros. That might bring diversification benefits but it would not deal with the underlying problem, namely that the emerging economies would still be dependent on foreign currencies to conduct their international business. They need, instead, to create their own reserve currencies. They need to create the financial equivalent of the Protestant Church. CHINA’S RESERVE CURRENCY In principle, it’s a simple process. Imagine, for example, that China’s renminbi became a reserve currency, widely held around the world and used for trade and capital market transactions.

Thus, while it’s perfectly possible to have more than one reserve currency circulating simultaneously, it has typically been a sign of weakness rather than strength. Reserve currency rivalry generally reflects unease with the international financial system, whether for economic or political reasons. Mr Putin’s comments and Beijing’s actions deserve to be taken seriously. In both the interwar years and the 1970s, the loss of trust in the prevailing reserve currency contributed to huge economic dislocations. This is hardly surprising. A reserve currency acts as a beacon of stability in an otherwise uncertain world.

Speaking at the World Economic Forum in Davos on 28 January 2009, Vladimir Putin, prime minister of Russia, said: The entire economic growth system, where one regional centre prints money without respite and consumes material wealth, while another regional centre manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback … excessive dependence on a single reserve currency is dangerous for the global economy. Consequently, it would be sensible to encourage the objective process of creating several strong reserve currencies in the future. It is high time we launched a detailed discussion of methods to facilitate a smooth and irreversible switchover to the new model … it is important that reserve currency issuers must implement more open monetary policies … these nations must pledge to abide by internationally recognized rules of macroeconomic and financial discipline.


Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies by Nik Bhatia

Alan Greenspan, bank run, basic income, Bear Stearns, bitcoin, blockchain, Bretton Woods, British Empire, central bank independence, Cornelius Vanderbilt, Credit Default Swap, cryptocurrency, distributed ledger, fiat currency, fixed income, Fractional reserve banking, interest rate derivative, interest rate swap, Isaac Newton, joint-stock company, Kickstarter, Long Term Capital Management, margin call, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, offshore financial centre, quantitative easing, reserve currency, risk free rate, Satoshi Nakamoto, slashdot, smart contracts, time value of money, tulip mania, universal basic income

When examining these two central banks that invented practically every aspect of what we today think of as central banking, it is essential to consider to what degree their monetary innovations served only to advance the agenda of their governments. These banks also gave us a look at what it meant to issue what the rest of the world considered to be its reserve currency. Central banks, world reserve currencies, and the arrival of third-layer money will be explored further in this chapter. Instant Settlement The Bank of Amsterdam (BoA) was only created thanks to the world’s first joint-stock company, the Dutch East India Company (Vereenigde Oostindische Compagnie, or VOC).

It had absolute financial surveillance over the economy because it centrally routed all of its transactions and gained a purview into the financial relationships between its patrons.8 Demand for the BoA’s denomination grew from around Europe while Amsterdam elevated its position as the continent’s axis of capital. The guilder was considered the world reserve currency during the seventeenth century because merchants and businesses from all over Europe held it in reserve due to uncompromising trust in its issuer. Its status as world reserve currency lasted well into the eighteenth century. Privileged Lending On the Bank of Amsterdam’s agenda was more than just a subtle advance in financial settlement. A closer examination suggests that the VOC positioned itself at the top of the money pyramid in order to extract power and resources.

The power to create money came with the responsibility, when necessary, to do whatever it took to preserve the currency denomination. The pound sterling spent the nineteenth century as the world reserve currency as other nations procured it as a savings vehicle due to the British Empire’s stature and stability. As the Empire expanded to cover half the Earth’s surface, the Bank of England faced the enormous challenge of maintaining a domestic denomination used by participants around the world. Pound sterling wouldn’t be the last currency to suffer from this conundrum. Across the Atlantic, the next world reserve currency was waiting in the wings. Chapter 4 Federal Reserve System Gold is money.


pages: 381 words: 101,559

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

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, deal flow, Deng Xiaoping, diversification, diversified portfolio, Dr. Strangelove, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, Great Leap Forward, guns versus butter model, high net worth, income inequality, interest rate derivative, it's over 9,000, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, power law, price mechanism, price stability, private sector deleveraging, proprietary trading, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, short squeeze, sovereign wealth fund, special drawing rights, special economic zone, subprime mortgage crisis, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, vertical integration, War on Poverty, Washington Consensus, zero-sum game

After Bretton Woods, the anchor consisted of the dollar and gold, and since 1971 the anchor has consisted of the dollar as the leading reserve currency. Yet in the postwar world there has always been a reference point. Never before have multiple paper reserve currencies been used with no single anchor. Consequently, the world Eichengreen envisions is a world of reserve currencies adrift. Instead of a single central bank like the Fed abusing its privileges, it will be open season with several central banks invited to do the same at once. In that scenario, there would be no safe harbor reserve currency and markets would be more volatile and unstable. One disturbing variation on Eichengreen’s optimistic vision consists of regional currency blocs, with local dominance by the dollar, euro and yuan, and possibly the ruble in Russia’s area of influence in Eastern Europe and Central Asia.

It can use a sovereign wealth fund to invest in stocks or other asset classes, or it can keep a portion in liquid instruments or gold. The liquid instruments can involve bonds denominated in a number of different currencies, each called a reserve currency, because countries use them to invest and diversify their reserves. Since Bretton Woods in 1944, the dollar has been by far the leading reserve currency; however, it has never been the sole reserve currency. The IMF maintains a global database showing the composition of official reserves, including U.S. dollars, euros, pounds sterling, yen and Swiss francs. Recent data show the U.S. dollar comprising just over 61 percent of identified reserves, while the next largest component, the euro, weighs in at just over 26 percent.

The continuation of the trend toward a diminished role for the dollar in international trade and the reserve balances begs the question of what happens when the dollar is no longer dominant but is just another reserve currency among several others? What is the tipping point for dollar dominance? Is it 49 percent of total reserves, or is it when the dollar is equivalent to the next largest currency, probably the euro? Barry Eichengreen is the preeminent scholar on this topic and a leading proponent of the view that a world of multiple reserve currencies awaits. In a series of academic papers and more recent popular books and articles, Eichengreen and his collaborators have shown that the dollar’s role as the leading reserve currency did not arise suddenly in 1944 as the result of Bretton Woods, but was actually achieved as early as the mid-1920s.


pages: 397 words: 112,034

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

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

PART V RESERVE CURRENCIES 12 THE FUTURE OF THE US DOLLAR AS A RESERVE CURRENCY John Greenwood Two topics that are widely discussed in the media and among investors are the possible displacement, or even demise, of the US dollar as an international reserve currency within a few years, as well as what currency might replace it. However, in order to comment sensibly on the prospects for the international reserve role of US currency, and to answer the question about what might replace it, we first need to set out the essential characteristics of an international reserve currency. This chapter will first review the historical process by which the US dollar emerged as the preeminent international reserve currency, drawing from that experience a list of the prerequisites for reserve status.

Most holdings of US dollars outside the United States are by private parties, and financial markets are operated largely by and for private parties, with governments and central banks taking advantage of market arrangements. If the SDR were to become a truly international currency, it would need to become a vehicle of choice by private parties. The RMB as a Potential International Reserve Currency Turning to consider future possible reserve currencies, what would have to happen for the Chinese RMB to emerge as an international reserve currency? Viewed in terms of the nine criteria for an international reserve currency, China and the RMB currently meet only five (unit of account, medium of exchange, store of value, economic size, and creditor status), while the remaining four (availability beyond home borders, full convertibility, developed financial system, and network effects) have yet to be met.

In summary, China’s financial system will require many fundamental reforms and an extended period of development before the currency can become a serious contender for the role of international reserve currency. In order for the RMB to compete with—let alone replace—the US dollar as the world’s primary international reserve currency, it is clear that the Chinese authorities still have a long march ahead of them. Conclusion It is clear that none of the other leading currencies in the world today are in a position to replace the US dollar as an international reserve currency. On the contrary, the US dollar is likely to remain the dominant international currency for many years, both for private transactions and for official uses such as intervention and reserve currency holding.


pages: 365 words: 56,751

Cryptoeconomics: Fundamental Principles of Bitcoin by Eric Voskuil, James Chiang, Amir Taaki

bank run, banks create money, bitcoin, blockchain, break the buck, cashless society, cognitive dissonance, cryptocurrency, delayed gratification, en.wikipedia.org, foreign exchange controls, Fractional reserve banking, Free Software Foundation, global reserve currency, Joseph Schumpeter, market clearing, Metcalfe’s law, Money creation, money market fund, Network effects, peer-to-peer, price stability, reserve currency, risk free rate, seigniorage, smart contracts, social graph, time value of money, Turing test, zero day, zero-sum game

The term “reserve currency ” [243] refers to a state hoard, as required for settlement [244] of accounts with other states. Money reserves of people within a state generally consist of the state’s issued money – primarily notes or fiat, with a lesser amount in coin [245] . States buy reserve currency from people using monopoly money [246] , foreign exchange controls [247] and direct taxation. Using their own money discounts purchases by the amount of seigniorage [248] . Foreign exchange controls restrict or prohibit use of the reserve currency as money. By treating the reserve currency as property but not money, the state creates a tax on the apparent capital gain [249] in the reserve money when it devalues its money [250] against the reserve money through monetary inflation [251] .

A meaningful ban implies one or more states (the “prison”) will enforce economic sanctions [164] (at least) on other states (the “prisoners”) potentially moving to Bitcoin as a reserve currency [165] . We assume that the prisoners who may decide to use Bitcoin are trading partners. In other words its use as a reserve currency requires a partner with whom to transact . Ordinal utility [166] is implied by subjective value [167] . No outcome ties [168] are observed, implying strong dilemma. Both symmetric and asymmetric knowledge assumptions are evaluated. The outcome for individual Bitcoin (Sucker) : Economic sanction. No trading partners (using Dollar). An unusable reserve currency (no trading partners). The outcome for mutual Bitcoin (Reward) : Economic sanction.

The outcome for mutual Bitcoin (Reward) : Economic sanction. Economic sanction of trading partner. A reserve currency not taxed via seigniorage. The outcome for individual Dollar (Temptation) : No economic sanction. Economic sanction of trading partner. A reserve currency taxed via seigniorage. The outcome for mutual Dollar (Punishment) : No economic sanction. No economic sanction of trading partner. A reserve currency taxed via seigniorage. Strong Symmetric Dilemma With Ordinal Outcome Relations Brazil\Ireland Bitcoin Dollar Bitcoin R\R S\T Dollar T\S P\P To be considered a prisoner’s dilemma T > R > P > S must be true where: T > R and P > S imply that Dollar is the dominant strategy for each.


pages: 466 words: 127,728

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

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

By extension, it is also about the potential collapse of the international monetary system because, if confidence in the dollar is lost, no other currency stands ready to take its place as the world’s reserve currency. The dollar is the linchpin. If it fails, the entire system fails with it, since the dollar and the system are one and the same. As fearsome a prospect as this dual collapse may be, it looks increasingly inevitable for all the reasons one will find in the pages to come. A journey to the past is in order first. Few Americans in our time recall that the dollar nearly ceased to function as the world’s reserve currency in 1978. That year the Federal Reserve dollar index declined to a distressingly low level, and the U.S.

We call for the reform of the International Financial Institutions to make them more representative and to reflect the growing weight of BRICS. . . . We remain concerned with the slow pace of the reform of the IMF. The BRICS summit also specifically addressed the U.S. dollar’s role as the world’s leading reserve currency, and its possible replacement by SDRs: We support the reform and improvement of the international monetary system, with a broad-based international reserve currency system providing stability and certainty. We welcome the discussion about the role of the SDR in the existing international monetary system including the composition of the SDR’s basket of currencies. Finally, and so as to leave no doubt about the BRICS’ status as a political rather than an economic project, the Durban summit devoted substantial time to topics such as the crisis in Syria, a Palestinian state, Israeli settlements, Iranian nuclear weapons development, the war in Afghanistan, instability in the Congo, and other purely geopolitical issues.

The resulting Saudi-Russian-Egyptian alliance removes another prop from under the dollar and creates a community of interest between Saudi Arabia and Russia, which had already announced its preference for an international monetary system free from dollar hegemony. For a GCC currency to become a true global reserve currency as opposed to a trade currency, further deepening of GCC financial markets and infrastructure would be needed. However, Saudi Arabia’s reevaluation of its security relations with the United States combined with the euro’s expansion and the efforts of the BRICS and the SCO to acquire gold and escape dollar dominance could presage a quite rapid diminution in the dollar’s international reserve-currency role. ■ The Island Twins Two nations stand apart from this survey of monetary multilateralism and rising discontent with the international monetary system: the U.K. and Japan.


pages: 328 words: 96,678

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

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

China is ready to substitute the dollar for the RMB and other strategic rivals of the United States—like Russia—are ready to dump dollar assets and a dollar-based reserve currency regime now that their foreign reserves and assets have been frozen. Cryptocurrency promoters are bent—if delusional—on trying to displace any fiat currency with their digital money, a near impossible goal as such cryptocurrencies lack essential features of a true currency. America’s reserve currency status won’t collapse overnight, but we will see it coming in waning US economic and geopolitical muscle around the world and increased weaponization of the US dollar for national security goals. For centuries global reserve currency status has gone hand in hand with geopolitical hegemony.

The weaponization of the US dollar—and, after the Russian war in Ukraine, other major currencies in countries allied with the United States—via the increased use of trade and financial sanctions risks undermining the role of the US dollar as a major global reserve currency and propels an inflationary disorderly fall in its value. In the 1970s, that inflationary shock was triggered by the end of the gold-exchange standard. History will remember the trade and financial sanctions imposed by the United States and its allies against Russia—starting with the effective freezing of most of its foreign reserves—as the trigger for Russia, China, and other rivals of the West to dump the US dollar as the major global reserve currency and the creation of an alternative to it that didn’t depend on dollar accounting, dollar payments, dollar funding, and dollar store of value accumulation.

A stable currency—in the last century the US dollar—is the anchor of that international monetary and financial system, where transactions in goods, service, capital, labor, technology, and data require a stable and accepted global reserve currency to grease international trade and globalization. That’s the theory, at least. In practice, decades of financial experimentation and innovation have created a very different reality. Unconventional central bank goals and policies spurred by the Global Financial Crisis and the COVID-19 pandemic have flooded advanced economies with unprecedented sums of liquidity. Swift and dramatic action averted recessions, but at what long-run cost? And now financial warfare risks undermining even the global reserve currency role of the US dollar, the anchor of international monetary and financial stability.


pages: 661 words: 185,701

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance by Eswar S. Prasad

access to a mobile phone, Adam Neumann (WeWork), Airbnb, algorithmic trading, altcoin, bank run, barriers to entry, Bear Stearns, Ben Bernanke: helicopter money, Bernie Madoff, Big Tech, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bretton Woods, business intelligence, buy and hold, capital controls, carbon footprint, cashless society, central bank independence, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, deglobalization, democratizing finance, disintermediation, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, eurozone crisis, fault tolerance, fiat currency, financial engineering, financial independence, financial innovation, financial intermediation, Flash crash, floating exchange rates, full employment, gamification, gig economy, Glass-Steagall Act, global reserve currency, index fund, inflation targeting, informal economy, information asymmetry, initial coin offering, Internet Archive, Jeff Bezos, Kenneth Rogoff, Kickstarter, light touch regulation, liquidity trap, litecoin, lockdown, loose coupling, low interest rates, Lyft, M-Pesa, machine readable, Mark Zuckerberg, Masayoshi Son, mobile money, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, offshore financial centre, open economy, opioid epidemic / opioid crisis, PalmPilot, passive investing, payday loans, peer-to-peer, peer-to-peer lending, Peter Thiel, Ponzi scheme, price anchoring, profit motive, QR code, quantitative easing, quantum cryptography, RAND corporation, random walk, Real Time Gross Settlement, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, risk/return, Robinhood: mobile stock trading app, robo advisor, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seigniorage, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, smart contracts, SoftBank, special drawing rights, the payments system, too big to fail, transaction costs, uber lyft, unbanked and underbanked, underbanked, Vision Fund, Vitalik Buterin, Wayback Machine, WeWork, wikimedia commons, Y Combinator, zero-sum game

The US institutional framework might have taken some body blows, but there is no rival that can match the combination of economic, financial, and institutional strength that anchors the dollar’s dominance. While reserve currencies might not be challenged as stores of value, digital versions of extant reserve currencies and improved cross-border transaction channels could intensify competition between reserve currencies themselves. In short, the finance-related technological developments that are underway or on the horizon portend some changes in domestic and international financial markets, but a revolution in the international monetary system is not quite in the cards for the foreseeable future.

Moreover, it is a stretch to suggest that such stablecoins would represent alternative stores of value. Indeed, the allure of stablecoins is precisely that their value is tightly linked to existing reserve currencies in which savers and investors around the world are willing to place their trust. In short, the emergence of stablecoins linked to existing reserve currencies will reduce direct demand for those currencies for international payments but will not in any fundamental way transform the relative balance of power among the major reserve currencies. A Synthetic Global Digital Currency At the Jackson Hole conference of central bankers in August 2019, Mark Carney, then the governor of the Bank of England, gave a luncheon speech that spanned a broad expanse of policy issues.

National currencies issued by their central banks could lose ground to private stablecoins and perhaps also to CBDCs issued by the major economies. Even among the major reserve currencies, there are some shifts in store. The US dollar could lose some ground as a payment currency, although it will remain dominant both in this dimension and as a store of value. A digital renminbi will help the currency gain traction as a payment currency, but the digitization of the currency by itself will do little to boost its status as a reserve currency. The renminbi’s further rise, even if gradual and modest, and the emergence of additional stablecoins could reduce the importance of the second-tier reserve currencies, including the euro, the British pound sterling, the Japanese yen, and the Swiss franc.


pages: 491 words: 131,769

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

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

It ran a current account surplus, and the dollar served as the international reserve currency. Under the famed Bretton Woods agreement, signed shortly before the end of World War II, other nations made their currencies convertible into dollars at certain fixed rates, and the United States pledged to convert those same dollars into gold. Most economists of the day—particularly American economists—thought Bretton Woods was a good idea, but Robert Triffin, a Belgian-born economist, begged to differ. In 1960 he spoke against the idea of having one nation’s currency simultaneously serve as an international reserve currency. Such an arrangement, he warned, contained the seeds of its own destruction.

Such an arrangement, he warned, contained the seeds of its own destruction. Triffin observed that nations that issue reserve currencies—Britain in the nineteenth century, the United States in the twentieth—generally maintain current account surpluses. In the case of the United States, that meant that more dollars flowed into the country than flowed out. So far, so good. But other countries, Triffin pointed out, would need to hold the reserve currency. The resulting demand for dollars would create a countervailing force, causing dollars to flow out of the United States. Those pressures, Triffin argued, would eventually create a current account deficit, which would eventually undercut the economic standing of the United States and, by extension, the dollar.

This may seem like a small matter, but it’s not: at present, much invoicing in international trade uses the dollar as the “unit of account,” even when the trade doesn’t involve the United States. This deference—similar to the respect accorded the pound sterling a century ago—reflects the dollar’s real and symbolic status as the international reserve currency. If the yuan gains widespread acceptance in the world’s account books, the dollar will see its reserve-currency status usurped. For now, however, the renminbi faces an uphill battle to become the world’s premier currency. Even the Chinese may not want it to happen too quickly. The exchange rate would have to become more flexible, allowing the renminbi to appreciate far more than it has already, and making China’s exports less affordable to other countries.


pages: 398 words: 111,333

The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham by Joe Carlen

Abraham Maslow, Albert Einstein, asset allocation, Bernie Madoff, book value, Bretton Woods, business cycle, business intelligence, discounted cash flows, Eugene Fama: efficient market hypothesis, full employment, index card, index fund, intangible asset, invisible hand, Isaac Newton, John Bogle, laissez-faire capitalism, margin call, means of production, Norman Mailer, oil shock, post-industrial society, price anchoring, price stability, reserve currency, Robert Shiller, the scientific method, Vanguard fund, young professional

However, as late as 1965 (eleven years prior to his death), Graham remained convinced that his plan was still preferable to the status quo or any of the other currency schemes that had been proposed since: “If ever expert world opinion should become ready for a new and improved formulation of sound money, my idea might be accepted as the best of its kind.”76 While “expert world opinion” has yet to accept Graham's plan as “the best of its kind,” it has resurfaced in some interesting places since his passing in 1976. COMMODITY-RESERVE CURRENCY: AN IDEA AHEAD OF ITS TIME? In a 1989 New York Times piece titled “The Volatile Dollar: The Floating Dollar Needs an Anchor,” the Boston-based economist David Ranson makes a strong argument for Graham's commodity-reserve currency in the face of the “high price”77 that the United States has paid for “the instability of the dollar.”78 However, Ranson makes no mention of Graham or either of the late writer's books on the subject.

Allen, a Harvard MBA graduate who once worked with Sir James Wolfensohn (chairman of the World Bank from 1995 to 2005), actually described Benjamin Graham as one of “history's most eminent economists.”82 Citing the governor of the Central Bank of China's recent advocacy of a new reserve currency “disconnected from individual nations”83 and “able to remain stable in the long run,”84 Allen told his illustrious LSE audience that “these were the same thoughts put forth by Benjamin Graham in his book World Commodities and World Currencies in 1944.”85 Certainly, if such an international currency is ever implemented (due to China's insistence or any other reason) and modeled after the ideas detailed in his writings, Graham's 1965 prediction that future generations would remember him best for his commodity-reserve currency plan may be proven correct after all.

However, as impressive as these examples are, they compose a surprisingly incomplete reflection of the intellectual powerhouse that was Benjamin Graham. Perhaps this is best illustrated with an example supplied by Graham himself: writing in 1957, he stated that “if my name has any chance of being remembered by future generations…it will be as inventor of the commodity reserve currency plan.”10 This was not false modesty about his contributions to investment finance; from his perspective at that time, this seemed quite plausible. After all, how many noneconomists (Graham had no formal training in economics) in the 1930s and 1940s developed economic proposals that were seriously considered not only by the Roosevelt administration but also by economic theorists the stature of John Maynard Keynes and Friedrich Hayek?


pages: 571 words: 106,255

The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous

"World Economic Forum" Davos, Airbnb, Alan Greenspan, altcoin, bank run, banks create money, bitcoin, Black Swan, blockchain, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, Charles Babbage, conceptual framework, creative destruction, cryptocurrency, currency manipulation / currency intervention, currency peg, delayed gratification, disintermediation, distributed ledger, Elisha Otis, Ethereum, ethereum blockchain, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, George Gilder, Glass-Steagall Act, global reserve currency, high net worth, initial coin offering, invention of the telegraph, Isaac Newton, iterative process, jimmy wales, Joseph Schumpeter, low interest rates, market bubble, market clearing, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Paul Samuelson, peer-to-peer, Peter Thiel, price mechanism, price stability, profit motive, QR code, quantum cryptography, ransomware, reserve currency, Richard Feynman, risk tolerance, Satoshi Nakamoto, scientific management, secular stagnation, smart contracts, special drawing rights, Stanford marshmallow experiment, The Nature of the Firm, the payments system, too big to fail, transaction costs, Walter Mischel, We are all Keynesians now, zero-sum game

Even as central banks repeatedly declared the end of gold's monetary role, their actions in maintaining their gold reserves ring truer. From a monetary competition perspective, keeping gold reserves is a perfectly rational decision. Keeping reserves in foreign governments' easy money only will cause the value of the country's currency to devalue along with the reserve currencies, while the seniorage accrues to the issuer of the reserve currency, not the nation's central bank. Further, should central banks sell all their gold holdings (estimated at around 20% of global gold stockpiles), the most likely impact is that gold, being highly prized for its industrial and aesthetic uses, would be bought up very quickly with little depreciation of its price and the central banks would be left without any gold reserves.

If Bitcoin continues to grow in value and gets utilized by a growing number of financial institutions, it will become a reserve currency for a new form of central bank. These central banks could be primarily based in the digital or physical worlds, but it is becoming worth considering if national central banks should supplement their reserves with Bitcoin. In the current monetary global system, national central banks hold reserves mainly in U.S. dollars, euros, British pounds, IMF Standard Drawing Rights, and gold. These reserve currencies are used to settle accounts between central banks and to defend the market value of their local currencies.

First, governments and banks were always creating media of exchange beyond the quantity of gold in their reserves. Second, many countries used not just gold in their reserves, but also currencies of other countries. Britain, as the global superpower at that time, had benefited from having its money used as a reserve currency all around the world, resulting in its reserves of gold being a tiny fraction of its outstanding money supply. With growing international trade relying on settlement of large quantities of money across the world, the Bank of England's banknotes became, in the minds of many at the time, “as good as gold.”


pages: 354 words: 92,470

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

"World Economic Forum" Davos, 9 dash line, Admiral Zheng, air freight, Alan Greenspan, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, Brexit referendum, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, currency risk, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, Global Witness, Great Leap Forward, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, Jeremy Corbyn, joint-stock company, Kickstarter, Long Term Capital Management, low interest rates, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, middle-income trap, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, plutocrats, post-truth, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Savings and loan crisis, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, The Rise and Fall of American Growth, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

Put another way, the smaller the US economy relative to the rest of the world, the less reliable the US dollar is likely to be as the world’s premier reserve currency. The Nixon Shock may only be a foretaste of future currency upheavals. Those upheavals, in turn, may reflect an increase in competitive currency clipping. With the formation of the euro and the rise of the Chinese renminbi, the world appears to be entering a new phase in which the US dollar faces competition for reserve currency status. Yet if reserve currency status enables the issuing country to more easily escape from a debt trap, the number of countries and regions attempting to engineer reserve currency status will only increase. Meanwhile, those already with reserve currency status will more easily lose the trust of everyone else.

Meanwhile, those already with reserve currency status will more easily lose the trust of everyone else. As reserve currencies proliferate, so more countries will want to claim that it’s ‘our currency, your problem’. Under those circumstances, however, it is difficult to see how globalization can easily progress. At best, we may end up with a series of regional currency blocs dominated by the US dollar, the euro and the renminbi. At worst, we could end up with a chaotic ever-changing constellation of currencies challenging globalization on three separate fronts: first, the desire for individual countries to deflect their debt problem somewhere else; second, the American economy’s diminishing status on the world stage; and third, the absence of a global financial imperium to replace the US.

While it could block the actions of others, it was equally possible that the others could block Washington’s own initiatives: after all, enough smaller countries could form their own ‘superminority’ in order to veto decisions that might otherwise have gone through.5 And over time, US influence has diminished: in 2016, the US vote share had dropped to around 16 per cent. Nevertheless, the principles established in the IMF’s early days still very much applied at the beginning of the twenty-first century: in particular, it was still better to be a creditor than a debtor (unless, like the US, you happened to be the issuer of the world’s principal reserve currency). THE RED MENACE AND THE DEEP POCKETS Despite the best of intentions, the IMF and the World Bank simply did not have the financial firepower to deliver a sustainable post-war settlement. In particular, the IMF’s job was to manage only temporary balance of payments distortions, specifically to keep the financial wheels of world trade well oiled.


Making Globalization Work by Joseph E. Stiglitz

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

Because each country is holding global greenbacks in its reserves, each no longer has to hold (as many) dollars or euros as reserves. For the global economy, this has enormous consequences, both for the former (current) reserve currency countries and for the global economy. We noted earlier the self-destructive logic of the current system, where the reserve currency country becomes increasingly in debt, to the point at which its money no longer serves as a good reserve currency. This is the process that is currently in play with the dollar. Because the global reserve system would no longer rely on the growing debt of a single country—the basic contradiction of the current system, which makes instability almost inevitable—global stability would be enhanced.

It is able and, especially since 2000, willing to run huge deficits. There is a seeming unending appetite for reserve country bonds, and it is all too easy for governments of reserve currency countries to get more and more into debt to feed this appetite. The fact that others are willing to lend at a low interest rate creates a situation politicians find hard to resist. It is easy to run fiscal deficits, to spend more than one has. Since the dollar became the major reserve currency, the United States has twice—in 1981 and 2001—financed huge tax cuts through deficits. This helps to explain our peculiar observation earlier—that the United States is the world’s richest country, yet is living beyond its means.

Without America’s profligacy, the fears of a weak global economy, possibly so weak that prices might actually start to fall—the fears of deflation that surfaced in the early years of this century, and which have plagued Japan for a decade—might have been realized.12 The question is, for how long can America continue to provide this service; that is, can it continue its spending spree? And are there alternative, more equitable ways of avoiding the global downward bias? Insufficiency of aggregate demand in the reserve currency country We have seen how the global reserve system leads to a problem of inadequacy of global aggregate demand. It also presents a special problem of inadequate aggregate demand in the reserve currency country. A country whose currency is being used as a reserve must—if it is to continue to be used as a reserve—“sell” its currency (or more accurately, its T-bills or bonds) to other countries, who hold on to them.13 When a country sells a T-bill to another country, it is, of course, simply borrowing from that country.


pages: 354 words: 105,322

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, blockchain, Boeing 747, Bonfire of the Vanities, Bretton Woods, Brexit referendum, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, driverless car, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, Glass-Steagall Act, global macro, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, low interest rates, machine readable, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Minsky moment, Money creation, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, operational security, Paul Samuelson, Peace of Westphalia, Phillips curve, Pierre-Simon Laplace, plutocrats, prediction markets, price anchoring, price stability, proprietary trading, public intellectual, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk free rate, risk-adjusted returns, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, sovereign wealth fund, special drawing rights, stock buybacks, stocks for the long run, tech billionaire, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, We are all Keynesians now, Westphalian system

One interesting property of the SDR is that it solves Triffin’s dilemma. This economic conundrum was posed by Belgian economist Robert Triffin in testimony to the U.S. Congress in 1960. Triffin observed that the issuer of a global reserve currency had to run persistent deficits to supply the world with sufficient reserves for normal trade. Yet a nation that runs deficits long enough goes broke. In this context, going broke means trading partners lose confidence in the stable value of the reserve currency and reject it in favor of alternatives. SDRs solve this problem because the issuer, the IMF, is not a country and does not run deficits. There is no confidence boundary on the amount of SDRs issued.

Another step on the road to world money was a November 2015 decision by the IMF executive board to include the Chinese yuan as a reference currency in the SDR basket. The other currencies are dollars, euros, yen, and sterling. This decision was purely political. The yuan did not meet the criteria for a true reserve currency and is unlikely to meet them for at least a decade. A reserve currency requires a deep, liquid sovereign bond market, with hedging instruments, repo financing, settlement and clearing facilities, and a good rule of law. China has none of these. Without bond market infrastructure, reserve holders have little to invest in. Still, the political symbolism of the IMF’s yuan decision is important.

The article states: Investment in global public goods—namely, the infrastructure needed to meet the needs of the developing world and to mitigate climate change—could spur global reflation. An estimated $6 trillion in infrastructure investment will be needed annually over the next 15 years just to address global warming. … With the US, the issuer of the world’s preeminent reserve currency, unwilling or unable to provide the liquidity needed to close the infrastructure investment gap, a new supplementary reserve currency should be instituted—one whose issuer does not have to confront the Triffin dilemma. This leaves one option: the International Monetary Fund’s Special Drawing Right. … An incremental expansion of the SDR’s role in the new global financial architecture, aimed at making the monetary-policy transmission mechanism more effective, can be achieved without major disagreement.


pages: 422 words: 113,830

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

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

The United States, although it had become the world’s principal creditor nation after World War I, had yet to establish the dollar as the world’s reserve currency. Britain, meanwhile, was clearly a faded global military and political hegemon, but through 1931 sterling remained the leading and most trusted currency. Neither nation fit the role of lender of last resort—the United States didn’t want to be, and Britain didn’t have the wherewithal. As 2008 ended, kindred warning flags flew. China was the leading creditor nation, with huge currency reserves. The United States was the weakening principal power that still printed the accepted reserve currency. The crux was whether the United States, having become the world’s principal debtor nation, could afford to provoke its global creditors with its biggest ever round of massive budget deficits and monetary expansion.

That was soon unsustainable—the British economy of 1949, pallid and stressed, was still implementing wartime food rationing, and the government was forced to devalue to a humbler $2.80 exchange rate. So much for a onetime reserve currency. Thirty-five years had passed since the early warnings of 1914, not too different from Americans in 2008 harking back thirty-seven years to when a Vietnam-wearied United States closed the gold convertibility window for foreign central banks. My point is that the dollar crisis has been taking shape for many years. Any abandonment of the greenback as the world’s reserve currency could hardly occur “overnight.” Unfortunately, a second yardstick is also relevant, one that the pound did not have to confront back in the first half of the twentieth century—the semiofficial link between U.S. currency and a strategic energy commodity.

Nevertheless, former Federal Reserve chairman Alan Greenspan told the German magazine Stern that although the dollar is still ahead of the euro, “it doesn’t have all that much of an advantage” anymore, so the euro could replace the dollar as the reserve currency of choice. More to the point was the nature of dollar wobbliness in a June 2007 survey conducted among central bank currency reserve managers by UBS, the Swiss bank. Only 47 percent expected the dollar still to be the most important reserve currency in twenty-five years, whereas 23 percent expected an Asian currency, 21 percent opted for the euro, and 8 percent chose gold.55 Perhaps the euro and an Asia-wide currency together could push the dollar down to 40 percent of central bank reserves by 2025; the euro would be hard-pressed to do so alone.


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

But it is very plain to me that the politicians and the central bankers will at this stage do more or less whatever it takes to avoid that collapse happening now, under their watch. They will not let nebulous long-term economic consequences get in the way. What are your thoughts on the status of the dollar as the world’s reserve currency? The dollar is certainly challenged, and will remain so for a number of reasons. A better longer-term solution for the world is probably more than one reserve currency. But unless the U.S. really mismanages things from here, the dollar will remain the world’s number one reserve currency 5 and 10 years down the road. It just might not enjoy such a wide margin of dominance in the future. Is this current bailout going to create the mother of all moral hazards?

If U.S. demand remains stagnant for several years, this could drive a destabilizing deflationary impulse, considering how fast lending growth and debt has been over the past year. China also presents a clear challenge to the U.S. dollar as the world’s reserve currency for the first time since World War II. Although the Chinese renminbi will not become the sole reserve currency, it will become a major tradable currency and could eventually become an important part of a world reserve currency basket. A clear concern is the structural flaw in the global monetary system, whereby the U.S. deficit is everyone else’s surplus. As such, everyone else is simply wed to the level of U.S. debt and implicitly to the U.S. economy’s growth rate.

And, by selling oceanfront, you own an implicit call on global warming! Obviously, and unfortunately, this is not a trade that you can really put on, although it does suggest renting oceanfront rather than buying until prices adjust. What about the U.S. dollar—is the dollar’s status as the world’s reserve currency on the wane? The idea that the dollar’s reserve currency status is disappearing is something I used to believe in, but now I am not so sure. In order for that to happen, the public sector would have to begin dumping its dollars, or at least no longer accumulate dollars. If the underlying U.S. trade deficit has fallen, then the public sector will likely be accumulating fewer dollars.


pages: 488 words: 144,145

Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen

Alan Greenspan, Albert Einstein, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carl Icahn, Carmen Reinhart, central bank independence, classic study, commoditize, conceptual framework, Cornelius Vanderbilt, corporate governance, corporate raider, creative destruction, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Ford Model T, Fractional reserve banking, full employment, Glass-Steagall Act, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, land bank, liquidity trap, low interest rates, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, special drawing rights, Suez canal 1869, Suez crisis 1956, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

Over the next ten to twenty years we will see a larger Eurozone that will provide an alternative reserve currency to the dollar.”12 Triffin’s Dilemma and the Dollar A reckoning long foreseen is at hand. “Nearly 50 years ago, Yale University economist Robert Triffin identified the inevitable future deterioration of the dollar in his book, Gold and the Dollar Crisis: The Future of Convertibility (1960),” wrote researcher Walker Todd in a December 2008 article. “Essentially, Triffin argued, under the Bretton Woods system in which the U.S. dollar was the world’s principal reserve currency (instead of gold, for example), the United States had to incur large trade deficits in order to provide the rest of the world with the liquidity required for the functioning of the global trading system.”13 Returning to the point with respect to the soaring cost of imported energy, the fact that the dollar continues to trade at current levels versus other currencies reflects the reality that as the global means of exchange, the dollar cannot be easily replaced.

Thus dealing with the role of the dollar in the global economy ultimately is linked to fiscal and political reform in the United States. Conventional wisdom says that there is no way out of the current situation of having the dollar as the global reserve currency. A study published in June 2010 by the Council on Foreign Relations quoted Luo Ping, a director-general at the China Banking Regulatory Commission, on the issue of the reserve currency status of the dollar: Except for U.S. Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or United Kingdom bonds. U.S. Treasuries are the safe haven. For everyone, including China, it is the only option. . . .

As part of this new international financial order, the world would gradually but deliberately replace the dollar as the sole international reserve currency and include at least two other currencies, the euro and the Chinese yuan. These currencies would gradually take a larger and larger share of international financial and commercial flows, and force the United States to manage its fiscal and monetary policies in a more responsible fashion. Instead of the dollar as the sole means of exchange for global commerce, there would now be three large reserve currency blocs built around Europe, North America, and Asia that would essentially compete in terms of encouraging growth and maintaining fiscal discipline.


pages: 183 words: 17,571

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

Alan Greenspan, banking crisis, banks create money, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, bond market vigilante , Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency risk, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, Glass-Steagall Act, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, junk bonds, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Michael Milken, mobile money, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nixon triggered the end of the Bretton Woods system, Paul Volcker talking about ATMs, Ponzi scheme, profit motive, proprietary trading, prudent man rule, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, Savings and loan crisis, seigniorage, shareholder value, Silicon Valley, SoftBank, Solyndra, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

America only briefly joined the gold standard, but instead pursued a liberal (as in loose) domestic credit system based on fractional reserve banking, and until 1913 eschewed the discipline of central banking. Britain accepted and even clung to the burden of maintaining a reserve currency until forced to impose strict exchange controls at the outbreak of war in 1939 largely through its governing class’s confusion between national prestige and practical economics. After the war, the “temporary” exchange controls stayed on until 1979. Sterling’s role as a reserve currency was unsustainable. The dollar became by default the only potential reserve currency after the war, but the remarkable fact is that by the 1944 Bretton Woods conference, the United States had been the largest economy in the world for about 65 years without taking up the burden of financial hegemon.

The key weakness in the Bretton Woods system was that it required monetary discipline on the part of the United States, whose dollar was in effect the new gold, the anchor for all other currencies.The United Kingdom understood its role as issuer of the global reserve currency and played it well until it could no longer afford it. The US government was and is inevitably driven by domestic politics to put its reserve currency obligations in second place at best. The simple fact was (and remains) that the US government could print money without limit if it chose to, and in the 1970s it did so with a vengeance to finance a vast expansion of social spending and the Vietnam War without raising taxes.

Nobody has a bigger stake in the global financial system. But will it take up the role of its hegemon? It is in fact likely that China, despite being the world’s largest exporter and creditor, will for some time at least contrive to avoid the role of hegemon, especially the burden of reserve currency issuer and lender of last resort. Reserve currencies, with the pound sterling as the most successful to date, become a global benchmark and safe haven that drives up their value relative to other currencies, which in many circumstances damages export competitiveness. Japan, the very model of an export-driven economy, remains the world’s largest creditor, with overseas assets of nearly $7 trillion.


pages: 234 words: 63,149

Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

airport security, banking crisis, barriers to entry, Berlin Wall, blood diamond, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, Global Witness, income inequality, informal economy, information security, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Kickstarter, Martin Wolf, mass immigration, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Nelson Mandela, Nixon shock, Nixon triggered the end of the Bretton Woods system, no-fly zone, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

A number of emerging powers have begun to insist in recent years that the dollar’s singular status provides Washington with a privilege it no longer deserves and that America’s mounting debt ensures that the dollar is no longer a stable enough store of value to serve as the world’s dominant reserve currency. “They [the United States] are living like parasites off the global economy and their monopoly of the dollar,” said Vladimir Putin in 2011. “There should be other reserve currencies.” In 2011, as federal debt climbed toward 75 percent of U.S. gross domestic product, critics at home and abroad questioned the willingness of Washington’s feuding lawmakers to pay the country’s bills and the long-term impact of the country’s political stalemate on the value of the dollar.

But the greenback has maintained its decades-long incumbency in part because there has never been a viable single alternative to it. During the Cold War, the shadow of Soviet tanks undermined long-term confidence in West Germany’s deutschmark, and Japan avoided pushing the yen as a reserve currency to keep tighter control of its value. The euro has become an alternative reserve currency in limited quantities, but recent debt crises in Eurozone countries have undermined confidence that the single European currency is here to stay. China has taken concrete steps in recent years to advance the yuan as an international currency, but next steps would force a degree of foreign involvement in Chinese markets and a transparency in Chinese policymaking that will be hard for risk-averse Chinese officials to accept anytime soon.

For example, Britain helped keep the peace by working to maintain a balance of force among the great powers of Europe. It promoted an increasingly open world economy, in part by using its unparalleled naval power to protect international sea lanes. It enabled capital flows and maintained the gold standard. The British pound served as the world’s primary reserve currency. The rise of Germany and the United States in the late nineteenth century began to undermine Britain’s dominance, and the breakdown of Europe’s concert of nations gave way to the First World War. But it was World War II that permanently crippled Britain’s ability to continue in this role. The United States, which suffered much less damage from the two conflicts than its enemies or its allies, proved ready, willing, and able to take on global leadership.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

The European crisis has shown that government bonds are not the risk-free asset that they had been assumed to be. OPTIONS FOR CHANGE So how might the system change? Much of the discussion concerns whether the US dollar will be replaced as the global reserve currency by the Chinese renminbi, or whether it will simply be one of a range of reserve currencies including the euro, renminbi and yen. The global reserve currency is the currency that forms the biggest proportion of the holdings of central banks. More broadly, however, it is also the one most likely to be accepted by merchants in other countries; if you are a tourist in Africa, you will be better off trying to buy goods with dollars than pounds or yen.

As of 2010, 60 per cent of all foreign exchange reserves were denominated in dollars, giving the US currency a critical mass.3 Investors are still comfortable with holding it; at times of crisis, the dollar is regarded as a safe haven despite the country’s fiscal problems. After all, sterling was still being used as a reserve currency in the mid-twentieth century long after Britain’s relative economic decline had become apparent. The choice of reserve currency involves many factors. The US’s political, military and economic pre-eminence have undoubtedly boosted the dollar’s status. But it is also important that investors, and other central banks, can easily realize their dollar holdings if they have to – in other words, that the US market is highly liquid.

And it will take even longer for international investors to become confident that a Communist-led government will always respect their rights. Even if the dollar steadily falls in value against the renminbi, as seems likely, it will still have attractions as a reserve currency. Indeed, currency depreciation goes with the territory of being a reserve currency. In a sense, this dates back to the Triffin dilemma outlined in Chapter 5: for a currency to be used internationally there must be lots of it circulating abroad. For that to happen, however, a country must run a deficit so its currency builds up in the accounts of overseas merchants.


pages: 444 words: 151,136

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

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

Once you start issuing $1 trillion to $2 trillion . . . we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.” Who benefits? Like Germany of the 1930s, the United States does, because being the operator of the world’s reserve currency, even if the creditor nations pull out of the dollar or other perhaps equally inflated paper currencies, it can make one last withdrawal of seigniorage from its money supply by monetizing it. But the cost would be the loss of operating the world reserve currency. Gao Xiqing continues, “‘If China has $2 trillion, Japan has almost $2 trillion, and Russia has some, and all the others, then—let’s throw away the ideological differences and think about what’s good for everyone.’

A key feature of that variant of the gold standard was the recruitment of major trading partners to substitute English pounds or U.S. dollars for their central bank reserves, 40 ENDLESS MONEY depending upon which currency or trading block in which they operated. From the perspective of the operator of the reserve currency, this simultaneously discouraged citizens from demanding gold in return for dollars, and it injected a cumbersome intermediate step before foreign currencies might be subject to the discipline of redemption. It also allowed British and U.S. banks to inflate and build up trade imbalances without fear of immediate settlement.

Yet losses then are estimated at only 2 percent, far less than the inflation to which the government subjected the people once the Act was legislated and the need to finance the Civil War became pressing.33 By 1903 the weakened state of silver globally provided the perfect opportunity for Britain and the United States to approach friendly countries with an opportunity to base their national currencies upon the pound or the dollar, respectively, which were grounded upon gold and could serve as a reserve base underneath foreign money supplies instead of silver. Seigniorage as well as control over financial affairs would accrue to the issuer of the reserve currency, the United States or Britain, and their client states would be subservient. The idea was to replace a genuine gold standard, in which each country (or, domestically, each bank) maintains its reserves in gold, by a pseudo-gold standard in which the central bank of the client country maintains its reserves in some key or base currency, say pounds or dollars . . . during the 1920s, most countries 56 ENDLESS MONEY maintained their reserves in pounds, and only Britain purported to redeem pounds in gold.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

According to what Connally told reporters, what he said to the Europeans was mild and affable: We told them that we were here as a nation that had given much of our resources and our material resources and otherwise to the World to the point where frankly we were now running a deficit and have been for twenty years and it had drained our reserves and drained our resources to the point where we could no longer do it and frankly we were in trouble and we were coming to our friends to ask for help as they have so many times in the past come to us to ask for help when they were in trouble. That is in essence what we told them. His real message is still ringing in European ears: It’s our currency but it’s your problem! What Connally meant was that, as the dollar was the reserve currency (i.e. the only truly global means of exchange), the end of Bretton Woods was not America’s problem. The Global Plan was, of course, designed and implemented to be in the interests of the United States. But once the pressures on it (caused by Vietnam and internal US tensions that required an increase in domestic government spending) became such that the system reached breaking point, the greatest loser would not be the United States, but Europe and Japan – the two economic zones that had benefited most from the Global Plan.

In contrast, the tribute of capital that fed the Global Minotaur flooded into the United States voluntarily. Why? How did US policy makers persuade capitalists from all over the world to fund the superpower’s twin deficits? What was in it for them? The answer turns on four factors. To stick to the mythological narrative, let’s call them the Minotaur’s charismas. The Minotaur’s four charismas Reserve currency status While the Global Plan lasted, it did not matter much which currency one held, since the exchange rates against the dollar were more or less fixed and the exchange rate between the dollar and gold was welded at $35 to an ounce of the gleaming metal. Nevertheless, oil magnates, German industrialists, French winemakers and Japanese bankers preferred to store their cash in dollars simply because of capital controls – that is, restrictions on how much cash one could convert to dollars or other currencies at any one time.

Increasing energy prices damaged the relative competitiveness of Germany and Japan vis-à-vis the United States. Moreover, the oil trade was intimately linked to US multinationals, and thus the higher oil prices meant a larger revenue base for them, higher profits, and a strengthening of their capacity to diversify internationally. As for non-US producers, the dollar’s reserve currency status, coupled with Volcker’s huge interest rates, magnetized their petrol dollars to New York where they metamorphosed into shares or US government bonds. Interestingly, it was not long before Japanese and German industry reacted to the shock by taking innovative paths that transformed their industrial production in ways that clawed back some of the relative gains that the United States had snatched from them by making energy so expensive.


pages: 276 words: 82,603

Birth of the Euro by Otmar Issing

accounting loophole / creative accounting, behavioural economics, Bretton Woods, business climate, business cycle, capital controls, central bank independence, currency peg, currency risk, financial innovation, floating exchange rates, full employment, inflation targeting, information asymmetry, labour market flexibility, labour mobility, low interest rates, market fundamentalism, money market fund, moral hazard, oil shock, open economy, price anchoring, price stability, purchasing power parity, reserve currency, Robert Solow, Y2K, yield curve

In this reserve currency role, the euro in practical terms initially superseded the D-Mark, which over time had become the second most important reserve currency after the US dollar. The D-Mark had come to play this role when the US dollar exchange rate weakened appreciably in the 1970s and a growing number of central banks sought an alternative to dollar investments. Meanwhile, the euro is playing an increasing part in the diversification of foreign exchange reserves by many central banks. The euro is – albeit a long way behind the US dollar – the world’s second most important reserve currency. Table 6 shows the euro’s share in the official foreign exchange reserves of various groups of countries.

Current account balances and cumulated ULC (percentage points; percentages of GDP; percentages) 172 173 209 210 211 212 215 216 Tables 1. Conversion rates 2. Key characteristics of the euro area 3. Per capita GDP in purchasing power standards relative to the euro area average 4. Annual change in the Harmonised Index of Consumer Prices (in %) 5. The euro as an international currency 6. Official foreign exchange reserves: currency shares 7. Countries with exchange rate regimes linked to the euro 8. Three-group rotation system (second stage); voting frequencies of governors in each group ix 20 44 46 142 179 180 182 225 Preface The date 1 January 1999 marks a milestone in monetary history. Eleven national currencies – not least among them the D-Mark, held in such high esteem by the citizens of Germany – ceased to exist.

In reality, the market rate is in most cases allowed to fluctuate within certain bounds. This does not alter the principle of the central bank’s obligation to intervene. The same considerations apply if the currency is linked to a metal (such as under the gold standard) or the price of a basket of commodities (commodity-reserve currency). 170 • The ECB – monetary policy for a stable euro If, in contrast, the market is left to determine the exchange rate, and the central bank therefore has no obligation to intervene, it can in principle direct its policy measures towards fulfilling a domestic mandate. Only with a flexible (floating) exchange rate is the central bank able to achieve a domestic objective (generally speaking, the objective of price stability).32 The choice of exchange rate regime is of central importance for monetary policy and also for the place of the central bank in the macroeconomic policy framework.


pages: 524 words: 143,993

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

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

The most radical suggestion is the creation of a global reserve asset. The idea was recently presented by a panel of experts commissioned by the UN Secretary General: [T]he idea of an international reserve currency issued by a supranational bank is not new. It was broached more than seventy-five years ago by John Maynard Keynes in his 1930 Treatise on Money, and refined in his Bretton Woods proposals for an International Clearing Union. There currently exist a number of alternative proposals for a new global reserve currency, for how the system might be administered, how the emissions of the new currency might be allocated, and how the transition to the new system might be managed.

Yet it is far from clear that the US benefits from being the supplier of the reserve currency. On the contrary, the evidence from the recent crisis is that the consequences for financial stability in the US are highly adverse. It seems likely that the Chinese government will have that view of a comparable role for the renminbi. It surely should do so. Maybe, the possibility of a transition to the kind of monetary regime Keynes envisaged may now emerge. It is at least clear that the world of floating fiat currencies, one of which is a reserve currency, is highly unstable. The experience already forced a drastic shift in the policies of emerging and developing countries after 1997, as this book has noted (see Chapter Five).

During the crisis, the finance they depended upon dried up. This was another ‘sudden stop’, very much the same as those that afflicted Ireland and southern Europe at that time. For investors, flight to safety is almost always also a rush back home, except if the economy to which the capital previously flowed is the home of a reserve, or near-reserve, currency, and possesses triple-A or close to triple-A status as a sovereign borrower (such as the US). The countries of Central and Eastern Europe did not possess those attributes. So the money took flight, whereupon these countries were forced to retrench suddenly and brutally. The result was deep recessions, with few exceptions.


pages: 859 words: 204,092

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

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

As a harbinger of the decline, and ultimate demise, of the present US-DOMINATED system, there is the prospect of the emergence over the next decade of the renminbi as a reserve currency, which would mean it could be used for trade and be held by countries as part of their reserves.180 Having acquired full convertibility against other currencies, it could rapidly assume a very important role outside China, acting as the de facto reserve currency in East Asia, marginalizing the yen, and challenging the position of the euro and ultimately the dollar as global reserve currencies.181 It is clear from the American financial meltdown in 2008 that the days when the US economy could sustain the global reserve currency are now numbered. The present international system is designed primarily to represent and promote American interests.

In that eventuality, and assuming the dollar declines, the renminbi will increasingly be used for trading purposes, other countries in the region will peg their currencies to it, and in time it will surely assume the role of the reserve currency of choice in the region.57 It is worth noting that in the zones around China’s borders - Myanmar, Mongolia, Laos, Cambodia and Vietnam - the renminbi, though not yet convertible, is already traded freely and used as a de facto reserve currency, sometimes instead of theUSdollar.58 Not surprisingly, China’s rapidly developing economic influence in the region is having wider political and cultural repercussions.59 Everywhere, in varying degrees, the impact of China can be felt.

Given that China is likely to be the main trading partner of every East Asian nation, it will be natural for trade to be conducted in the renminbi, for the value of their currencies to be fixed against it rather than the dollar, which is largely the case now, and for the renminbi to be used as the reserve currency of choice. As the dollar continues to weaken with the relative decline of the US economy and the emergence of developing countries like China and India, it will steadily lose its global pre-eminence, to be replaced by a basket of currencies, with power initially being shared by the dollar and the euro, and perhaps the yen.50 When the renminbi is made fully convertible, it is likely to become one of the three major reserve currencies, along with the dollar and the euro, and in time will replace the dollar as the world’s major currency.


pages: 782 words: 187,875

Big Debt Crises by Ray Dalio

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

If you are interested in reviewing actual case studies showing the reasons why inflationary depressions happen rather than deflationary ones, it is worth noting the differences between the Weimar case study and the US Great Depression and 2007–2011 case studies, which are also examined in Part 2. Can reserve-currency countries that don’t have significant foreign-currency debt have inflationary depressions? While they are much less likely to have inflationary contractions that are as severe, they can have inflationary depressions, though they emerge more slowly and later in the deleveraging process, after a sustained and repeated overuse of stimulation to reverse deflationary deleveraging. Any country, including one with a reserve currency, can experience some movement out of its currency, which changes the severity of the trade-off between inflation and growth described earlier.

Any country, including one with a reserve currency, can experience some movement out of its currency, which changes the severity of the trade-off between inflation and growth described earlier. If a reserve-currency country permits much higher inflation in order to keep growth stronger by printing lots of money, it can further undermine demand for its currency, erode its reserve currency status (e.g., make investors view it as less of a store hold of wealth), and turn its deleveraging into an inflationary one. The Phases of the Classic Inflationary Debt Cycle Classically, inflationary deleveragings follow the ebbs and flows of money and credit through five stages that mirror the stages of deflationary deleveragings, but that are different in important ways.

For example, for a country that has become reliant on borrowing from external creditors, the pulling back of lending due to exogenous causes will lead to liquidity tightening. A tightening of monetary policy in the currency in which debts are denominated can be enough to cause foreign capital to pull back. This can happen for reasons unrelated to conditions in the domestic economy (e.g., cyclical conditions in a reserve currency country leads to a tightening in liquidity in that currency, or a financial crisis results in a pullback of capital, etc.). Also, a rise in the currency the debt is in relative to the currency incomes are in can cause an especially severe squeeze. Sometimes unanticipated shortfalls in cash flows due to any number of reasons can trigger the debt crises.


Green Economics: An Introduction to Theory, Policy and Practice by Molly Scott Cato

Albert Einstein, back-to-the-land, banking crisis, banks create money, basic income, Bretton Woods, Buy land – they’re not making it any more, carbon footprint, carbon tax, central bank independence, clean water, Community Supported Agriculture, congestion charging, corporate social responsibility, David Ricardo: comparative advantage, degrowth, deskilling, energy security, food miles, Food sovereignty, Fractional reserve banking, full employment, gender pay gap, green new deal, income inequality, informal economy, intentional community, Intergovernmental Panel on Climate Change (IPCC), job satisfaction, land bank, land reform, land value tax, Mahatma Gandhi, market fundamentalism, Money creation, mortgage debt, Multi Fibre Arrangement, passive income, peak oil, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, reserve currency, Rupert Read, seminal paper, the built environment, The Spirit Level, Tobin tax, tontine, University of East Anglia, wikimedia commons

In a democratic age one would expect money, created in official currencies as part of a national or supranational money supply backed by governments, to be created by professionally independent central monetary authorities (like the European Central Bank) and given to governments or international government agencies to spend into circulation on public purposes.7 Money and global injustice While at the national level the consequences of the existing money system are focused on the way it generates private and public debt, its instability, and the way it creates a squeeze on the social aspects of the economy, in an international context green economists criticize the money system for its role in stimulating conflict and creating massive inequality between nations. The international financial system is complex and closely interrelated with the system of global trade. The relationship revolves around the system of reserve currencies – the dollar, euro, yen and pound sterling – which countries are prepared to accept from one another, or from third countries outside the charmed circle, in settlement of external trade balances.8 This system clearly gives the countries that control these currencies a huge advantage in trade terms, especially the US, which negotiated that its currency should have the supreme advantage of being acceptable alongside gold as the international reserve asset during the Bretton Woods negotiations that established this system at the end of the Second World War.

It provides a fascinating example of how a currency issued by people for their own use and without support of any reserves, can provide a means of facilitating exchange and, in fact, of underpinning a whole economy. Conclusion Green economists have shown a strong interest in all aspects of monetary reform, from concern for the way a reserve currency system creates geopolitical instability and global poverty, to a critical stance on the distorting and inefficient nature of national money creation. Many of the most prominent green economists have also been involved as pioneers of their own local currency systems. In conclusion it is worth mentioning the ongoing division within green economics concerning the focus of effort in the arena of monetary reform.

All workers in sectors exposed to international competition may therefore see their wages fall as markets open up, but those most exposed will fare the worst.3 More fundamentally, trade means the exchange of goods in the medium of money, and that money is not, as economic theory assumes, a neutral medium. Rather, because of the way the countries controlling reserve currencies have a disproportionate amount of power in the world economy (for more on how this works see Chapter 5), they are able to run huge trade deficits, effectively importing goods for next-to-nothing: Allowing the free market to determine the price of surplus goods offered to corporate monopoly buyers based in powerful industrial nations, produced by underdeveloped nations, carrying massive debts, under pressure to export – this is bound to lead to low prices.


pages: 710 words: 164,527

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

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, business cycle, capital controls, Charles Lindbergh, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, lateral thinking, low interest rates, margin call, means of production, Michael Milken, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, Nixon triggered the end of the Bretton Woods system, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, public intellectual, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Hu noted, however, that the undesirable global repercussions of Fed actions derived from flaws in “the current international currency system,” which was a “product of the past.”36 Governor Zhou, for his part, went further in explicitly recalling Triffin, whose analysis had suggested that no manner of American goodwill or prudence could rectify this fundamental problem. Zhou called for a wholesale remaking of the international monetary system. “The acceptance of credit-based national currencies as major international reserve currencies, as is the case in the current system, is a rare special case in history,” Zhou observed. But issuers of reserve currencies “cannot pursue different domestic and international objectives at the same time”; this is the heart of the Triffin critique of Bretton Woods. “Although crisis may not necessarily be an intended result of the issuing authorities,” he argued, “it is an inevitable outcome of the institutional flaws.”

“The collapse of the Bretton Woods system, which was based on the White approach,” he concluded, “indicates that the Keynesian approach may have been more farsighted.” He called on the IMF to take the lead in boosting the all-but-forgotten SDR—to make it into a true “super-sovereign reserve currency,” using the model of Keynes’s bancor.37 Xinhua, after blasting the United States for its “debt addiction” in 2011, repeated Zhou’s call for a “new, stable, and secured global reserve currency.”38 China, though a huge creditor of the United States, is, unlike the United States in the 1940s, in no position to orchestrate a Bretton Woods–type refashioning of the global monetary architecture.

The key insight, he held, was that the very existence of money at the heart of the economy wreaked havoc with the self-stabilizing mechanisms that classical economists believed to be at constant work. Keynes would apply his insight in the design of a new global monetary architecture, built around a new international reserve currency—one that would be a threat to the global supremacy of the U.S. dollar and which White was determined to keep from seeing the light of day. His visionary monetary schemes notwithstanding, Keynes had ultimately come to the United States with the mission of conserving what he could of bankrupt Britain’s historic imperial prerogatives—what little room for maneuver it would be allowed in what seemed sure to be a dollar-dominated postwar world.


pages: 348 words: 99,383

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope by John A. Allison

Affordable Care Act / Obamacare, Alan Greenspan, American ideology, bank run, banking crisis, Bear Stearns, Bernie Madoff, business cycle, clean water, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, fiat currency, financial innovation, Fractional reserve banking, full employment, Greenspan put, high net worth, housing crisis, inverted yield curve, invisible hand, life extension, low skilled workers, market bubble, market clearing, minimum wage unemployment, money market fund, moral hazard, negative equity, obamacare, open immigration, Paul Samuelson, price mechanism, price stability, profit maximization, quantitative easing, race to the bottom, reserve currency, risk/return, Robert Shiller, subprime mortgage crisis, The Bell Curve by Richard Herrnstein and Charles Murray, too big to fail, transaction costs, Tyler Cowen, yield curve, zero-sum game

Second, there were housing bubbles created by the central banks in a number of other countries (such as Ireland and Spain), and these bubbles also burst. Finally, and most important, the U.S. dollar is the world’s reserve currency. If the Fed makes a mistake, its error will be transmitted to the global economy. The Fed increased the world’s monetary reserves, creating a global financial bubble. It is surprising to me, given the Fed’s string of errors, that international players have not abandoned the dollar and moved to a different standard. Of course, the Chinese have threatened to do just this. (Also, it can be argued that gold is rapidly becoming the world’s reserve currency.) It was previously outlined how subdivision zoning laws played an important role in driving up residential land site values and contributed to the housing bubble.

As was discussed earlier, the gold standard was falsely accused of being a major contributor to the Great Depression. The benefit of the gold standard is that it limits the ability of politicians and government bureaucrats to debase the value of the dollar. After World War II, the U.S. dollar became the reserve currency of the world and foreign governments could ask the United States to convert dollars to gold. Under Lyndon Johnson, the Fed printed so many dollars that the U.S. Treasury did not have enough gold to make the dollar-to-gold conversion. For this reason, Richard Nixon completely decoupled the dollar from gold in 1971.

Of course, politicians had found other ways to cheat, but, at least, with a gold standard debasing the currency was harder. We have been running a high-risk experiment since 1971 by relying on government bureaucrats to self discipline. The problems with the euro reflect the risk in this experiment. Should the U.S. dollar lose its status as the world’s reserve currency, the consequences would be severe. The Fed’s radical expansion of the money supply in reaction to the recent financial crisis is a form of Russian roulette. It may work but is very risky. It is noteworthy that most liberal economists treat the advocates of the gold standard without any respect.


End the Fed by Ron Paul

affirmative action, Alan Greenspan, Bear Stearns, Bernie Madoff, Bernie Sanders, Bretton Woods, business cycle, crony capitalism, currency manipulation / currency intervention, fiat currency, Fractional reserve banking, guns versus butter model, hiring and firing, housing crisis, illegal immigration, invisible hand, Khyber Pass, Long Term Capital Management, low interest rates, market bubble, means of production, military-industrial complex, Money creation, moral hazard, Ponzi scheme, price mechanism, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, Savings and loan crisis, too big to fail, tulip mania, We are all Keynesians now, Y2K

And, of course, the best prediction of the Austrian economists was the breakdown of the Bretton Woods Agreement, and that certainly told us something about what to expect in the 1970s. But the concerns from that school of thought would be that we still are inflating. Between 1995 and 1999, our M3 money supply went up 41 percent. It increased during that period of time twice as fast as the GDP, contributing to this condition that we have. We have had benefits as a reserve currency of the world, which allows us to perpetuate the bubble, the financial bubble. Because of our huge current account deficit, we are now borrowing more than a billion dollars a day to finance, you know, our prosperity, and most economists, whether they are from the Austrian school or not, would accept the notion that this is unsustainable and something would have to happen.

We can create credit and money out of thin air and it acts as capital by stealing value from the existing currency. We’ve been doing that for a long time, so the process can continue but it literally is the inflation. Also, we can resort to borrowing overseas and we are permitted because we have the reserve currency of the world to export our inflation and that seems to be a free ride for us as well. But, how long can we fool the world? How long can we continue with a current account deficit of 6 percent if our productive jobs are going overseas? And, like the gentleman mentioned before about more jobs going overseas, eventually, this is going to catch up with us.

Just as Henry Hazlitt and other Austrian economists knew, in 1944, when the Bretton Woods system was established, that it would not last, many others knew from the beginning that the current system started on April 15, 1971, would also fail. The date may not have been known, but its demise was predictable. The current crisis, started in 2007 with the break in the housing mortgage market, is now in full swing and signifies the end of the fiat dollar reserve currency system. It is impossible to understand the current crisis without understanding the international monetary system, which has been dominated by our Federal Reserve. The core of the contemporary problem dates from 2001 when the Fed attempted to forestall recession through low interest rates. Actual interest rates fell well below historical averages and any monetary rule that the Fed claimed to be following. 2 Greenspan slashed the federal funds target from 6.5 percent in January 2001 down to 1 percent by June 2003.


pages: 238 words: 73,121

Does Capitalism Have a Future? by Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian, Craig Calhoun, Stephen Hoye, Audible Studios

affirmative action, blood diamond, Bretton Woods, BRICs, British Empire, business cycle, butterfly effect, company town, creative destruction, deindustrialization, demographic transition, Deng Xiaoping, discovery of the americas, distributed generation, Dr. Strangelove, eurozone crisis, fiat currency, financial engineering, full employment, gentrification, Gini coefficient, global village, hydraulic fracturing, income inequality, Isaac Newton, job automation, joint-stock company, Joseph Schumpeter, junk bonds, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, loose coupling, low skilled workers, market bubble, market fundamentalism, mass immigration, means of production, mega-rich, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, offshore financial centre, oil shale / tar sands, Ponzi scheme, postindustrial economy, reserve currency, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, Suez crisis 1956, too big to fail, transaction costs, vertical integration, Washington Consensus, WikiLeaks

It then remained virtually static from 1970 to 2005 as the United States successfully exploited the advantages of having the dollar as the reserve currency of the world. A relative decline has occurred since then, largely a product of the higher growth of India and China, but the dollar remains almighty, America can still borrow unlimited cash at an interest rate of lower than 2%, and in most years it still outperforms Europe and Japan in economic productivity and growth. The IMF and Barry Eichengreen have both guessed that the dollar will remain as the world’s reserve currency until some date soon after 2020. The United States also has 48% of the world’s military expenditure, its highest-ever percentage, and it retains its dominance over patents, Nobel prizes, elite universities, and popular culture.

This actually reduces, not increases, the possibilities of the endless accumulation of capital, and intensifies rather than counteracts the structural crisis of the world-system. Furthermore, the austerity measures now so widespread are reducing the customer base for the exports of the BRICS. The most likely financial result of the economic turmoil will be the final eviction of the United States dollar as the world’s reserve currency, followed not by another currency performing this function, but a multicurrency world that allows for the constant fluctuations of exchange rates, a further inducement to the freezing of the financing of new productive activity. Meanwhile, and simultaneously, the decline of US hegemony became irreparable after the blowback caused by the political-military fiasco of the neocon program of unilateral military machismo undertaken in the period 2001–2006 by the administration of President George W.

The Habsburgs and France were the leading powers at this time in Europe, but the continent (and its empires) had essentially multipower geopolitics. Britain was more dominant in the 19th century, for it was the leading industrial capitalist power with the biggest navy, the biggest empire, and for a time the reserve currency, but it was never hegemonic over the continent of Europe and it relied on a balance of power between other states to protect itself. Wallerstein then sees a period of rivalry between two potential hegemons, Germany and the United States, before the latter triumphed. He describes the period 1914 to 1945 as a “thirty years war” between the two, an odd description for wars into which America only entered tardily, and only when attacked by Japan in the second war.


pages: 270 words: 73,485

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

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, 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, Glass-Steagall Act, 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, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, 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

Governments also had control over their own money supply as long as their trade deficits were not so large as to cause a run on their currency and a likely devaluation. Britain tried to maintain its status as a victorious Allied power and retained sterling as a reserve currency, but within 25 years of 1945 sterling had to be devalued twice. Only the dollar was the true reserve currency. The shelter of a fixed exchange rate, control over their own money supply, and the relaxed attitude about budget deficits and public debt allowed Western economies to have 25 years of steady growth with only a few shallow recessions. Inflation was a problem but until the end of the 1960s it was mainly a domestic problem which different countries dealt with in their own way.

The US agreed to buy and sell gold at $35 an ounce, as the Bank of England had done before World War I (at £3 17s 10½d). But gold was not to circulate domestically, nor would citizens be allowed to present gold bullion for coinage. It was decided to have a system of fixed exchange rates, with the dollar as the reserve currency. All currencies had to declare and defend a fixed parity with the dollar. The International Monetary Fund was established to police the working of the fixed exchange rate standard. The IMF was allowed to give loans to countries in temporary balance-of-payments difficulty, but only if they promised to correct the imbalance by suitable deflation, or, in extreme cases, devaluation.

(i) Clayton Act (i) Clinton Administration (i) closed economy (i), (ii), (iii), (iv), (v), (vi) Cobb, Charles (i) Cobb-Douglas Production Function (i), (ii) coincidence, vs.causation (i) Cold War (i) collateralized debt obligations (CDO) (i) colonization (i) Combinations (trade unions), as harmful (i) Committee on the Bank of England Charter (i) commodity markets price rises (i) regulation (i) Common Market (i) communications, advances in (i), (ii) companies, collapse of (i) comparative advantage (i) compatibility microeconomics/macroeconomics (i), (ii), (iii) unique static equilibrium/moving data (i) competition and efficiency (i) imperfect (i) theory of (Marshall) (i) computer technology development of (i), (ii); see also technological innovations stock markets (i) confidence, rise and fall (i) conflicting interests (i), (ii) Connally, John (i) consols (i) consumer credit (i) consumption function (i), (ii) contagion (i), (ii) control of money supply (i) convertibility (i) cooperation (i) correlation/coincidence, vs. causation (i) corruption (i) Countrywide Financial (i) Cournot, Antoine Augustin (i) Cowles, Alfred (i) Cowles Foundation (i) creative destruction (i) credit business dependence (i) cheap (i) as driver of investment (i) credit cards (i) credit default swaps (CDS) (i) crises beginnings of (i) developing countries (i) Juglar’s theory (i) Mexican (i) proliferation (i) as recurrent (i), (ii) as regular occurrences (i) ten year pattern (i) unpredictability (i) crisis of 1825 (i) crisis of profitability (i) Crosland, Anthony (i) The Future of Socialism (i) currency, convertibility (i) depreciation (i) pegging (i), (ii) cycles (i) banking system as root (i) combinations of (i) Goodwin (i), (ii) Juglar’s study (i) Keynes on (i) long (i) loss of interest in (i) Marx’s theories (i), (ii) measuring (i) origins (i) random events (i) reproduction by Keynesian models (i) rocking horse analogy (i) short (i) Wicksell’s theory (i) see also Frisch; Kondratieff cycles debit cards (i) Debreu, Gerard (i), (ii) debt crises (i) easy availability (i) levels (i) see also government debt debt-fueled boom (i) debts brokers (i) farmers’ (i) post-World War II (i) purchase of (i) decisions, patterns (i) deficits, endemic (i) deflation (i) deindustrialization (i), (ii) Deism (i) demand, factors in (i) demographics (i) demutualization (i) depreciation (i) advocacy of (i) Ricardo’s theory (i) value of goods (i) deregulation, banking (i) derivatives (i), (ii) Deserted Village, The (Oliver Goldsmith) (i) deutschmark (i) developing countries, Wicksellian boom (i) disequilibrium dynamic (i), (ii), (iii), (iv) stock (i) system, capitalism as (i) tradition (i) displacement effect, technological innovations (i) division of knowledge (i) division of labor (i), (ii) dollar purchasing power (i) as reserve currency (i), (ii) dollar exchange standard (i), (ii) dot.com boom (i) double deficits (i) Douglas, Paul (i), (ii) Dow Jones (i) Duménil, Gerard (i) durable goods (i) Dutch Disease (i) dynamic stochastic general equilibrium (DSGE) models (i), (ii) econometric modeling (i), (ii) Econometric Society (i), (ii) econometrics (i), (ii) economic activity, shift (i) economic analysis, applicability (i) economic cycles (i) Marx/Engels (i) see also Kondratieff cycles economic data, proliferation (i) economic growth, problems of (i) economic policy, activism (i) economic sectors, conflicting interests (i), (ii) economic slump, post-World War I (i) economic stagnation (i) economic theory (i) and individual lives (i) economic trajectories (i) economic vocabulary (i), (ii), (iii) economics background to (i) celebrated (i) changing scope of (i) as dismal science (i) professionalization (i) teaching of (i) “Economics and Knowledge” (Hayek) (i) economies, interconnections (i) economies of scale (i) economists, research methods (i) economy changing nature of (i) equilibrium/disequilibrium (i) visions of (i) efficiency, use of term (i) efficient market hypothesis (EMH) (i), (ii), (iii) Eisenhower, Dwight D.


pages: 247 words: 60,543

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony by David G. W. Birch

"World Economic Forum" Davos, Alan Greenspan, algorithmic management, AlphaGo, bank run, Big Tech, bitcoin, blockchain, Bretton Woods, BRICs, British Empire, business cycle, capital controls, cashless society, central bank independence, COVID-19, cross-border payments, cryptocurrency, Diane Coyle, disintermediation, distributed ledger, Donald Trump, driverless car, Elon Musk, Ethereum, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, forward guidance, Fractional reserve banking, global reserve currency, global supply chain, global village, Hyman Minsky, information security, initial coin offering, Internet of things, Jaron Lanier, Kenneth Rogoff, knowledge economy, M-Pesa, Mark Zuckerberg, market clearing, market design, Marshall McLuhan, mobile money, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, new economy, Northern Rock, one-China policy, Overton Window, PalmPilot, pattern recognition, Pingit, QR code, quantum cryptography, race to the bottom, railway mania, ransomware, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social distancing, sovereign wealth fund, special drawing rights, subscription business, the payments system, too big to fail, transaction costs, Vitalik Buterin, Washington Consensus

Cohen draws attention to this because the dollar’s role as prime currency, as global hegemonic currency, brings (as is well known) substantial benefits to the American economy and substantial support to American foreign policy. The fundamental exorbitant privilege is measurable and substantial. As Robert Kaplan, president of the Federal Reserve Bank of Dallas, said, thinking about cryptocurrency and digital currencies reinforces the view that ‘the dollar may not be the world’s reserve currency forever, and if that changes, and you tack on 100 basis points to $20 trillion … [that is] $200 billion a year and all of a sudden we’ve got a tremendous problem’ (Keoun 2019). As top dog, the United States earns significant ‘seigniorage ’ on its currency. The Treasury prints more $100 bills than dollar bills, and there are now more than seven billion pictures of Benjamin Franklin in circulation.

The problem he is alluding to is that the US dollar’s global electronic hegemony ‘made sense after World War II, when the [United States] accounted for 28% of global exports’. Now, however, that figure is 8.8%, according to the IMF. ‘Yet the dollar still dominates international trade’ (Michaels and Vigna 2019). This means demand for the US dollar and dollar-denominated instruments remains artificially high, so the dollar is still the world’s reserve currency, even though the United States’s share of global GDP has approximately halved in the last 60 years (figure 9). Figure 9. United States’s share of global GDP. The US dollar is involved in around 9 in 10 FX trades (compared with around 1 in 25 for China’s renminbi), and BIS figures show that non-US banks hold some $12 trillion in dollar assets (of which China accounts for a trillion) that must be funded with dollar liabilities.

As former American Treasury secretary Jack Lew explained to an audience in Washington (US Department of the Treasury 2016): The risk that sanctions overreach will ultimately drive business activity from the US financial system could become more acute if alternatives to the United States as a center of financial activity, and to the US dollar as the world’s preeminent reserve currency, assume a larger role in the global financial system. Lew went on to point out that it is hard to change an IMFS overnight, and there are no current alternatives to the US dollar (or US markets). This does not mean the dollar’s Prime role should be taken for granted; America ‘should not be surprised’ that countries are looking to avoid the United States because of sanctions.


pages: 287 words: 81,970

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

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

Not so with the United States. Since the end of World War II, the U.S. dollar has been the reserve currency of the world. Just as central banks including our own once held gold and issued their currencies as a marker for gold, under the Bretton Woods agreement, foreign central banks have held U.S. dollars against which they issue their own currencies. Despite the abrogation of the U.S. promise of dollar /gold redeemability, the dollar standard has persisted. Almost two thirds of foreign currency reserves are held in dollars. As the world’s leading reserve currency, the advantages for the United States are several. This dollar standard results in greater market demand for dollars and therefore a higher exchange rate than would otherwise exist.

Conventional investments have been the place to be in the recent past: stocks from 1982 to 2000; real estate boomed as the authorities engineered a loose credit environment to cushion the consequences of their prior bubble popping; the dot-com market. But gold’s recent advances signal that we are in a period of major transition now. The American dollar’s role as the world’s reserve currency is inherently unstable and the signs of a breakdown are all around. Just as the monetary authorities have been unable to reinflate the high-tech bubble or the real estate bubble, when the dollar bubble is finally burst, no other paper currency will be able to take its place—at least for a generation or two when the costly lessons of irredeemable currency may have to be relearned in another era.

Instead of trading side-by-side forever as the president had claimed, the real silver coins began to disappear from circulation at once. Despite the disappearance of gold and silver coins from the domestic monetary scene, as far as foreigners were concerned the dollar still had some ties to gold. Since the end of World War Two the dollar has been the accepted reserve currency of the world, initially because of its promised convertibility to gold. The London Gold Pool was established in 1961 to maintain the fiction of dollar convertibility at the rate of $35 to the ounce. To keep the price stable, the pool was supposed to sell gold when the price rose above that benchmark and buy when it fell.


pages: 261 words: 86,905

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

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

Sometimes, it’s for pretty much the same reasons people go to pawnshops—because they need the cash immediately, in order to balance their books; sometimes it’s as a part of much more complicated strategies to do with the mix of risks and assets on their books; and sometimes it’s a bit more shady than that, as when Lehman Brothers, just before the bank collapsed, used a repo to hide $50 billion of dodgy assets from the Feds. reserve currency A currency held in large quantities by foreign governments and companies: at the moment, the global reserve currency is the US dollar. (In the first quarter of 2013, the dollar made up 62.2 percent of foreign exchange reserves, the euro 23.7 percent). That means in effect that the dollar is the earth’s currency: for instance, almost all commodity transactions are priced in dollars, including the most important one of all, oil. Being able to print as much of the global reserve currency as it wants is a huge economic advantage for the USA.

decoupling What happens when two processes that used to be linked start to operate independently. In recent years it has taken on a specific meaning, to do with the separation of the rest of the world economy from the performance of the United States. Because the USA is the biggest economy in the world, and because the US dollar is the world’s reserve currency, the US economy and the spending power of the US consumer have since the Second World War in effect been the driving force of the world economy. The question at issue after the credit crunch and during the Great Recession was whether new sources of growth in the world, particularly the developing and emerging world and very specifically China, would be able to keep growing at a sufficiently strong rate to keep the global economy in motion.

paradis fiscal The wonderful French term for tax haven—I love the idea that a tax-free location is a form of paradise, in which people spend all their time cavorting on yachts. petrodollar Money made by selling oil; these transactions are denominated in US dollars because the USA made a deal with Saudi Arabia, after the collapse of the Bretton Woods agreement in 1971, as a way of maintaining demand for the US dollar as the de facto global reserve currency. positional goods Things whose value is determined not by how useful they are in themselves but by the fact that other people can’t have them. The term was coined by Fred Hirsch in his 1976 book Social Limits to Growth. Positional goods are tools for signaling status, and the fact that the owner of the positional good is doing better than the people around her.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

"World Economic Forum" Davos, affirmative action, agricultural Revolution, airport security, Alan Greenspan, anti-communist, Asian financial crisis, battle of ideas, Bear Stearns, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, Great Leap Forward, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, low interest rates, Mahatma Gandhi, Martin Wolf, mutually assured destruction, National Debt Clock, new economy, no-fly zone, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, Suez crisis 1956, The future is already here, The Great Moderation, Thomas L Friedman, Thomas Malthus, three-masted sailing ship, trade route, Washington Consensus, working-age population, young professional, zero-sum game

In each case, the hegemon was the dominant economic and military player, becoming the market and lender of last resort, home to the world financial center, and holder of the reserve currency. In politico-military terms, each secured the sea lanes, balanced against rising threats, and intervened when it thought necessary to prevent disorder. Although both made many mistakes, the stability of the system and the success of the world economy and the open societies it created are an extraordinary legacy of Anglo-American hegemony. What if that hegemony is waning? America no longer has the only large market in the world. The dollar is unlikely to retain its totemic position forever as the reserve currency, yielding to a basket that is largely composed of euros and dollars but includes other currencies too.

For almost three centuries, the world has been undergirded by the presence of a large liberal hegemon—first Britain, then the United States. These two superpowers helped create and maintain an open world economy, protecting trade routes and sea lanes, acting as lenders of last resort, holding the reserve currency, investing abroad, and keeping their own markets open. They also tipped the military balance against the great aggressors of their ages, from Napoleon’s France, to Germany, to the Soviet Union. For all its abuses of power, the United States has been the creator and sustainer of the current order of open trade and democratic government—an order that has been benign and beneficial for the vast majority of humankind.

For all its abuses of power, the United States has been the creator and sustainer of the current order of open trade and democratic government—an order that has been benign and beneficial for the vast majority of humankind. As things change, and as America’s role changes, that order could begin to fracture. The collapse of the dollar—to the point where there was no global reserve currency—would be a problem for the world just as much as for America. And solving common problems in an era of diffusion and decentralization could turn out to be far more difficult without a superpower. Some Americans have become acutely conscious of the changing world. Business leaders are increasingly aware of the shifts taking place around the world and responding to them rapidly and unsentimentally.


pages: 326 words: 91,532

The Pay Off: How Changing the Way We Pay Changes Everything by Gottfried Leibbrandt, Natasha de Teran

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, banks create money, Bear Stearns, Big Tech, bitcoin, blockchain, call centre, cashless society, Clayton Christensen, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, Donald Trump, Edward Snowden, Ethereum, ethereum blockchain, financial exclusion, global pandemic, global reserve currency, illegal immigration, information asymmetry, initial coin offering, interest rate swap, Internet of things, Irish bank strikes, Julian Assange, large denomination, light touch regulation, lockdown, low interest rates, M-Pesa, machine readable, Money creation, money: store of value / unit of account / medium of exchange, move fast and break things, Network effects, Northern Rock, off grid, offshore financial centre, payday loans, post-industrial society, printed gun, QR code, RAND corporation, ransomware, Real Time Gross Settlement, reserve currency, Rishi Sunak, Silicon Valley, Silicon Valley startup, Skype, smart contracts, sovereign wealth fund, special drawing rights, tech billionaire, the payments system, too big to fail, transaction costs, WikiLeaks, you are the product

The USA has by far the biggest and most established domestic securities market, so there are plenty of liquid assets in which to keep your surplus dollars if you don’t want to leave them with banks.2 With the status of global reserve currency comes ‘exorbitant privilege’: the USA is the only country that can borrow almost limitless amounts in its own currency, which effectively shields it from devaluations and speculators. It can also print money to repay its creditors, something no other country can do at the pace and in the volumes it does. This phenomenon is neither recent nor accidental. Two world wars and some adroit moves in their aftermath helped the US dollar to usurp the pound sterling in its role as the world’s reserve currency. Nor was the USA slow to appreciate that reserve currency status comes laden with power.

The USA is therefore well placed to demand data on its customers’ transactions, wherever they live, which puts HSBC in the invidious position of having to bite the hand that feeds it: providing evidence against the country that gave it its name and supplies a good chunk of its profits. Will frequent unilateral use of this mighty weapon blunt it as some, including many of Obama’s former advisers on sanctions, claim? This could happen in two ways: first, the accelerated demise of the dollar as the world’s only reserve currency; and second, the development of alternative means to pay for sanctioned transactions. The first seems a stretch right now. As we saw earlier, the power of the dollar rests on several pillars, none of which is likely to crumble any time soon. In addition, there are the network effects (described in Chapter 9) to contend with: much of the value of the dollar rests on the fact that everyone uses it as a global unit of account and lingua franca.

Eggers) 177 Cirrus/Maestro 58 Citibank 56, 64, 133, 158, 220–1, 222, 248, 260 Clearing House Interbank Payments System (CHIPS) 240 clearing systems 117–19, 122, 239–40 Clearpay 175 Clifford, Clark 264 Clinton, Hillary 267 closed vs open payment systems 220–6 cloud computing 270 ClubMed 170 ‘code as law’ 195–6 Collison, Patrick and John 163, 165 Committee on Payments and Market Infrastructure (CPMI) 120–1 commodity money 8 Competition and Consumer Commission, Australian 224 Competition and Markets Authority, UK 180 competition authorities 223–4, 225–6 compound interest 90 ‘Confirmation of Payee’ systems 66 Connally, John 248 Consumer Reports 89 contactless payments 11, 173 conventions, payment 15, 17–19, 121–2, 215–16, 230 Corporate Transaction Banking 95 correspondent banking 138–42, 143, 144–5, 146–8, 223, 248, 267–8 Cotten, Gerald 200 counterfeiting and piracy 108, 112, 258 Covid-19 global pandemic 6, 8, 34, 37, 111, 134, 151, 159, 224, 245 credit cards business payments 95 cardboard 40, 41, 46–7, 108 debt 45, 100, 101 fraud 46, 51, 108–10 ‘honour all cards’ rule 56–7 interchange fees 42–4, 100 interest 90, 94, 173 introduction of 19, 39–44, 45–6, 70 online payments 50–1 overspending 173 paying to pay 101 real-time authorisation 47–8, 143–4 Union Pay, China 59 use in Europe 58, 101 see also Mastercard; Visa credit checks 175 credit default swaps 132 credit derivatives 131–3 Credit Suisse 65 Crelan bank 111 crime rates 33, 67 critical mass and payment systems 69–70, 79 cross-border payments 93, 133 card networks 143–4 clearing 240 correspondent banking 138–42, 143, 144–5, 146–8 debit cards 58–9 domestic instant payment systems 144 fees 137, 238–9 G20 agenda 148–9 global payments innovation (gpi) 147–8 Hawala system 142–3 interest made by banks 145–6 Letters of Credit 149–51 money remitters 144, 146 regulations 144, 145, 148, 239 TransferWise 146–7 Crossan, Doug 172 cryptocurrencies 16, 37, 63, 84, 187–209, 252, 269, 270 see also Central Bank Digital Currencies CryptoHQ 187 Cuba 149–50, 211 Cunliffe, John 11 currency controls 144 Currency Education Program (CEP), US 25 current account bank charges 91–2, 100–1 customer-loyalty programmes 219–20 CVV and CVV2 (Card Verification Value) codes 109, 171 cybercrime 107–8, 110–14, 232–3, 270 D Danske Bank 256–7 dark net 199 data privacy regulations 179, 233–4 dating-app fraud 111–12 de-risking 267–8 debit cards 19, 49, 50, 56–9, 91, 98 debts 8–10, 13–14, 45, 170, 173–4 Decentralized Autonomous Organization (DAO) 196 Deliveroo 82–3 Deloitte 264 Denmark 172, 256, 257 derivatives market 131–3, 208 Deutsche Bank 64, 133, 166, 260 devaluation 203 DG Comp 224, 225–6 Diem/Libra 63 digital wallets 224 Dimon, Jamie 206 Diners Club 40 direct debits 67, 119 disgorgement 198 distributed computing platform 194–6 Dodd-Frank legislation 98 dollar bills, circulation overseas 24–5, 213 dollars, global power of US 246–54 domestic securities market, US 247 Dorsey, Jack 155 drugs economy 27, 255, 258, 263 Dubai First Royal Mastercard 52 Durbin Amendment 57, 98 Dutch Data Protection Authority 234 Dutch Golden Age 5 Dutch parliament 266 Dutch resistance 7–8 E EBA Clearing 239–40 eBanking 36, 181 eBay 19, 51, 52, 70, 161, 163, 165 The Economist 55, 184 email fraud 110–11 embassies, diplomatic 266–7 embedded payments 169 E.On 119 Epic Games 225 Eriksson, Björn 35 errors, payment 64–6 Escobar, Pablo 255 escrow account systems 52 Estonia, Danske Bank 256–7 Ethereum/Ether 194–6, 198–9 euro E500 bills 24, 25, 28 see also Europe; European Central Bank; European Commission; European Union; Eurozone Europaisch-Iranische Handelsbank (EIH) 248 Europay 59, 90–1 Europe bank fines and financial crime 259–60 bank revenue 98, 99, 100–1, 102–3, 237–9, 241, 242 credit card use 58, 101 current accounts 100–1 Eastern 78, 213 financial literacy 172 instant payment systems 86 own payment network 59–60 paying to pay 98, 100–1 protection of personal data 179 regulatory authorities 224, 225–6, 231, 232, 237–42, 244 use of debit cards 58–9 European Banking Authority 256 European Banking Federation 239 European Central Bank 34, 86, 205–6, 233, 237, 240–1, 271 European Commission 60, 83, 85–6, 224, 225, 237, 238, 239, 240, 271 European Payments Council (EPC) 240 European Payments Initiative 60, 271 European Union (EU) 79, 148, 180–1, 237, 238–9, 243, 244–5, 265–6 Eurozone 102–3, 119, 183, 240 eWallets 36, 52, 216, 217 executive-whaling 110–11 F FACC AG 111 Facebook 63, 70, 110, 147, 158, 165, 179, 184, 201–2, 204–6, 209, 220, 222, 224, 269 facilitators, payment 162 Fantástico 234 far-right groups 4 Faster Payments Service (FPS) 82, 83, 84, 86 FBI (Federal Bureau of Investigation) 113 federal debt 9 Federal Reserve Bank 12, 36, 37, 113–14, 131, 232, 259 Fedwire 126–7 Financial Action Task Force (FATF) 262 Financial Conduct Authority, UK 37–8 financial crime 255–64 see also counterfeiting; fraud; money laundering; robbery financial literacy 172 Financial Stability Board (FSB) 135, 268, 269 Financial Times 103, 128, 129, 166–7 FinCEN 253, 255 FinTech 38, 147, 151, 155–9, 162–7, 240 lack of regulation 156, 235–6 First American Bankshare 264 foreign ATM fees 90 foreign exchange 56, 89, 90, 93, 131, 133, 140, 144, 205, 208, 246 Foreign Funds Control (FFC), US 249 foreign reserves, dollars and 247 Fortnite 225 four-corner payment model 41–2, 174, 220 France 63, 67, 119, 243, 245, 259, 260 Frankfurt Stock Exchange 166 fraud bank 261–5 card payment 46, 51, 52, 108–9 dating-app 111 cryptocurrency 199–200 detection services 56, 162 emails 110–11 and frictionless payments 170, 171–2 social media 110 free-banking era, US 208 free speech 184 Freis, Jim 167 French foreign ministry 234 frictionless payments 170–5 Friedlein, Joe 127 G G20 148–9 geographic payment preferences 67–8, 72 George, Edward 126 Germany 28, 67, 78–9, 111, 123, 158, 166–7, 183, 243, 245, 247, 248–9 Giannini, A. P. 45 gift vouchers 53 global financial crisis (2008) 131–2 global payments cost, annual 89 global payments innovation (gpi) 147–8 global reserve currency 246–7, 252, 254 Global Transaction Banking 96 gold 12, 29 gold standard 204, 248 Google 82–3, 111, 147, 158, 169, 182, 184, 220, 222, 224, 225, 234, 271 Google Pay 184–5, 271 government bonds, dollar-based 247 Graeber, David 8–9 Great Recoinage (1816) 203 Great Western Railway 68 Greenspan, Alan 128 ‘grey money’ 29–30 Gross Domestic Profit (GDP) 25, 27, 29, 32, 33, 59, 74, 77, 89, 100, 101, 120, 121, 206, 257 Guardian 35 Guevara, Che 211 guinea coins 203 H Hamilton, Alexander 9 Harfield, Henry 149 Hawala 142–3, 216 hawaladars 143 Heineken, Freddy 27–8 Herstatt Bank 123, 125 Hin Leong 151 Hinrikus, Taavet 146 HMRC (Her Majesty’s Revenue & Customs) 150 Hock, Dee 47 Holland 7–8, 184 ‘honour all cards’ rules 56–7 housing market 127–8 HSBC (Hongkong and Shanghai Banking Corporation) 133, 252, 260, 270 Huawei 251–2 Hurricane Maria, Puerto Rico 36–7 hyper-inflation 203 I Iberpay 81 illegal activities 25–6, 27–8, 29–30, 33, 46, 164, 167, 199–200, 212–13, 255–64 see also counterfeiting and piracy; cybercrime; fraud; money laundering; robbery image scanning, cheque 67 immigrants and refugees 265, 266 in-app purchases 172, 224–5 India 38, 253–4 cash purge 29–30 instant payment system 81, 82–5, 86, 182, 271 Punjab National Bank fraud 115–16 Tez payment app 185 InfoWars 4 ING 179, 260 initial coin offerings (ICOs) 187, 193, 196 The Innovator’s Dilemma (C.


pages: 816 words: 191,889

The Long Game: China's Grand Strategy to Displace American Order by Rush Doshi

"World Economic Forum" Davos, American ideology, anti-communist, Asian financial crisis, autonomous vehicles, Black Lives Matter, Bretton Woods, capital controls, coronavirus, COVID-19, crony capitalism, cross-border payments, cryptocurrency, defense in depth, deindustrialization, Deng Xiaoping, deplatforming, disinformation, Dissolution of the Soviet Union, Donald Trump, drone strike, energy security, European colonialism, eurozone crisis, financial innovation, George Floyd, global pandemic, global reserve currency, global supply chain, global value chain, Great Leap Forward, high-speed rail, Internet Archive, Internet of things, Kickstarter, kremlinology, Malacca Straits, middle-income trap, Mikhail Gorbachev, MITM: man-in-the-middle, Monroe Doctrine, Network effects, Nixon triggered the end of the Bretton Woods system, offshore financial centre, positional goods, post-truth, purchasing power parity, RAND corporation, reserve currency, rolodex, Ronald Reagan, South China Sea, special drawing rights, special economic zone, TikTok, trade liberalization, transaction costs, UNCLOS, UNCLOS, undersea cable, zero-sum game

Instead, China’s actions reveal intense and long-standing hopes for an international economic architecture in which the dollar is only one among many reserve currencies, and it is reasonable to see China’s advocacy for the renminbi in such terms as well. Beijing has increasingly turned to renminbi internationalization as an instrument to not only hasten diversification, but also build the foundation for China’s own structural power across Asia. The 2008 Global Financial Crisis marked the start of this effort. After the crisis, China’s leadership increasingly called into question the dollar’s reserve currency status. Of course, various Chinese officials had for decades criticized the international economic order as unfair and called for its reform, and leading central bank officials had at times been critical of the “irrational” monetary system and urged greater monetary surveillance of advanced economies.59 In this sense, the 2008 Global Financial Crisis marked a shift less in China’s preferences and more in its confidence that it could reshape the international economic architecture around it.

C4ISR architecture in the face of attack might be the single most effective step the United States can take to strengthen its conventional deterrent.”57 Economic Building •Maintain Dollar Dominance amid Challenges from China and New Technology: The dollar’s status as the reserve currency is the backbone of US global hegemony, and it makes it easier for the United States to finance deficit spending, monitor cross-border financial transactions, and implement financial sanctions. The United States might constitute only a quarter of global GDP, but the dollar is 60 percent of global reserve currencies—an advantage amplified by the fact that the United States is open, retains deep and liquid financial markets, and possesses a large and diversified economy.

In addition to the growing focus on the periphery, China also began to become far more active in pushing for international monetary reform. As the case study on financial alternatives discusses in greater detail, from 2008 onward, Chinese officials took the unprecedented step of routinely calling for monetary diversification and a weakening of the dollar’s role as reserve currency. These statements were made not only by the head of the People’s Bank of China, but also by President Hu and other senior leaders at top economic forums including the G20. This strategy was explicitly outlined in Hu’s own 2009 speech and has remained a feature of Chinese policy since. A Building Strategy China’s efforts to build regional order emerged under the rubric of Hu’s call to “Actively Accomplish Something.”


pages: 371 words: 98,534

Red Flags: Why Xi's China Is in Jeopardy by George Magnus

"World Economic Forum" Davos, 3D printing, 9 dash line, Admiral Zheng, AlphaGo, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bear Stearns, Bretton Woods, Brexit referendum, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, general purpose technology, Gini coefficient, global reserve currency, Great Leap Forward, high net worth, high-speed rail, hiring and firing, Hyman Minsky, income inequality, industrial robot, information security, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, megaproject, middle-income trap, Minsky moment, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, Shenzhen special economic zone , smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, vertical integration, Washington Consensus, women in the workforce, working-age population, zero-sum game

The likelihood of China running current account deficits or allowing a meaningful liberalisation of capital account transactions any time soon is negligible. If anything, the surplus is likely to increase again as growth slows in the future. Consequently, the Renminbi is strongly handicapped when it comes to becoming a more serious global reserve currency. It is still possible for businesses and commercial organisations to use the Renminbi more for transactions in the future but that is quite different from becoming a more important global reserve currency. Second, for all the fanfare about the Renminbi’s inclusion in the Special Drawing Rights, it isn’t clear that this has much practical purpose other than to confer modest status. The SDR is not going to dethrone the US dollar, and there haven’t really been any significant initiatives to issue substantial quantities of SDR bonds or enhance its global usage.

Ultimately, China will have to inflate or deflate its way out of debt, but both options raise penetrating questions about its capacity to absorb both the economic and social consequences. Chapter 5 reviews the Renminbi trap, asking whether China can keep its currency stable in the wake of the debt problem. It also considers the structural shortcomings that will prevent the Renminbi becoming a truly global reserve currency. Chapter 6 considers the demographic trap in the fastest ageing country on earth. Ageing is occurring substantially faster than it has done in the West, and at lower levels of income per head, giving rise to the question of whether China will get old before it gets rich. Chapter 7 focuses on the middle-income trap, a condition which is primarily about the quality and effectiveness of governance and institutions.

The currency has been the subject of an active campaign in and outside China to internationalise its usage in denominating trade and investment transactions, and as a reserve asset held by other central banks. It is one of the constituent units of the IMF’s Special Drawing Rights, and a lot of people believe that it is on course to become a more significant reserve currency, perhaps one day rivalling the US dollar. This chapter is going to argue two things. First, that it is not enough to want currency stability – delivering it, if domestic money and credit policies are not compatible, is impossible. Second, that China cannot have a truly global currency when current account surpluses and capital controls restrict the accumulation of Renminbi by foreigners.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Big bang: deregulation of the City of London, bilateral investment treaty, book value, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, Carmen Reinhart, central bank independence, classic study, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, democratizing finance, 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, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, military-industrial complex, 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, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, proprietary trading, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, scientific management, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, stock buybacks, structural adjustment programs, subprime mortgage crisis, Tax Reform Act of 1986, 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, vertical integration, very high income, Washington Consensus, We are all Keynesians now, Works Progress Administration, zero-coupon bond, zero-sum game

The CEO of Caterpillar, the world’s largest manufacturer of construction and mining equipment, called Washington’s debt-ceiling saga in the summer of 2011 not only “ugly” but also “a red herring,” which got in the way of Congress’s ratification of outstanding free-trade agreements, as well as much-needed domestic infrastructure programs.5 The Fed’s Ben Bernanke, noting that Congress had “disrupted financial markets,” warned that “similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold US financial assets or to make direct investments in job-creating US businesses.”6Yet, although it was precisely on these grounds that the credit-rating agency Standard & Poor’s downgraded US Treasury bonds, what was especially remarkable was that the appetite for these bonds, even at record-low interest rates, far from abating, increased.7 Ruminations about an alternative reserve currency went nowhere—especially as the smoldering crisis in Europe’s interbank markets burst into flames, sending the widespread earlier expectations that the euro would challenge the dollar up in smoke. Much like Germany in the crisis of the 1970s, even China today explicitly speaks in terms of the US’s unique responsibilities for “the world’s economic soundness,” given its status as “the world’s largest economy and the issuer of the dominant international reserve currency.” American political leaders were reminded that “political brinkmanship in Washington is dangerously irresponsible . . .

Whereas in 1812 Jefferson had seen conquering Canada as the only way of preventing “difficulties with our neighbors,” exactly a century later President Taft could celebrate the “greater economic ties” that were making Canada “only an adjunct of the USA.”69 US economic penetration of Canada had the added advantage of “providing access to unfettered trade within the British Empire which could look like part of the scaffolding of a new world order, all the more as American capital had a growing stake in it.”70 Yet the latitude that even Canada could claim within the American informal empire was demonstrated in 1911 when Canadian voters (spurred by fears of annexation) rejected a free trade agreement with the US, and when Canada immediately entered into World War I in support of Britain, while the US initially stayed out.71 It was nevertheless a mark of the status of Canada as a “rich dependency” within the American empire that Canadian banks were virtually unique internationally in utilizing the dollar as a reserve currency, and maintained large external balances in New York as a source of liquidity and to cover the massive flow of goods and capital across the border. This would presage the type of relationship that would develop between the American empire and so many other capitalist countries, including the most advanced, before the twentieth century had run its course.

The Republican administrations made sure, moreover, that all of Congress’s tariff bills of the 1920s, which in any case did not go back to the levels of the nineteenth century, remained linked to the Open Door reciprocity and non-discrimination principles of the 1913 Underwood Tariff. By the mid 1920s manufactured goods exports were double what they had been before the war, and from 1922 to 1928 total exports grew almost 50 percent faster even than domestic GDP, which grew in real terms by 40 percent.19 The dollar became the major reserve currency in the world financial system, albeit still sharing the stage with sterling, and to a lesser extent the franc. Moreover, the flow of private American capital to Europe after World War I was considerably greater than immediately after World War II.20 The US Department of Commerce itself claimed that the rapidity with which the US acquired foreign assets through the 1920s was “unparalleled in the experience of any major creditor nation in modern times.”21 Over the decade of the 1920s, the book value of total American foreign direct investment increased by 129 percent in manufacturing, and 95 percent overall.


pages: 247 words: 68,918

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

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

The wealthiest and most powerful among the merchant class fought to preserve their state-guaranteed competitive advantages by forming alliances with well-placed bureaucrats, whose role expanded into mutually profitable enforcement of an ever-expanding web of state regulations. Why the preoccupation with gold? There was no obvious alternative. The world had no internationally accepted global reserve currency. National currencies were barely exchangeable. But wherever they traveled, even among the most primitive societies, mercantilists encountered the universal human fascination with precious metals. Generally speaking, Europe’s mercantilists had two methods of increasing their stockpiles: by building a positive trade balance (more gold coming in than going out) and by conquering the lands where new reserves were discovered.

Officials on both sides of the Pacific saw that a bad day for America’s economy is still a bad day for China’s, and Beijing’s bid to restructure its economy to rely much more for growth on domestic consumer demand remains a long-term project. Second, as the crisis metastasized around the world, risk-averse investors again turned to U.S. treasuries as a hedge against turmoil in developing states, helping Washington protect the advantages that come with the dollar’s status as the world’s reserve currency. Finally, the same polls that underscored the Bush administration’s international unpopularity revealed that the election of Barack Obama had inspired much more positive attitudes toward America and its role in the world in almost every country surveyed.9 Yet over the longer term, the financial crisis has done considerable damage to America’s ability to lead by example as a champion of free-market capitalism.

Could they use their acquisitions to gain access to classified information, defense technologies, or trade secrets? On the other hand, as the world recovers from the global recession and investors regain their appetite for risk, what if we discover that state-capitalist governments mean what they say about diversifying away from the dollar to diminish its status as the world’s reserve currency? In other words, what if they slowly but steadily reduce their willingness to finance America’s debt by buying U.S. Treasury bills? In 2008, as America’s subprime mortgage mess generated an international crisis, sovereign wealth funds from Asia and the Middle East rode to the rescue with tens of billions of dollars for Citigroup, Merrill Lynch, and other financial institutions.


pages: 242 words: 71,943

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity by Charles L. Marohn, Jr.

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, A Pattern Language, American Society of Civil Engineers: Report Card, anti-fragile, bank run, big-box store, Black Swan, bread and circuses, Bretton Woods, British Empire, business cycle, call centre, cognitive dissonance, complexity theory, corporate governance, Detroit bankruptcy, Donald Trump, en.wikipedia.org, facts on the ground, Ferguson, Missouri, gentrification, global reserve currency, high-speed rail, housing crisis, index fund, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jane Jacobs, Jeff Bezos, low interest rates, low skilled workers, mass immigration, megaproject, Modern Monetary Theory, mortgage debt, Network effects, new economy, New Urbanism, paradox of thrift, Paul Samuelson, pensions crisis, Ponzi scheme, quantitative easing, reserve currency, restrictive zoning, Savings and loan crisis, the built environment, The Death and Life of Great American Cities, trickle-down economics, Upton Sinclair, urban planning, urban renewal, walkable city, white flight, women in the workforce, yield curve, zero-sum game

Our modern development pattern – a continental-scale social experiment – was established during a period of unprecedented abundance after World War II. We were not only the sole economic superpower that wasn’t devastated by war; the biggest players in the world were indebted to us. We held the global reserve currency, we had the greatest amount of easily accessible oil and coal resources, and we had a generation of motivated young people culturally unified by shared hardship and common enemies. All the systems that launched this massive experiment, from the new financing mechanisms to the highway and infrastructure programs, were developed at a unique period of time when we could dream big and accomplish anything.

Keynes had argued against the gold-backing – some contend to free economies from the constraints of gold-backing, others as a cynical ploy to maintain the power of the British Empire’s sterling trading block – but the American negotiators, who literally had the gold, insisted on it. One ounce of gold was set at $35. The U.S. dollar was now as good as gold and would become the world’s reserve currency. To grasp the profound nature of this arrangement, understand that the sale of oil by the Soviet Union to communist China was done in U.S. dollars. Everyone wanting to trade needed dollars, an exorbitant privilege for the last country standing. The Post-War Boom Paul Samuelson, Nobel prize–winning economist and perhaps second only to Keynes in terms of influence on modern economics, wrote an essay in 1943 on employment after the war.

Not only did the country avoid a return to economic depression, the United States embarked on a multi-decade economic mania that is still looked at as a golden age. America took its industrial capacity and directed it toward building a new version of prosperity, a continent-wide experiment in a new living arrangement. With the world’s reserve currency, abundant and cheap oil, and low individual debt levels, the United States serendipitously found itself with the ingredients it needed for rapid economic growth. What happened was a generation of American growth, two and a half decades of spreading prosperity that is still broadly nostalgized.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, book value, Bretton Woods, business climate, capital controls, carbon tax, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, Cornelius Vanderbilt, 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, foreign exchange controls, 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, low interest rates, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price elasticity of demand, 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, Tragedy of the Commons, transaction costs, universal basic income, urban sprawl, vertical integration, working-age population

As things stand, there is a large gap in the ability of the IMS to expand international liquidity rapidly to manage a global crisis.27 The global reserve system is also deeply problematic from a long-​run perspective due to the potential instability involved in national currencies serving as international reserves (in other words, a modern version of the old ‘Triffin problem’).28 If a reserve issuer (such as the United States) runs persistent surpluses, the world is starved of liquidity; if it runs persistent deficits, its external debt rises too fast and confidence in the reserve currency is sapped. The number of reserve currencies is set to rise in future. The euro has joined the dollar as a major reserve currency though its future is still rather clouded due to the troubles of the eurozone. The Chinese renminbi is the obvious next candidate in line, if and when it becomes freely convertible.29 Optimists hope that competition between reserve currencies will discipline reserve issuers and resolve the ‘new Triffin problem’. But this is too sanguine. Currently, instability is kept in check by the fact that those who wish to flee from the dollar have few good alternatives.

Currently, instability is kept in check by the fact that those who wish to flee from the dollar have few good alternatives. In a world in which there were, say, three reserve currencies, there could be large destabilizing movements of money, if confidence in one of them were to weaken. China’s recent moves to ‘internationalize’ the renminbi suggest that it is committed to making it an international reserve currency. So, in the long run, the drive to a multi-​ currency reserve system is probably unstoppable. In principle, an SDR-​based reserve system would be much more stable. But despite the agreement in 2009 to increase the supply of SDRs by $200 billion, they constitute only 4 per cent of global reserves.

In 2014, India joined the other BRICS countries to set up a development bank and a ‘contingency reserve fund’ to share currency reserves. But the latter is miniscule in size. See Steil (2014). Triffin (1960). The IMF decided at the end of 2015 to include the renminbi in the SDR basket. This is an important staging post on the way to the renminbi becoming a reserve currency. If BRICS and other emerging countries had presented a united front, they could have secured substantial changes in IMF governance after the 2008 crisis, when they became major lenders to the IMF, and European countries became major borrowers. I n di a a n d t h e W or l d Ec o n o m y [ 271 ] 272 31.


pages: 829 words: 187,394

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

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

After the Bretton Woods system collapsed in 1971, the US dollar became the global reserve currency. After this date most international trade was denominated in the US currency, along with a large share of cross-border financial transactions. Dozens of countries pegged their own currencies to the dollar. If the Gold Standard was characterized by its ‘golden fetters’, the chief vice of the Dollar Standard is its extreme elasticity. Central bank reserves are mostly composed of dollar-denominated securities (US Treasury bonds and agency debt), which, unlike gold, can be issued without limit. As the keeper of the world’s reserve currency, the United States doesn’t need to maintain its own foreign-exchange reserves, nor worry about its balance of payments.

On each of these occasions, the lack of inflation encouraged central banks to maintain interest rates below the economy’s growth rate. Each of these credit booms ended in disaster. In Part Three (The Game of Marbles) we examine the impact of ultra-low interest rates on emerging markets. The initial effect of reducing rates to zero on the world’s reserve currency, the US dollar, was to drive capital flows into emerging markets. Commodity prices took off. Rising food prices helped to spur the 2011 popular uprising in the Middle East known as the Arab Spring. After the Federal Reserve started to tighten policy a couple of years later, commodity prices collapsed and emerging markets entered the doldrums.

Why were the credit systems of so many different countries, from Australia to Iceland, so vulnerable at the time? The unifying factor appears to be the low-interest rate policy of the Federal Reserve at the turn of the century, which, owing to the special position of the dollar as the global reserve currency, created the conditions for a credit boom that engulfed much of the world’s economy. Prior to the crisis, global interest rates were negative in real terms and far below the growth rate of the world’s economy. Even countries with relatively high interest rates enjoyed no respite, since they were inundated with foreign capital flows.fn9 There’s no need to appeal to ad hoc explanations: easy money produced the boom and the boom was followed by the inevitable bust.


pages: 221 words: 46,396

The Left Case Against the EU by Costas Lapavitsas

anti-work, antiwork, banking crisis, Bretton Woods, capital controls, central bank independence, collective bargaining, declining real wages, eurozone crisis, financial engineering, Francis Fukuyama: the end of history, global reserve currency, hiring and firing, low interest rates, machine translation, neoliberal agenda, offshore financial centre, post-work, price stability, quantitative easing, reserve currency, Ronald Reagan, Washington Consensus, Wolfgang Streeck

The first is that the EMU has not simply created a common means of exchange among its members. From its inception the euro was designed to serve an international role, not only among EMU member states but also in relation to the world market. It has always been a competitor to the dollar and other global reserve currencies, a form of what Marx called ‘world money’.34 World money is qualitatively different from national monies because it acts as a means of payment and a means of hoarding in the world market, a role that gold has historically played for centuries, and which has been assumed by the US dollar for decades.

The euro is a peculiar form of world money because it has been created ex nihilo through the monetary union of several states of vastly different economic and political power. There is nothing ‘natural’ or ‘spontaneous’ about the emergence of the euro in the contemporary international markets, and that is a source of both strength and weakness. To act as a world reserve currency the euro has had to gain global acceptability and credibility from scratch, and its institutional mechanisms were designed partly with this purpose in mind. The ECB and the Eurosystem were created with the express aim of ensuring price stability, which is necessary for the euro to act as a reserve of value.

EU policy defended primarily the interests of big business, and especially banks, at the expense of wage labour and the poor. Perhaps worst of all, it did not fully resolve the crisis but rather pacified it, and has left the EMU in a still precarious position at the end of the 2010s. The paramount concern of the EU was to prevent the monetary union from collapsing, and to defend the euro as an international reserve currency. To this purpose it was imperative to protect the interests of banks, particularly those of the core. It was also necessary to boost the regime of fiscal discipline that was already integral to the monetary union. For the EU, the monetary union had to continue functioning in accordance with Maastricht, which meant that the existing framework had to be made stronger and harsher.


pages: 241 words: 81,805

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis by Tim Lee, Jamie Lee, Kevin Coldiron

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, backtesting, bank run, Bear Stearns, Bernie Madoff, Bretton Woods, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, currency risk, debt deflation, disinformation, distributed ledger, diversification, financial engineering, financial intermediation, Flash crash, global reserve currency, implied volatility, income inequality, inflation targeting, junk bonds, labor-force participation, Long Term Capital Management, low interest rates, Lyft, margin call, market bubble, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, negative equity, Network effects, Ponzi scheme, proprietary trading, public intellectual, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, rising living standards, risk free rate, risk/return, sharing economy, short selling, short squeeze, sovereign wealth fund, stock buybacks, tail risk, TikTok, Uber and Lyft, uber lyft, yield curve

However, when things do happen, when exchange rates or asset prices move against the carry trader, losses can mount suddenly and substantially. A significant part of this book is devoted to explaining these trades, particularly in the currency and the stock markets. One conclusion is that the greater liquidity and breadth of financial instruments in the US markets, as well as the dollar’s role as the global reserve currency, has placed the US markets, and specifically the S&P 500 index, at the center of the global carry trade. A further purpose of the book is to convey how carry has come to dominate the global business cycle, creating a pattern of long, steady, but unspectacular expansions punctuated by catastrophic crises.

Low or zero inter- 196 THE RISE OF CARRY est rates in the major developed economies, bailouts, central banks’ quantitative easing policies, and their implicit promise to intervene in the event of market “instability” have all encouraged investment or speculative strategies that seek to extract a return from expectations of low market volatility. Given the increasing dominance of the dollar as the carry funding currency of choice, along with its role as the world’s major reserve currency, a further, crucial, element of the picture has been the US Federal Reserve’s liquidity swap arrangements with other central banks and the Fed’s willingness to enter into liquidity swaps on a large scale when there is stress in the dollar funding markets. Central bank liquidity swap arrangements can also be perceived as underwriting the “circular flow of dollars” in the global economy (a topic of the discussion of the currency carry trade in Chapter 2).

When we think of the global carry regime as being a fundamentally deflationary regime composed of trillions of dollars of potentially interconnected currency carry trades, credit carry trades, and volatility selling trades in general, then it would be unlikely that this regime could exist with the dollar as the predominant funding and reserve currency without the Fed’s underwriting of it via liquidity swaps. To illustrate, we can return to an example used earlier in the book, of a hypothetical Brazilian company that has borrowed dollars to finance a domestic investment. Imagine that at the time the funding matures and has to be refinanced, there is a global carry crash; carry trades are being unwound, and the Brazilian currency, the real, plunges against the dollar.


pages: 491 words: 141,690

The Controlled Demolition of the American Empire by Jeff Berwick, Charlie Robinson

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, airport security, Alan Greenspan, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, bank run, barriers to entry, Berlin Wall, Bernie Sanders, Big Tech, big-box store, bitcoin, Black Lives Matter, bread and circuses, Bretton Woods, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cass Sunstein, Chelsea Manning, clean water, cloud computing, cognitive dissonance, Comet Ping Pong, coronavirus, Corrections Corporation of America, COVID-19, crack epidemic, crisis actor, crony capitalism, cryptocurrency, dark matter, deplatforming, disinformation, Donald Trump, drone strike, Edward Snowden, Elon Musk, energy transition, epigenetics, failed state, fake news, false flag, Ferguson, Missouri, fiat currency, financial independence, George Floyd, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, Indoor air pollution, information security, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jeff Bezos, Jeffrey Epstein, Julian Assange, Kickstarter, lockdown, Mahatma Gandhi, mandatory minimum, margin call, Mark Zuckerberg, mass immigration, megacity, microapartment, Mikhail Gorbachev, military-industrial complex, new economy, no-fly zone, offshore financial centre, Oklahoma City bombing, open borders, opioid epidemic / opioid crisis, pill mill, planetary scale, plutocrats, Ponzi scheme, power law, pre–internet, private military company, Project for a New American Century, quantitative easing, RAND corporation, reserve currency, RFID, ride hailing / ride sharing, Saturday Night Live, security theater, self-driving car, Seymour Hersh, Silicon Valley, smart cities, smart grid, smart meter, Snapchat, social distancing, Social Justice Warrior, South China Sea, stock buybacks, surveillance capitalism, too big to fail, unpaid internship, urban decay, WikiLeaks, working poor

The dollar is not worth nearly as much as people perceive it to be, in part because of the excessive money printing, but that is not the biggest problem that it faces these days, and it is not the only reason for the difference between the perceived value of the dollar and its actual value. The removal of the Petrodollar as the world’s reserve currency will mean that countries around the world will no longer be forced to purchase all of the oil that they require in U.S. Dollars exclusively. When these dollars are no longer needed, they will return back to whence they came, which is the United States. As they begin to pile up inside America, their value will fall, and this removal as the world’s reserve currency will be the event that destroys the American Empire, financially at first, then socially only weeks later. America will do what all flailing empires do when faced with their own mortality: they will pretend that this time is different and that those empires that have crumbled before them were either weak militarily, lacking in fiscal creativity, or morally inferior, but none of this will matter because in the end all empires crumble under the weight of their own greed and arrogance, and no amount of propping up by their bought-off accomplices in the corporate media will help to break their fall.

• Brittan (1815-1945) 130 years. • United States (1945-2020+) 75 years. Officially the U.S. dollar has only been the world’s reserve currency for a little over 75 years, but the dollar has been used to settle trades since 1920 and has been used in world finance for purposes like world wars and the like. The Federal Reserve started their scheme in 1913 and instituted the Internal Revenue Service as the funding mechanism, so the dollar has been in its current iteration for over 100 years, maybe not as the reserve currency the entire time, but definitely globally manipulated since the beginning, and recognized by most nations as the dominant currency.

They always cross that threshold at some point, without fail, whether they are an average country just trying to find that line, an up-and-coming country testing out the boundaries of their currency, or a decrepit and corrupt empire on its last leg. For every country that has been delisted as the world’s reserve currency, they have been immediately plunged into a decade’s long depression featuring a string of wars and bloody revolutions on the streets. These currency situations are not built to be sustainable, and they are not, lasting usually about a century under the best of circumstances. Like a metropolis built on a fault line, the question is not “if” the big one is coming, but “when”?


pages: 438 words: 109,306

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

Alan Greenspan, banking crisis, Basel III, Bear Stearns, 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, foreign exchange controls, forensic accounting, Glass-Steagall Act, Goldman Sachs: Vampire Squid, haute cuisine, IBM and the Holocaust, Kickstarter, low interest rates, Occupy movement, offshore financial centre, Ponzi scheme, power law, price stability, quantitative easing, reserve currency, special drawing rights

Henry Morgenthau and Harry Dexter White led the American delegation. The conference agreed on the creation of the International Monetary Fund (IMF) and an International Bank for Reconstruction and Development (BRD), which became part of the World Bank. The IMF would monitor exchange rates and lend reserve currencies to indebted countries. The new bank would provide loans to underdeveloped countries. Bretton Woods also gave its name to a new international currency exchange system, where currencies were linked to the US dollar. In exchange the United States agreed to fix the price of gold at $35 an ounce.

Which was true enough, as Abs had embodied a century of German banking, although not in the adulatory sense that the writer had envisaged.17 ALWAYS QUICK TO adapt to changing circumstances, the BIS spotted a new opportunity during the 1960s. The continuing drain on Britain’s economy of its empire and the country’s general economic malaise made sterling increasingly vulnerable. But sterling was also a reserve currency, especially across Britain’s current and former dominions. Thus sterling, like the price of gold, had to be stabilized. The BIS was not a lender of last resort, but it could arrange loans to troubled central banks. In June 1966 a group of European central banks, the New York Federal Reserve, and the BIS agreed to make around $1 billion available to the Bank of England to defend sterling.

This was significant, not just because of the sums involved, but because the BIS was its center. All the monies involved, apart from French and American funds, would be paid through a single account at the BIS. The bank was now coordinating a long-term strategic rescue of one of the world’s reserve currencies. However opaque the governors’ meetings were, they were a more edifying spectacle than the farcical and very public scenes at the November 1968 G10 conference in Bonn. With the franc and sterling under pressure, and German reserves up by $4 billion, the conference was always going to be difficult.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, Robert Solow, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

He was hindered in his battle against international finance by the formidable Dexter White, backed up by the full force of US imperial power. White wished to retain the US dollar as the centre of the international monetary system, whilst Keynes wanted it replaced with a new international currency — the bancor. White emerged victorious, and the US gained the “exorbitant privilege” of controlling the world’s reserve currency.5 In other words, as well as constraining international finance, Bretton Woods also institutionalised American imperialism.6 The Bretton Woods conference marked the dawning of a new era for the global economy. Europe set about the long processes of post-war reconstruction and decolonisation, and the multinational corporations of the world’s newest superpower profited handsomely.7 Trade flows increased after the years of autarky during the war, and a new age of globalisation began.

Socialist and newly-wealthy oil-producing states that wanted to hold dollar deposits without depositing them in US banks were able to put their dollars in London instead. London’s Eurodollar markets grew substantially as a result. The Eurodollar markets undermined Bretton Woods by creating a global system of unregulated capital flows.13 Those investors holding dollars — pretty much everyone, given the use of the dollar as the global reserve currency — could now deposit them into the City of London. These dollars would then be free to float around the global economy at will, unhindered by the strict regulation then imposed on US banks by the Federal Reserve. Billions of dollars had ended up in the unregulated Eurodollar markets by the 1970s, undermining Keynes’ determination to curb the hot money of the rentier class.

The combination of the emergence of the Eurodollar markets and the rise of the multinational corporation were beginning to place serious strain on Bretton Woods. But it was the US government — not the banks — that dealt the final blow to the system that it had helped to create. With the dollar as the reserve currency, the US had gained the “exorbitant privilege” of being able to produce dollars to finance its spending15. Because everyone needed dollars, the US could spend as much as it liked without the threat of hyper-inflation. The gold peg was supposed to rein in this behaviour: if investors started to think that there were more dollars in circulation than gold to back it up, they might turn up at Fort Knox demanding the weight of their dollars in gold.


pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

4chan, Aaron Swartz, airport security, AltaVista, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, Boeing 747, bread and circuses, business climate, business intelligence, business process, Chelsea Manning, clean water, commoditize, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, decentralized internet, disinformation, Edward Snowden, failed state, financial independence, Firefox, full text search, gamification, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, independent contractor, informal economy, intangible asset, invisible hand, it's over 9,000, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, Laura Poitras, M-Pesa, mass immigration, mass incarceration, mega-rich, military-industrial complex, MITM: man-in-the-middle, mutually assured destruction, Naomi Klein, national security letter, Nelson Mandela, new economy, New Urbanism, no silver bullet, Occupy movement, off-the-grid, offshore financial centre, packet switching, patent troll, peak oil, power law, pre–internet, private military company, race to the bottom, real-name policy, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Stallman, Ross Ulbricht, Russell Brand, Satoshi Nakamoto, security theater, selection bias, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, twin studies, union organizing, wealth creators, web application, WikiLeaks, Y2K, zero day, Zipf's Law

Often, the world had a "reserve currency" that was considered the most stable and convertible, and held by governments as part of their foreign exchange reserves. For a long time, this was the British Pound Sterling. Then in the middle of the last century, the US Dollar became a significant reserve currency, and at the start of this century, the Euro joined. The government behind a reserve currency tends to use it to create debt, which then causes the currency to deflate and the world to switch to another. This seems to be happening with the US Dollar today, though it's unclear what the future reserve currency would be.

This seems to be happening with the US Dollar today, though it's unclear what the future reserve currency would be. The Internet has been searching for a reserve currency, indeed any currency that could be used to buy goods and services on line, for a long time. The digital economy presents a unique set of challenges for security and privacy. Credit Cards Most Internet trade still uses credit cards from firms like Visa and MasterCard. These firms charge merchants about 3-4% on each transaction, which is an astonishing amount and points to a cartel operation. Indeed, these two firms have been under fire from European antitrust authorities for years. They should have gotten some patents. Mobile phones can now be turned into wireless credit card terminals by using little credit card readers that plug into the phone.


pages: 511 words: 151,359

The Asian Financial Crisis 1995–98: Birth of the Age of Debt by Russell Napier

Alan Greenspan, Asian financial crisis, asset allocation, bank run, banking crisis, banks create money, Berlin Wall, book value, Bretton Woods, business cycle, Buy land – they’re not making it any more, capital controls, central bank independence, colonial rule, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, Deng Xiaoping, desegregation, discounted cash flows, diversification, Donald Trump, equity risk premium, financial engineering, financial innovation, floating exchange rates, Fractional reserve banking, full employment, Glass-Steagall Act, hindsight bias, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, if you build it, they will come, impact investing, inflation targeting, interest rate swap, invisible hand, Japanese asset price bubble, Jeff Bezos, junk bonds, Kickstarter, laissez-faire capitalism, lateral thinking, Long Term Capital Management, low interest rates, market bubble, mass immigration, means of production, megaproject, Mexican peso crisis / tequila crisis, Michael Milken, Money creation, moral hazard, Myron Scholes, negative equity, offshore financial centre, open borders, open economy, Pearl River Delta, price mechanism, profit motive, quantitative easing, Ralph Waldo Emerson, regulatory arbitrage, rent-seeking, reserve currency, risk free rate, risk-adjusted returns, Ronald Reagan, Savings and loan crisis, savings glut, Scramble for Africa, short selling, social distancing, South China Sea, The Wealth of Nations by Adam Smith, too big to fail, yield curve

It had been the decline in the US dollar, combined with strong capital inflows, which had forced the central banks to create the excess liquidity that was fuelling high economic growth and ever higher local asset prices. The Asian growth story was supposed to be about good fundamentals and those special ‘Asian values’ and not the direction of the reserve currency on the international exchanges. Throughout this period of a rising dollar, which had begun in early 1995, institutional investors often referenced the declining valuations of Asian equities as reasons to invest. This insistence on basing investment decisions on such value considerations, as the rise of the US dollar negatively impacted domestic liquidity conditions, was perhaps the biggest mistake investors were to make in this period.

This was not yet evident by early August, but on 4 September Alan Greenspan spoke in California and stated that “it is just not credible that the United Sates can remain an oasis of prosperity” given what was happening in the rest of the world. He was not to cut US interest rates until later that month, but his willingness to do so had been flagged up by his speech of 4 September. Relief in the form of easier monetary policy from the central bank running the world’s reserve currency was now just a few weeks away. Investors in Asian equities still had to weather the storms of August. The great inflexion? 5 August 1998, Regional So what happens if one company gains competitiveness through a falling currency while the other loses it? Well, if the Asian equity markets continue their slump, the answer to that question is that the share prices of both companies fall.

As suggested yesterday, at this stage the BOJ is doing its turn centre stage and attempting to produce a consumption boom which would move Japan rapidly into a current account deficit. I believe the chances of that being successful are at best one in ten, but most investors seem to think that one in a 100 would be a fairer price to quote on this one. Anyway, at some stage it seems highly likely that the steward of the world’s reserve currency will have to get into the business of providing liquidity relief to prevent the global commercial banking system producing a huge global credit contraction. So the US dollar is likely to face a larger trade deficit, a rapid slowdown in capital inflows and the prospect of lower domestic interest rates.


pages: 327 words: 90,542

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"there is no alternative" (TINA), "World Economic Forum" Davos, 9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Alan Greenspan, Albert Einstein, Alfred Russel Wallace, Anthropocene, Anton Chekhov, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, bitcoin, bond market vigilante , Bretton Woods, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, 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, digital divide, disintermediation, disruptive innovation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial engineering, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, geopolitical risk, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, Great Leap Forward, Greenspan put, happiness index / gross national happiness, high-speed rail, 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), it is difficult to get a man to understand something, when his salary depends on his not understanding it, It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, Kevin Roose, knowledge economy, knowledge worker, Les Trente Glorieuses, light touch regulation, liquidity trap, Long Term Capital Management, low interest rates, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, middle-income trap, Mikhail Gorbachev, military-industrial complex, Minsky moment, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, PalmPilot, passive income, peak oil, peer-to-peer lending, pension reform, planned obsolescence, 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, Robert Solow, Ronald Reagan, Russell Brand, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, Stephen Fry, systems thinking, 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, uber lyft, 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

The West, moreover, did not want to confer any advantage on the communist Soviet Union, which controlled a sizeable proportion of known gold reserves and had emerged as a geopolitical rival to the US. Bretton Woods therefore established a system of fixed exchange rates using the US dollar as a reserve currency. The dollar was to have a set relationship to gold, at US$35 an ounce, and the US government committed to converting dollars into gold at that price. Other countries would peg their currencies to it, giving the US an unprecedented influence in the global economy that exists to this day. Supreme as the world's currency, the dollar was now as good as gold.

The actions have made it difficult for immigrants or foreign workers to remit funds to the developing world, which provide critical support for families and communities. Foreign nations increasingly resent the extraordinary power enjoyed by the US through the position of the dollar as the global reserve currency, central to international finance, trade, and payments. In response, non-Americans are seeking to reduce the dominance of the US dollar. Retaliatory prosecutions of American businesses are possible. Negotiation of closer trade and financial relationships will be detrimentally affected. In 2015, the EU commenced action against Google relating to alleged abuse of its dominance of Internet search engines.

While US energy independence is not likely in the near term, and the benefits from shale gas are overstated, increased domestic production provides America with a significant advantage in the form of competitive fuel and power costs. With no clear replacement available, the US dollar is likely to continue as the world's reserve currency, with a dominant share of global trade and investments. The US borrows in its own currency, benefiting from a ready market for its securities, both domestically and internationally. Over US$6 trillion of Treasury bonds are held by foreign investors, mainly in China, Japan, elsewhere in Asia, and the Middle East.


pages: 339 words: 95,270

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein

Alan Greenspan, Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, collective bargaining, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, deglobalization, deindustrialization, Deng Xiaoping, Donald Trump, Double Irish / Dutch Sandwich, Fall of the Berlin Wall, falling living standards, financial innovation, financial repression, fixed income, full employment, George Akerlof, global supply chain, global value chain, Great Leap Forward, high-speed rail, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, low interest rates, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, Money creation, money market fund, mortgage debt, New Urbanism, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck

Outside of the four biggest economies—France, Germany, the United Kingdom, and the United States—currencies issued by other governments accounted for about a third of all reserve assets. (The rest was gold bullion.) Beyond continental Europe, where the French franc and German reichsmark were more prevalent, and Canada, which held its reserves in U.S. dollars, the pound sterling was by far the dominant reserve currency. Almost all of Japan’s holdings of reserve assets in 1913, for example, took the form of financial claims issued by the U.K. government and banks, rather than gold or other foreign currencies.10 During the war, all the major powers except the United States suspended the convertibility of paper currency into physical gold.

Americans have therefore had to bear the burden of the Europeans’ unwillingness to spend on their own domestic needs. Despite their ongoing complaints about American policy, European leaders have done nothing to change this situation. It is as if the 1960s have returned.43 Keynes’s Revenge The conventional wisdom is that it is good to be an issuer of a reserve currency, but that is a misconception grounded in psychology rather than economics. Unless the reserve issuer overwhelmingly dominates the world economy, there will always be conflicts between its domestic needs and the global demand for reserve assets. For more than six decades, the United States has satiated savers in the rest of the world at the expense of its own workers.

That decision—which Keynes vigorously opposed as an economic adviser to the U.K. government—came at the expense of British industry. British exports were about 25 percent lower throughout the 1920s than they were in 1913, while artificially cheap imports displaced domestic production. British workers endured nearly a decade of extremely high unemployment. Issuing one of the world’s major reserve currencies was no privilege for them. But things changed in the period from 1930 to 1932, when the British public voted to place domestic concerns above international responsibilities. The United Kingdom abandoned its international commitments, devalued its currency against gold, lowered domestic interest rates, and imposed tariffs, after which the country quickly closed the gap in living standards that had emerged in the 1920s between it and the rest of the rich world.44 Before then, the British government had deliberately imposed pain on its own citizens to maintain the status of the pound sterling.


pages: 108 words: 27,451

Magic Internet Money: A Book About Bitcoin by Jesse Berger

Alan Greenspan, barriers to entry, bitcoin, blockchain, Bretton Woods, Cambridge Analytica, capital controls, carbon footprint, correlation does not imply causation, cryptocurrency, diversification, diversified portfolio, Ethereum, ethereum blockchain, fiat currency, Firefox, forward guidance, Fractional reserve banking, George Gilder, inflation targeting, invisible hand, Johann Wolfgang von Goethe, liquidity trap, litecoin, low interest rates, Marshall McLuhan, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, planned obsolescence, price mechanism, Ralph Waldo Emerson, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Robert Metcalfe, Satoshi Nakamoto, the medium is the message, Vitalik Buterin

As such, nations held gold in reserve to support the value of their currencies. If they wanted to create more currency, they had to acquire more gold, ensuring that the currency’s values were justified because gold vouched for its integrity. In 1971, with gold-backed US dollars serving as the world’s reserve currency, the United States unilaterally severed the convertibility of dollars to gold.5 From that point onwards, all global currencies started a journey into unchartered territory, unsupported and unrestrained by any credible reserve asset. In effect, the sound characteristics that had been conferred by gold were traded for expediency, giving countries free reign to undermine the integrity, and therefore the value, of their currencies, regardless of the consequences.

So, in an economy that is careless in its consideration of future consequences – where currency issuance is inexpensive, rising in spite of its ability to gauge value, and where debts can be incurred without regard to repayment – why should fiat currency be considered valuable? What promise does it hold? Practically and historically speaking, fiat money’s fundamental value proposition is suspect, and its promises are seemingly empty. US MONETARY POLICY: As the world reserve currency, the US dollar settles the majority of global trade, and its monetary policies could be considered a proxy for all fiat currencies. Since the Global Financial Crisis, supply has been increasing at an unpredictable rate, and interest rates have been flatlining. As of May 2020, with the US national debt at a staggering $25 trillion (over $75,000 per American), it is worth asking – on what basis is the fiat monetary system credible?


pages: 1,066 words: 273,703

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

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

Kudrin had come to announce the repayment of a large tranche of international debt still owed to the Paris Club of creditors from the bad old days of the 1990s. But he had also come to deliver a less friendly message. The dollar, Kudrin declared, was in danger of forfeiting its status as the “universal or absolute reserve currency.”34 It was simply too uncertain in value. “Whether it is the U.S. dollar exchange rate or the U.S. trade balance, it definitely causes concerns with regard to the dollar’s status as a reserve currency.” Eight years on from the humiliation of 1998, when Russia’s finance minister spoke, the markets listened. Kudrin’s words were enough to send the dollar down against the euro by almost half a cent.

Advocates of reform argued that at the root of global financial instability was the overreliance on the dollar as a reserve currency. This conferred on America an exorbitant privilege, which it exploited irresponsibly, running up deficits and borrowing abroad. In 2009 the head of China’s central bank and a special commission of the United Nations would advance proposals for a new global currency system.33 The Russians liked the idea, and so too did the West Europeans.34 In September, Peer Steinbrück told journalists, “When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative.”35 Two months later, President Sarkozy declared ahead of the G20 summit, “I am leaving tomorrow for Washington to explain that the dollar—which after the Second World War under Bretton Woods was the only currency in the world—can no longer claim to be the only currency in the world.

All this made the ECB the most remote of all the modern central banks.26 To call it apolitical would be a misnomer, because it, in fact, entrenched a conservative bias against inflation as the unquestionable doxa of Europe. Nor would it be fair to say that anti-inflation politics were the ECB’s only ambition. It also wanted to promote Europe as a financial center and the euro as a reserve currency, and that meant actively developing European debt markets. Specifically, it meant importing to Europe the American model of a repo market for government debt. Being able to repo government securities made them much more attractive as assets. This was a lesson that France had learned in the 1980s.


Global Financial Crisis by Noah Berlatsky

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

She also states that China would be better off working with— rather than trying to compete against—the United States. Jing Men further believes that China should focus on its own economic development. As you read, consider the following questions: 1. Since the 1970s, China’s economy has grown annually by what percentage rate? 2. With what does the head of the People’s Bank of China think a new world reserve currency will help? 3. What leads China’s development? T he 20th century was the century of the United States. Will the 21st century be the one of China? China is rising. Since its reform policy at the end of the 1970s, China’s economy has been growing at an average rate Jing Men, “World Financial Crisis: What It Means for Security,” NATO Review, May 2009.

China is the largest source of US imports, with which it enjoyed a trade surplus of $266.3 billion in 2008. In the same year, China became the largest foreign owner of American government debt, overtaking Japan. Zhou Xiaochuan, the head of the People’s Bank of China, feels that the flaws in the international monetary system could be dealt with to a certain degree by creating a new world reserve currency. The financial crisis has further enhanced China’s importance in the world economy. It is said to have about $2 trillion in foreign currency reserves. This huge reserve of US currency contrasts sharply with the US, whose budget deficit is likely to exceed $2 trillion this year [2009]. The Chinese government’s $586 billion stimulus package demonstrated its determination to keep the crisis at bay.

China Looks to Avoid Financial Crisis in the Future Chinese leaders are not only trying to find solutions for the problems that have occurred, but are also interested in finding out why they occurred in the first place, so as to avoid similar problems in the future. Zhou Xiaochuan, the head of the People’s Bank of China, feels that the flaws in the international monetary system could be dealt with to a certain degree by creating a new world reserve currency. His controversial idea alarmed the Americans, but was quietly welcomed by many Europeans and Asians. Although Zhou’s idea is not to replace the dominant status of the dollar in the near future, it may provoke a revolution in the international monetary system. Together with China’s rising economic power, China has also steadily increased its military expenditure, with double digit annual growth.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Abraham Maslow, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, currency risk, diversification, diversified portfolio, family office, financial engineering, fixed income, glass ceiling, Glass-Steagall Act, global macro, Greenspan put, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, inverted yield curve, John Meriwether, junk bonds, land bank, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, Market Wizards by Jack D. Schwager, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, out of africa, panic early, paper trading, Paul Samuelson, Peter Thiel, price anchoring, proprietary trading, purchasing power parity, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, tail risk, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, Vision Fund, yield curve, zero-coupon bond, zero-sum game

The reason that trade is attractive is that cyclically the UK economy has been weakening, while the U.S. economy has been surprisingly robust. More importantly, on a secular basis, the United Kingdom has moved from being a high-inflation country to a very low-inflation country.The UK inflation rate is strikingly low. (See Figure 6.8.) The U.S. dollar, as the reserve currency of the world, is in decline. When the British pound was the reserve currency of the world and in decline, there were periodic currency crises and an uptrend in underlying inflation, and a trend up in the relative interest rate against the rest of the world. So long UK Gilts against U.S.Treasuries is a relative value trade that fits in the macro sphere.

On the positive side, they’re unbelievably rich in natural resources and a real comer with an unbelievably educated population.The communists had a great education system. On the United States, I’m not very positive.That could change if they start cutting these deficits. Everybody says this time it’s different, but when the world’s biggest debtor is also the world’s reserve currency, you have a problem. The only way out of deflation is through the printing press, which is problematic for the whole global financial system. China will always be an interesting story but it’s one of those places where it’s probably too good to be true. I won’t be surprised if a lot of people lose a fortune in China.The Chinese are going to do what’s good for the Chinese.

At the moment,American politicians want the dollar to go down, they are encouraging it to go down, and they think it’s good. It is a horrible policy that has never worked for any country in the world. I suggest that your American readers be patriotic, help support the government, and sell dollars. Get your money out of the country. How low will it go? Well, the pound sterling was once the world’s reserve currency and it went down 80 percent from top to bottom.The dollar went up 400 percent against it, top to bottom, which is the other side. (See Figure 11.1.) Likewise, the Japanese yen was at 500 to the U.S. dollar after World War II. Now it’s at 100, so the yen has gone up 400 percent and the dollar has gone down 80 percent.Yet Japan is still very competitive.


pages: 484 words: 136,735

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

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Instead of either a government-controlled fixed-rate system or the purely market-based clean floating of the precrisis period, the currency relations of the future will probably be closer to the 1980s model of a managed float. Within this system of floating but partially managed exchange rates, the dollar will almost certainly retain its pivotal global role. A serious challenge to the dollar’s reserve currency status is almost impossible to imagine because there is no alternative reserve currency and no reason to expect one to emerge. Those who believe that U.S. budget deficits and monetary expansion will destroy the dollar’s international status must point to another currency that is underpinned by stronger fiscal and monetary foundations.

However nervous investors may feel about the dollar, they can sell it only by buying some other currency in which they have greater confidence. And when the prophets of doom who see the United States heading down the road to Zimbabwe are asked what other currency investors should buy in exchange for the trillions of dollars they hold, the answer is silence. Why is there no serious alternative to the dollar as an international reserve currency? The absence of serious currency competition has little, if anything, to do with America’s military hegemony, its globally dominant culture, or even the depth and sophistication of its financial markets (an argument that now looks frayed). The main reason is simply that the world has only two other very large advanced economies—the eurozone and Japan—and America, for all its problems, has generally better prospects than either.

Currencies and Financial Relations: Will There Be a New Bretton Woods? A comprehensive reform of the global currency system has been widely demanded in the aftermath of the crisis. The French, Chinese, and many other governments have called for a new Bretton Woods and for a new international reserve currency to replace the dollar. These calls have sometimes been endorsed by such prominent U.S. and British policymakers as Paul Volcker and Gordon Brown. 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.


pages: 497 words: 143,175

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein

1960s counterculture, accelerated depreciation, activist lawyer, affirmative action, airline deregulation, Alan Greenspan, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business cycle, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, do well by doing good, Dr. Strangelove, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Gunnar Myrdal, guns versus butter model, Ida Tarbell, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, Les Trente Glorieuses, liberal capitalism, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Martin Wolf, new economy, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, open economy, Paul Samuelson, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Robert Solow, Ronald Reagan, Savings and loan crisis, Simon Kuznets, strikebreaker, three-martini lunch, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War

This was obviously true for the United States, but it was also true for Germany and Japan, which depended upon the U.S. market for its exports-led growth.39 The world was awash with solutions for fixing the system, among them returning to the gold standard, creating a new reserve currency, and finding better means of addressing deficits and surpluses. But nothing was done because Europe and the United States each nursed its own grievance and failed to see the other’s complaint. The Europeans, led by the French, believed that the reserve currency role of the dollar encouraged American businessmen to buy up European industries and allowed the U.S. government to spend beyond its means. Yet they benefited from the overvalued dollar.

The trade act was “the administration’s Holy Cause,” and “decent people are prepared to lie for it,” said Oscar Gass, an economist in FDR’s Treasury Department.37 Gass was referring to the congressional testimony of Kennedy’s cabinet—Arthur Goldberg, Orville Freeman, Luther Hodges, George Ball—all of whom stated that the United States would be the net gainer from the trade negotiations and U.S. exports to Europe would rise. Gass predicted mounting trade deficits, and then foreigners would exchange their accumulating dollars for gold. Because the U.S. dollar was in practice the reserve currency, the United States bolstered faith in the greenback by promising to exchange $35 for one ounce of gold. If too many nations got rid of their dollars, the only solution would be to raise U.S. interest rates, which would bring back the dollars but also significantly increase American unemployment.38 Seymour Harris, an economist in the Treasury Department, had other misgivings.

Beginning in the 1950s and escalating during the 1960s, the U.S. trade surplus disappeared. That surplus “paid” for military expenditures abroad and net foreign investment. When the surplus went, the U.S. balance of payments turned negative. The deficits were financed by the creation of liabilities: dollars. The dollars became, willy-nilly, the major reserve currency, lubricating growth everywhere. In the Euro-dollar market big sums moved from one country to another in search of profit after 1958, when European currencies became convertible, meaning that they could be bought and sold freely.36 Speculators, short-term investors, moved money quickly in response to differences in national interest rates.


pages: 363 words: 98,024

Keeping at It: The Quest for Sound Money and Good Government by Paul Volcker, Christine Harper

Alan Greenspan, anti-communist, Ayatollah Khomeini, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, central bank independence, corporate governance, Credit Default Swap, Donald Trump, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, forensic accounting, full employment, Glass-Steagall Act, global reserve currency, income per capita, inflation targeting, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, margin call, money market fund, Nixon shock, oil-for-food scandal, Paul Samuelson, price stability, proprietary trading, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Ronald Reagan, Rosa Parks, Savings and loan crisis, secular stagnation, Sharpe ratio, Silicon Valley, special drawing rights, too big to fail, traveling salesman, urban planning

Williams, however, doubted that the International Monetary Fund created in Bretton Woods could sustain and enforce the new exchange-rate system. In his view, more informal cooperation would be needed, beginning with an understanding between the United States and Britain because their two currencies were globally accepted, used around the world as so-called reserve currencies. Later I spent years of my life trying to prove him wrong. I should have listened more carefully. During my second year at Harvard, I lived in a new graduate dormitory with a pretty active intellectual and social life. It was easy to get to Boston’s legendary Durgin-Park or to the Old Lobster House for an occasional good dinner for, as I recall, less than $10; or once in a great while to the infamous Old Howard burlesque house, long ago destroyed but then a hallowed Harvard tradition.

His answer was that, yes, he could accept that result if it was the consensus of the group. That “temporary” arrangement essentially remains in place fifty years later. The world has been operating without an agreed monetary standard, with varying degrees of “floating” and “fixing,” and with the dollar still the global reserve currency. As I look back, the coda for the Bretton Woods composition was silently expressed at a private lunch in Paris one week later. Arthur Burns pleaded with George Shultz once again to work toward restoring a fixed exchange rate for the dollar. My instinctive comment, given that the dollar couldn’t possibly be stabilized unless we tackled our inflation problem, was “Then, you’d better get back to Washington and tighten money.”

Secretary Shultz’s constructive speech helped to save the day by laying out his desire to advance the reform discussions in the Committee of Twenty. From the start of those discussions, the Europeans, with Schweitzer’s evident support, pressed hard for a system of “asset settlement.” The goal was to rule out the wide use of the dollar as a reserve currency and prevent the United States, as they saw it, from exploiting the “exorbitant privilege” that the French had denounced years earlier. Put simply, all nations would be required to settle their balance-of-payments accounts in an agreed neutral asset—presumably gold, SDRs, or some combination thereof.


pages: 222 words: 70,559

The Oil Factor: Protect Yourself-and Profit-from the Coming Energy Crisis by Stephen Leeb, Donna Leeb

Alan Greenspan, book value, Buckminster Fuller, buy and hold, currency risk, diversified portfolio, electricity market, fixed income, government statistician, guns versus butter model, hydrogen economy, income per capita, index fund, low interest rates, mortgage debt, North Sea oil, oil shale / tar sands, oil shock, peak oil, profit motive, reserve currency, rising living standards, Ronald Reagan, shareholder value, Silicon Valley, Vanguard fund, vertical integration, Yom Kippur War, zero-coupon bond

There’s another benefit to the U.S. from having oil priced in dollars: it helps maintain the dollar as the world’s reserve currency, which loosely means that banks and corporations need the dollar more than other currencies to pay for internationally based transactions. If some other currency replaced the dollar as the world’s reserve currency, the U.S. would lose a lot of control over its economic fate. Oil sales are probably the most important of all internationally based transactions, and the willingness of oil exporters to price oil in terms of dollars is a big reason that the dollar remains the world’s reserve currency. We would argue that the chief reason oil exporters have remained so loyal to the dollar is their undoubted awareness of our military resources—again, the silently effective big stick.


The Future of Money by Bernard Lietaer

agricultural Revolution, Alan Greenspan, Alvin Toffler, banks create money, barriers to entry, billion-dollar mistake, Bretton Woods, business cycle, clean water, complexity theory, corporate raider, currency risk, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, geopolitical risk, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, John Perry Barlow, Lao Tzu, Lewis Mumford, low interest rates, Mahatma Gandhi, means of production, microcredit, Money creation, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, Recombinant DNA, reserve currency, risk free rate, Ronald Reagan, San Francisco homelessness, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, Thomas Davenport, trade route, transaction costs, trickle-down economics, two and twenty, working poor, world market for maybe five computers

Some currencies are operational only among a small group of friends (like tokens used in card games), for certain time periods (like the cigarette medium of exchange among frontline soldiers during World War II), or among the citizens of one particular nation (like most 'normal' national currencies today). Such a community can be the entire global community (as is the case of the US dollar by treaty, as long as it is accepted as reserve currency), or a geographically disparate group (such as Internet participants). Finally, the key function that transforms the chosen object into a currency is its role as means of payment. Notice that the words 'means of payment' are used instead of the more traditional 'medium of exchange' (see sidebar).

It therefore guarantees the full integration of the proposed currency in the existing market system of the 'real' economy in all its aspects. There are indeed real costs associated with storing commodities, and the sustainability Fee would simply be the cost of storing the basket of commodities agreed upon. These storage costs (and therefore the sustainability fees) have been estimated in a detailed study for a Commodity Reserve Currency at 3 to 3.5% per annum. Note that these costs are not new additional costs to the economy as a whole. They are indeed already factored in the current economy. What is proposed is simply transferring these existing costs to the bearer of the Terra, thereby giving them the useful social function of a sustainability fee.

Bonds: Financial instrument sold by a borrower against periodic payment of interest and of the principal at maturity. Bretton Woods: Township in New Hampshire where the Bretton Woods Agreement was finalised in 1945 after negotiations mainly between the British and the US. The system agreed upon has also been called the dollar gold equivalence standard, because it gave the status of official global reserve currency to the US$, on condition that the US guaranteed the convertibility of dollars into gold on demand of other central banks, at a fixed rate of 535 per ounce. In August 1971, President Nixon unilaterally reneged on that latter clause by 'closing the gold window' when France and the UK requested such redemptions.


pages: 372 words: 107,587

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

3D printing, agricultural Revolution, Alan Greenspan, Anthropocene, Apollo 11, back-to-the-land, banking crisis, banks create money, Bear Stearns, biodiversity loss, Bretton Woods, business cycle, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, degrowth, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, global village, green transition, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jevons paradox, Kenneth Rogoff, late fees, liberal capitalism, low interest rates, mega-rich, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, rolling blackouts, Ronald Reagan, short selling, special drawing rights, systems thinking, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, WikiLeaks, working poor, world market for maybe five computers, zero-sum game

In effect, the nation’s government and its central bank are together becoming the lender of last resort and the borrower of last resort — and (via the military) increasingly also both the consumer of last resort and the employer of last resort. How can the US continue to run up deficits at a sizeable proportion of GDP? If other nations did the same, the result would be currency devaluation and inflation. America can get away with it for now because the dollar is the reserve currency of the world, and so if the dollar entirely failed most or all of the global economy would go down with it. Other nations are willing to continue holding dollar-denominated debt obligations simply because they see no better alternative. Meanwhile some currency devaluation actually works to America’s advantage by making its exports more attractively priced.

17 Currency Wars Since the economic crisis began, stresses in trade between the US and China have led to unfriendly official comments on both sides regarding the other nation’s currency. Some financial commentators suggest that “currency wars,” which might also embroil the European Union and other nations, may be in the offing, and that these could eventually turn into trade wars or even military conflicts. The US dollar, as the world’s reserve currency and as the national currency of the country leading the world into the post-growth era, appears to be central to these “money wars.” It takes a little history to understand what currency conflicts are about.18 Prior to the 20th century, most national currencies either consisted of gold or were tied to gold; therefore the currency of one nation was fairly easily convertible to that of another.

At the Bretton Woods monetary conference of 1944 the Allied nations laid the groundwork for a postwar international economic system that included new institutions such as the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank. The US would assume a dominant role in these institutions, and the (partially) gold-backed dollar became, in effect, the world’s reserve currency. Throughout the next half-century and more, citizens and businesses in nations around the world — even in the Soviet Union — who wanted a hedge against instability in their own national currency would hoard US greenbacks. In the early 1970s, as the US borrowed heavily to finance the Vietnam War, France insisted on trading its surplus dollars for gold; this had the effect of emptying out US gold reserves.


pages: 665 words: 146,542

Money: 5,000 Years of Debt and Power by Michel Aglietta

accelerated depreciation, Alan Greenspan, bank run, banking crisis, Basel III, Berlin Wall, bitcoin, blockchain, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, cashless society, central bank independence, circular economy, collapse of Lehman Brothers, collective bargaining, corporate governance, David Graeber, debt deflation, dematerialisation, Deng Xiaoping, double entry bookkeeping, energy transition, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, forward guidance, Francis Fukuyama: the end of history, full employment, German hyperinflation, income inequality, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, joint-stock company, Kenneth Arrow, Kickstarter, land bank, liquidity trap, low interest rates, margin call, means of production, Money creation, money market fund, moral hazard, Nash equilibrium, Network effects, Northern Rock, oil shock, planetary scale, plutocrats, precautionary principle, price stability, purchasing power parity, quantitative easing, race to the bottom, reserve currency, secular stagnation, seigniorage, shareholder value, special drawing rights, special economic zone, stochastic process, Suez crisis 1956, the payments system, the scientific method, tontine, too big to fail, trade route, transaction costs, transcontinental railway, Washington Consensus

But if this mechanism was to be accepted, agreement was still needed on the nature of the asymmetries to be corrected. The Americans saw the surplus countries as responsible for the asymmetries. For the Europeans, and above all for the Germans, the system’s asymmetry owed to the dollar’s status as reserve currency. For the Germans, the rise in global inflation was the proof that imbalances were not to be treated symmetrically. There were thus no grounds for an agreement on adjustment. As for the question of international liquidity, making SDR the main reserve asset implied the possibility of substituting them for dollar assets.

This is particularly true of the relations between the United States and the emerging economies.31 The first of these asymmetries owes to the size and the structure of national economies’ international indebtedness. Founded on a national currency, today’s monetary architecture attributes an ‘exorbitant privilege’ to the country that issues the reserve currency.32 This is because it allows it to import products and financial assets without giving anything back to the rest of the world in exchange. Following this approach, the United States could take on heavy or even almost unlimited debts in its own currency.33 Conversely, the emerging and developing countries cannot take on international debts in their own currency.

This involves the introduction of private capital into the ownership of state enterprises and the development of a multiplicity of forms of finance, designed to encourage the rise of an innovative private sector. All this implies the need to develop financial asset markets. The second priority is to promote the yuan to the level of an international reserve currency by 2020, thus making it fully convertible. This priority forms part of China’s shifting geopolitical strategy. During the high-growth period in which China was the ‘workshop of the world’, its key means of asserting itself internationally was to expand its trade. Yet today it is rearranging its economy with a view to the enrichment of its middle classes, the development of diversified consumption habits, and the promotion of innovation, enabling it to achieve global standards.


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

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

Indeed, the act was repeatedly repealed – in 1847, 1857, and 1866 – to allow the Bank of England to print new notes in excess of its gold reserves to prevent massive financial collapses following bank failures (for it is far cheaper for central banks to step in and bail out banks than it is for the tax payer to do the same). Many historians attribute the Golden Period not so much to the 1844 Act as to Britain becoming the dominant world power. This underpinned the credibility of the Bank of England’s governance of the whole international monetary system through Sterling as the world’s reserve currency. It had the additional feature that the British state increasingly came to rely on issuing bonds at interest, just as the United States has been able to do through most of the twentieth century. 3.6. Twentieth century: the decline of gold, deregulation, and the rise of digital money 3.6.1.

The pound floated freely once again.94 Other countries had either already left the gold standard or would do so soon after.95 The rigid adherence to the standard, the consequent inability for exchange rates to adjust to reflect changes in international competitiveness and the high interest rates required to defend currencies from speculative attacks have been blamed for deepening the Great Depression, with some studies finding a correlation between the length of countries’ adherence to the standard and the severity of the depression in that country.96, 97 It has also been suggested that inter-war instability was in part a result of the shift of power from the pre-war dominance of sterling to the new global reserve currency – the US dollar – and hence the de facto governance of the global financial system passing to the US Federal Reserve, which was unaccustomed to and ill-prepared for such an undertaking. Following WWII, a 20-year period of relative financial stability ensued in much of the Western world, with the Bretton Woods agreement providing a fixed exchange rate against the US dollar, which in turn was convertible into gold at a fixed price.

* Fringe banks – or secondary banks – were individual small lenders who were not subject to banking regulations.102 † 12.5 per cent of banks deposits would have to be held in the form of ‘eligible reserve assets’, which included balances in the Bank of England, Treasury bills and money at call with the discount markets.104 * Eurodollars is the generic name for US dollar deposits held by non-US banks outside the USA and therefore outside the jurisdiction of the US Federal Reserve. This market developed from the combination of the status of the US dollar as the global reserve currency after WWII, and the desire of the Soviet Union to move its holdings out of the USA during the Cold War, as well as the build-up of dollar revenues from oil exporting countries that they preferred to hold outside the US. * Bank of England statistics: M4 (LPQAUYN) and Notes and Coins (LPMB8H4).


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

"there is no alternative" (TINA), accounting loophole / creative accounting, air traffic controllers' union, Airbnb, Alan Greenspan, basic income, behavioural economics, Ben Bernanke: helicopter money, billion-dollar mistake, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, market bubble, means of production, military-industrial complex, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, tacit knowledge, technological determinism, The Future of Employment, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

Moreover, local collaboration is needed to hold down traditionalist opposition to capitalist Landnahme outside the developed world. Contemporary capitalism increasingly suffers from global anarchy, as the United States is no longer able to serve in its post-war role, and a multipolar world order is nowhere on the horizon. While there are (still?) no Great-Power clashes, the dollar’s function as international reserve currency is contested – and cannot be otherwise, given the declining performance of the American economy, its rising levels of public and private debt and the recent experience of several highly destructive financial crises. The search for an international alternative, perhaps in the form of a currency basket, is getting nowhere since the United States cannot afford to give up the privilege of indebting itself in its own currency.

In particular, the United States began to sell its public debt abroad to sovereign investors, especially to the governments of oil-producing countries looking for opportunities to ‘recycle’ their surpluses and in return gain military protection against regional adversaries and their own peoples. In subsequent years ‘financial services’ became the most important growth industry by far in both the United States and the United Kingdom.16 After the end of the Bretton Woods monetary regime, with the dollar continuing to be the leading global reserve currency, the United States enjoyed the ‘exorbitant privilege’ (Giscard d’Estaign) of being able to indebt itself internationally in its own currency and repay its debt, if need be, by printing basically unlimited amounts of it. The rich supply of fiat dollars that ensued nourished an expanding financial industry about to turn into the financial sector of capitalism worldwide.

Bush during his presidential campaign in 2000 as ‘returning to citizens what is rightfully theirs’. Yet neither this nor the wars in Afghanistan and Iraq did anything to diminish the confidence of financial markets. The United States has more than one way to reassure its creditors, including its capacity to produce unlimited amounts of a global reserve currency out of thin air. That the American government nevertheless administered the bitter medicine of domestic austerity to its already anaemic welfare state in the 1990s can only have added to financial markets’ trust in its ‘full credit’, on top of the culturally established primacy of financial market obligations over citizen entitlements.


pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

accounting loophole / creative accounting, Alvin Toffler, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, Charles Babbage, classic study, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, company town, cotton gin, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, death from overwork, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, drone strike, end world poverty, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, gentrification, global reserve currency, Great Leap Forward, Guggenheim Bilbao, Gunnar Myrdal, Herbert Marcuse, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, military-industrial complex, Money creation, Murray Bookchin, new economy, New Urbanism, Occupy movement, peak oil, phenotype, planned obsolescence, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, Savings and loan crisis, scientific management, short selling, Silicon Valley, special economic zone, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

The US dollar has functioned as the reserve currency for the global monetary system since 1945 and the USA has exclusive rights of seignorage (creation) of that money. The monetary powers of other states are circumscribed because international debts are typically denominated in US dollars and have to be paid in dollars. An individual state cannot monetise its debts by printing its own currency because the immediate effect will be to devalue the local currency against the US dollar. There are other currencies which might be used for global trade – pounds sterling (which used to be the global reserve currency), the euro and the yen and maybe in the future the Chinese yuan.

But these have so far not threatened the position of the US dollar and occasional proposals to replace the dollar with a market-basket of currencies (of the sort that Keynes originally proposed at Bretton Woods in 1944) have so far been rebuffed by the USA. Considerable benefits accrue to the USA, after all, from its control over the global reserve currency. US imperial power has been exercised either directly or indirectly by dollar diplomacy. The hegemony of the US state in the world system is largely sustained by its control over the world currency and its ability to print money to pay, for example, for its excessive military expenditures. In the face of this, individual states may give up their role over their own currency.

283 Maddison, Angus 227 Maghreb 174 Malcolm X 291 Maldives 260 Malthus, Thomas 229–30, 232–3, 244, 246, 251 Manchester 149, 159 Manhattan Institute 143 Mansion House, London 201 manufacturing 104, 239 Mao Zedong 291 maquilas 129, 174 Marcuse, Herbert 204, 289 market cornering 53 market economy 198, 205, 276 marketisation 243 Marshall Plan 153 Martin, Randy 194 Marx, Karl 106, 118, 122, 142, 207, 211 and alienation 125, 126, 213 in the British Museum library 4 on capital 220 conception of wealth 214 on the credit system 239 and deskilling 119 on equal rights 64 and falling profits 107 and fetishism 4 on freedom 207, 208, 213 and greed 33 ‘industrial reserve army’ 79–80 and isolation of workers 125 labour theory of value 109 and monetary system reforms 36 monopoly power and competition 135 reality and appearance 4, 5 as a revolutionary humanist 221 and social reproduction 182 and socialist utopian literature 184 and technological innovation 103 and theorists of the political left 54 and the ‘totally developed individual’ 126–7 and world crises xiii; Capital 57, 79–80, 81, 82, 119, 129, 132, 269, 286, 291–2 The Economic and Philosophic Manuscripts of 1844 269, 286 Grundrisse 97, 212–13 Theories of Surplus Value 1 Marxism contradiction between productive forces and social relations 269 ‘death of Marxism’ xii; ecologically sensitive 263 and humanism 284, 286, 287 ‘profit squeeze’ theory of crisis formation 65 traditional Marxist conception of socialism/ communism 91 Marxists 65, 109 MasterCard Priceless 275 Mau Mau movement 291 Melbourne 141 merchants 67 and industrial capital 179 price-gouging customers 54 and producers 74–5 Mercosur 159 Mexican migrants 115, 175, 195–6 Mexico 123, 129, 174 Mexico City riots (1968) x microcredit 194, 198 microfinance 186, 194, 198, 211 Microsoft 131 Middle East 124, 230 Milanovic, Branko 170 military, the capacities and powers 4 dominance 110 and technology 93, 95 ‘military-industrial complex’ 157 mind-brain duality 70 mining 94, 113, 123, 148, 239, 257 MIT (Massachusetts Institute of Technology) 292 Mitchell, David: Cloud Atlas 264 Mitchell, Timothy 122 Modern Times (film) 103 Mondragon 180 monetarism xi monetary wealth and incomes, inequalities in (1920s) x 1071 monetisation 44, 55, 60, 61, 62, 115, 192–3, 198, 235, 243, 250, 253, 261, 262 money abandonment of metallic basis of global moneys 30, 37, 109 circulation of 15, 25, 30–31, 35 coinage 15, 27, 29, 30 commodification of 57 commodity moneys 27–31 creation of 30, 51, 173, 233, 238–9, 240 credit moneys 28, 30, 31, 152 cyber moneys 36, 109–10 electronic moneys 27, 29, 35, 36, 100 and exchange value 28, 35, 38 fiat 8, 27, 30, 40, 109, 233 gap between money and the value it represents 27 global monetary system 46–7 love of money as a possession 34 measures value 25, 28 a moneyless economy 36 oxidisation of 35 paper 15, 27, 29, 30, 31, 37, 40, 45 power of 25, 36, 59, 60, 62, 65–66, 131–6, 245, 266 quasi-money 35 relation between money and value 27, 35 represented as numbers 29–30 and social labour 25, 27, 31, 42, 55, 88, 243 and the state 45–6, 51, 173 storage of value 25, 26, 35 the US dollar 46–7 use value 28 money capital 28, 32, 59, 74, 142, 147, 158, 177, 178 money laundering 54, 109 ‘money of account’ 27–8, 30 monopolisation 53, 145 monopoly, monopolies 77 and competition 131–45, 218, 295 corporate 123 monetary system 45, 46, 48, 51 monopoly power 45, 46, 51, 93, 117, 120, 132, 133–4, 136, 137, 139, 141, 142–3 monopoly pricing 72, 132 natural 118, 132 of state over legitimate use of force and violence 42, 44, 45, 51, 88, 155, 173 see also prices, monopoly monopsony 131 Monsanto 123 Montreal Protocol 254, 259 ‘moral restraints’ 229, 233 mortgages 19, 21, 28, 32, 54, 67, 82, 239 multiculturalism 166 Mumbai 155, 159 Murdoch, Rupert xi Myrdal, Gunnar 150 N NAFTA 159 name branding 31, 139 nano-trading 243 Nation of Islam 291 national debt 45, 226, 227 National Health Service 115 National Labor Relations Board 120 National Security Administration 136 nationalisation 50 nationalism 7, 8, 44, 289 natural resources 58, 59, 123, 240, 241, 244, 246, 251 nature 56 alienation from 263 capital’s conception of 252 capital’s relation to 246–63 commodification of 59 domination of 247, 272 Heidegger on 59, 250 Polanyi on 58 power over 198 process-thing duality 73 and technology 92, 97, 99, 102 Nazis 151 neoclassical economists 109 neocolonialism 143, 201 neoliberal era 128 neoliberal ethic 277 neoliberalisation x, 48 neoliberalism xiii, 68, 72, 128, 134, 136, 176, 191, 234, 281 capitalism 266 consensus 23 counter-revolution 82, 129, 159, 165 political programme 199 politics 57 privatisation 235 remedies xi Nevada, housing in 77 ‘new economy’ (1990s) 144 New York City 141, 150 creativity 245 domestic labour in 196 income inequality 164 rental markets 22 social reproduction 195 Newton, Isaac 70 NGOs (non-governmental organisations) 189, 210, 284, 286, 287 Nike 31 Nkrumah, Kwame 291 ‘non-coincidence of interests’ 25 Nordic countries 165 North America deindustrialisation in 234 food grain exports 148 indigenous population and property rights 39 women in labour force 230 ‘not in my back yard’ politics 20 nuclear weapons 101 Nyere, Julius 291 O Obama, Barack 167 occupational safety and health 72 Occupy movement 280, 292 Ohlin Foundation 143 oil cartel 252 companies 77, 131 ‘Seven Sisters’ 131 embargo (1973) 124 ‘peak oil’ 251–2, 260 resources 123, 240, 257 oligarchy, oligarchs 34, 143, 165, 221, 223, 242, 245, 264, 286, 292 oligopoly 131, 136, 138 Olympic Games 237–8 oppositional movements 14, 162, 266–7 oppression 193, 266, 288, 297 Orwell, George 213 Nineteen Eighty-Four 202 overaccumulation 154 overheating 228 Owen, Robert 18, 184 Oxfam xi, 169–70 P Paine, Tom: Rights of Man 285 Paris 160 riots (1968) x patents 139, 245, 251 paternalism 165, 209 patriarchy 7 Paulson, Hank 47 pauperisation 104 Peabody, George 18 peasantry ix, 7, 107, 117, 174, 190, 193 revolts 202 pensions 134, 165, 230 rights 58, 67–8, 84, 134 people of colour: disposable populations 111 Pereire, Emile 239 pesticides 255, 258 pharmaceuticals 95, 121, 123, 136, 139 Philanthropic Colonialism 211 philanthropy 18, 128, 189, 190, 210–11, 245, 285 Philippines 115, 196 Picasso, Pablo 140–41, 187, 240 Pinochet, Augusto x Pittsburgh 150, 159, 258 planned obsolescence 74 plutocracy xi, xii, 91, 170, 173, 177, 180 Poland 152 Polanyi, Karl 56, 58, 60, 205–7, 210, 261 The Great Transformation 56–7 police 134 brutality 266 capacities and powers 43 powers xiii, 43, 52 repression 264, 280 surveillance and violence 264 violence 266, 280 police-state 203, 220 political economy xiv, 54, 58, 89, 97, 179–80, 182, 201, 206–9 liberal 204, 206, 209 political parties, incapable of mounting opposition to the power of capital xii political representation 183 pollutants 8, 246, 255 pollution 43, 57, 59, 60, 150, 250, 254, 255, 258 Pontecorvo, Gillo 288 Ponzi schemes 21, 53, 54, 243 population ageing 223, 230 disposable 108, 111, 231, 264 growth 107–8, 229, 230–31, 242, 246 Malthus’s principle 229–30 Portugal 161 post-structuralism xiii potlatch system 33 pounds sterling 46 poverty 229 anti-poverty organisations 286–7 and bourgeois reformism 167 and capital 176 chronic 286 eradication of 211 escape from 170 feminisation of 114 grants 107 and industrialisation 123 and population expansion 229 and unemployment 170, 176 US political movement denies assistance to the poor 292–3 and wealth 146, 168, 177, 218, 219, 243 world xi, 170 power accumulation of 33, 35 of capital xii, 36 class 55, 61, 88, 89, 97, 99, 110, 134, 135, 221, 279 computer 105 and currencies 46 economic 142, 143, 144 global 34, 170 the house as a sign of 15–16 of labour see under labour; of merchants 75 military 143 and money 25, 33, 36, 49, 59, 60, 62, 63, 65–6, 245, 266 monopoly see monopoly power; oligarchic 292 political 62, 143, 144, 162, 171, 219, 292 purchasing 105, 107 social 33, 35, 55, 62, 64, 294 state 42–5, 47–52, 72, 142, 155–9, 164, 209, 295 predation, predators 53, 54, 61, 67, 77, 84, 101, 109, 111, 133, 162, 198, 212, 254–5 price fixing 53, 118, 132 price gouging 132 Price, Richard 226, 227, 229 prices discount 133 equilibrium in 118 extortionate 84 food 244, 251 housing 21, 32, 77 land 77, 78, 150 low 132 market 31, 32 and marketplace anarchy 118 monopoly 31, 72, 139, 141 oil 251, 252 property 77, 78, 141, 150 supermarket 6 and value 31, 55–6 private equity firms 101, 162 private equity funds 22, 162 private property and the commons 41, 50, 57 and eradication of usufructuary rights 41 and individual appropriation 38 and monopoly power 134–5, 137 social bond between human rights and private property 39–40 and the state 47, 50, 58, 59, 146, 210 private property rights 38–42, 44, 58, 204, 252 and collective management 50 conferring the right to trade away that which is owned 39 decentralised 44 exclusionary permanent ownership rights 39 and externality effects 44 held in perpetuity 40 intellectual property rights 41 microenterprises endowed with 211 modification or abolition of the regime 14 and nature 250 over commodities and money 38 and state power 40–41, 42–3 underpinning home ownership 49 usufructuary rights 39 privatisation 23, 24, 48, 59, 60, 61, 84, 185, 235, 250, 253, 261, 262, 266 product lines 92, 107, 219, 236 production bourgeois 1 falling value of 107 immaterial 242 increase in volume and variety of 121 organised 2 and realisation 67, 79–85, 106, 107, 108, 173, 177, 179, 180, 221, 243 regional crises 151 workers’ dispossession of own means of 172 productivity 71, 91, 92, 93, 117, 118, 121, 125, 126, 132, 172, 173, 184, 185, 188, 220, 239 products, compared with commodities 25–6 profitability 92, 94, 98, 102, 103, 104, 106, 112, 116, 118, 125, 147, 184, 191–2, 240, 252, 253, 256, 257 profit(s) banking 54 as capital’s aim 92, 96, 232 and capital’s struggle against labour 64, 65 and competition 93 entrepreneurs 24, 104 falling 81, 107, 244 from commodity sales 71 and money capital 28 monopoly 93 rate of 79, 92 reinvestment in expansion 72 root of 63 spending of 15 and wage rates 172 proletarianisation 191 partial 175, 190, 191 ‘property bubble’ 21 property market boom (1920s) 239 growth of 50 property market crashes 1928 x, 21 1973 21 2008 21–2, 54, 241 property rights 39, 41, 93, 135 see also intellectual property rights; private property property values 78, 85, 234 ‘prosumers’ 237 Proudhon, Pierre-Joseph 183 Prozac 248 public goods 38 public utilities 23, 60, 118, 132 Q quantitative easing 30, 233 R R&D ix race 68, 116, 165, 166, 291 racial minorities 168 racialisation 7, 8, 62, 68 racism 8 Rand, Ayn 200 raw materials 16, 17, 148, 149, 154 Reagan, Ronald x, 72 Speech at Westminster 201 Reagan revolution 165–166 realisation, and production 67, 79–85, 106, 107, 108, 173, 177, 179, 180, 221, 243 reality contradiction between reality and appearance 4–6 social 27 Reclus, Elisée 140 regional development 151 regional volatility 154 Reich, Robert 123, 188 religion 7 religious affiliation 68 religious hatreds and discriminations 8 religious minorities 168 remittances 175 rent seeking 132–3, 142 rentiers 76, 77, 78, 89, 150, 179, 180, 241, 244, 251, 260, 261, 276 rents xii, 16–19, 22, 32, 54, 67, 77, 78, 84, 123, 179, 241 monopoly 93, 135, 141, 187, 251 repression 271, 280 autocratic 130 militarised 264 police-state 203 violent 269, 280, 297 wage 158, 274 Republican Party (US) 145, 280 Republicans (US) 167, 206 res nullius doctrine 40 research and development 94, 96, 187 ‘resource curse’ 123 resource scarcity 77 revolution, Fanon’s view of 288 revolutionary movements 202, 276 Ricardo, David 122, 244, 251 right, the ideological and political assault on the left xii; response to universal alienation 281 ‘rights of man’ 40, 59, 213 Rio de Janeiro 84 risk 17, 141, 162, 219, 240 robbery 53, 57, 60, 63, 72 robotisation 103, 119, 188, 295 Rodney, Walter 291 romantic movement 261 Roosevelt, Theodore 131, 135 Four Freedoms 201 Rousseau, Jean-Jacques 213, 214 Ruhr, Germany 150 rural landscapes 160–61 Russia 154 a BRIC country 170, 228 collapse of (1989) 165 financial crisis (1998) 154, 232 indebtedness 152 local famine 124 oligarchs take natural resource wealth 165 S ‘S’ curve 225, 230–31 Saint-Simon, Claude de Rouvroy, comte de 183 sales 28, 31, 187, 236 San Francisco 150 Santiago, Chile: street battles (2006–) 185 Sao Paulo, Brazil 129, 195 savings the house as a form of saving 19, 22, 58 loss of 20, 58 private 36 protecting the value of 20 Savings and Loan Crisis (USA from 1986) 18 savings accounts 5, 6 Scandinavia 18, 85, 165 scarcity 37, 77, 200, 208, 240, 246, 260, 273 Schumpeter, Joseph 98, 276 science, and technology 95 Seattle 196 Second Empire Paris 197 Second World War x, 161, 234 Securities and Exchange Commission 120, 195 security xiii, 16, 121, 122, 165, 205, 206 economic 36, 153 food 253, 294, 296 job 273 national 157 Sen, Amartya 208–11, 281 Development as Freedom 208–9 senior citizens 168 Seoul 84 serfdom 62, 209 sexual hatreds and discriminations 8 Shanghai 153, 160 share-cropping 62 Sheffield 148, 149, 159, 258 Shenzhen, China 77 Silicon Valley 16, 143, 144, 150 silver 27–31, 33, 37, 57, 233, 238 Simon, Julian 246 Singapore 48, 123, 150, 184, 187, 203 slavery 62, 202, 206, 209, 213, 268 slums ix, 16, 175 Smith, Adam 98, 125–6, 157, 185, 201, 204 ‘invisible hand’ 141–2 The Wealth of Nations 118, 132 Smith, Neil 248 social distinction 68, 166 social inequality 34, 110, 111, 130, 171, 177, 180, 220, 223, 266 social justice 200, 266, 268, 276 social labour 53, 73, 295 alienated 64, 66, 88 and common wealth 53 creation of use values through 36 expansion of total output 232 household and communal work 296 immateriality of 37, 233 and money 25, 27, 31, 42, 55, 88, 243 productivity 239 and profit 104 and value 26, 27, 29, 104, 106, 107, 109 weakening regulatory role of 109, 110 social media 99, 136, 236–7, 278–9 social movements 162–3 social reproduction 80, 127, 182–98, 218, 219, 220, 276 social security 36, 165 social services 68 social struggles 156, 159, 165, 168 social value 26, 27, 32, 33, 55, 172, 179, 241, 244, 268, 270 socialism 215 democratic xii; ‘gas and water’ 183 socialism/communism 91, 269 socialist revolution 67 socialist totalitarianism 205 society capitalist 15, 34, 81, 243, 259 civil 92, 122, 156, 185, 189, 252 civilised 161, 167 complex 26 demolition of 56 and freedom 205–6, 210, 212 hope for a better society 218 industrial 205 information 238 market 204 post-colonial 203 pre-capitalist 55 primitive 57 radical transformation of 290 status position in 186 theocratic 62 women in 113 work-based 273 world 204 soil erosion 257 South Africa 84–5, 152, 169 apartheid 169, 202, 203 South Asia labour 108 population growth 230 software programmers and developers 115, 116 South Korea 123, 148, 150, 153 South-East Asia 107–8 crisis (1997–8) 154, 232, 241 sovereign debt crises 37 Soviet Bloc, ex-, labour in 107 Soviet Union 196, 202 see also Russia Spain xi, 51, 161 housing market crash (2007–9) 82–3 spatio-temporal fixes 151–2, 153, 154, 162 spectacle 237–8, 242, 278 speculative bubbles and busts 178 stagnation xii, 136, 161–2, 169 Stalin, Joseph 70 standard of life 23, 175 starvation 56, 124, 246, 249, 260, 265 state, the aim of 156–7 brutality 266, 280 and capital accumulation 48 and civil society 156 curbing the powers of capital as private property 47 evolution of the capitalist state 42 and externality effects 44 guardian of private property and of individual rights 42 and home ownership 49–50 interstate system 156, 157 interventionism 193, 205 legitimate use of violence 42, 44, 45, 51, 88, 155, 173 loss of state sovereignty xii; and money 1, 45–6, 51, 173 ‘nightwatchman’ role 42, 50 powers of 42–5, 47–52, 57–8, 65, 72, 142, 155–9, 209, 295 and private property 47, 50, 58, 59, 146, 210 provision of collective and public goods 42–3 a security and surveillance state xiii; social democratic states 85 war aims 44 state benefits 165 state regulatory agencies 101 state-finance nexus 44–5, 46–7, 142–3, 156, 233 state-private property nexus 88–9 steam engine, invention of the 3 steel industry 120, 121, 148, 188 steel production 73–4 Stiglitz, Joseph 132–4 stock market crash (1929) x Stockholm, protests in (2013) 171, 243 strikes 65, 103, 124 sub-prime mortgage crisis 50 suburbanisation 253 supply and demand 31, 33, 56, 106 supply chain 124 supply-side remedies xi supply-side theories 82, 176 surplus value 28, 40, 63, 73, 79–83, 172, 239 surveillance xiii, 94, 121, 122, 201, 220, 264, 280, 292 Sweden 166, 167 protests in (2013) 129, 293 Sweezy, Paul 136 swindlers, swindling 45, 53, 57, 239 ‘symbolic analysts’ 188 Syntagma Square, Athens 266, 280 T Tahrir Square, Cairo 266 Taipei, Taiwan 153 Taiwan 123, 150, 153 Taksim Square, Istanbul 266, 280 Tanzania 291 tariffs 137 taxation 40, 43, 47, 67, 84, 93–4, 106, 133, 150, 155, 157, 167, 168, 172, 190 Taylor, Frederick 119, 126 Taylorism 103 Tea Party faction 205, 280, 281, 292 technological evolution 95–6, 97, 101–2, 109 technological imperatives 98–101 technological innovation 94–5 technology changes involving different branches of state apparatus 93–4 communicative technologies 278–9 and competition 92–3 constraints inhibiting deployment 101 culture of 227, 271 definition 92, 248 and devaluation of commodities 234 environmental 248 generic technologies 94 hardware 92, 101 humanising 271 information 100, 147, 158, 177 military 93, 95 monetary 109 and nature 92, 97, 99, 102 organisational forms 92, 99, 101 and productivity 71 relation to nature 92 research and development 94 and science 95 software 92, 99, 101 a specialist field of business 94 and unemployment 80, 103 work and labour control 102–11 telephone companies 54, 67, 84, 278 Tennessee 148 Teresa, Mother 284 Thatcher, Margaret (later Baroness) x, 72, 214, 259 Thatcherism 165 theft 53, 60, 61, 63 Thelluson, Peter 226, 227 think tanks 143 ‘Third Italy’ 143 Third World debt crisis 240 Toffler, Alvin 237 tolls 137 Tönnies, Ferdinand 122, 125 tourism ix, 16, 140, 141, 187, 236 medical 139 toxic waste disposal 249–50, 257 trade networks 24 trade unions xii, 116, 148, 168, 176, 184, 274, 280 trade wars 154 transportation 23, 99, 132, 147–8, 150, 296 Treasury Departments 46, 156 TRIPS agreement 242 tropical rainforest 253 ‘trust-busting’ 131 trusts 135 Turin, Italy 150 Turkey 107, 123, 174, 232, 280, 293 Tuscany, Italy 150 Tutu, Archbishop Desmond 284 Twitter 236 U unemployment 37, 104, 258, 273 benefits 176 deliberately created 65, 174 high xii, 10, 176 insurance 175 and labour reserves 175, 231 and labour-saving technologies 173 long-term 108, 129 permanent 111 echnologically induced 80, 103, 173, 274 uneven geographical developments 178, 296 advanced and underserved regional economies 149–50 and anti-capitalist movements 162 asset bubbles 243 and capital’s reinvention of itself 147, 161 macroeconomic processes of 159 masking the true nature of capital 159–60 and technological forms 219 volatility in 244 United Fruit 136 United Kingdom income inequality in 169; see also Britain United Nations (UN) 285 United States aim of Tea Party faction 280 banking 158 Bill of Rights 284 Britain lends to (nineteenth century) 153 capital in (1990s) 154 Constitution 284 consumption level 194 global reserve currency 45–6 growth 232 hostility towards state interventions 167 House of Representatives 206 human rights abuses 202 imperial power 46 indebtedness of students in 194 Indian reservations 249 interstate highway system 239 jobless recoveries after recession 172–3 liberty and freedom rhetoric 200–201, 202 Midwest ‘rust belt’ 151 military expenditures 46 property market crashes x, 21–2, 50, 54, 58, 82–3 racial issues 166 Savings and Loan Crisis (from 1986) 18 social mobility 196 social reproduction 196–7 solidly capitalist 166 steel industry 120 ‘symbolic analysts’ 188 ‘trust-busting’ 131 unemployment 108 wealth distribution 167 welfare system 176 universal suffrage 183 urbanisation 151, 189, 228, 232, 239, 247, 254, 255, 261 Ure, Andrew 119 US Congress 47 US dollar 15, 30, 45–6 US Executive Branch 47 US Federal Reserve xi, 6, 30, 37, 46, 47, 49, 132, 143, 233 monetary policy 170–71 US Housing Act (1949) 18 US Treasury 47, 142, 240 use values collectively managed pool of 36 commodification of 243 commodities 15, 26, 35 common wealth 53 creation through social labour 36 and entrepreneurs 23–4 and exchange values 15, 35, 42, 44, 50, 60, 65, 88 and housing 14–19, 21–2, 23, 67 and human labour 26 infinitely varied 15 of infrastructural provision 78 loss of 58 marketisation of 243 monetisation of 243 of money 28 privatised and commodified 23 provision of 111 and revolt of the mass of the people 60 social demand for 81 usufructuary rights 39, 41, 59 usury 49, 53, 186, 194 utopianism 18, 35, 42, 51, 66, 119, 132, 183, 184, 204, 206–10, 269, 281, 282 V value(s) commodity 24, 25 failure to produce 40 housing 19, 20, 22 net 19 production and realisation of 82 production of 239 property 21 relation between money and value 27, 35 savings 20 storing 25, 26, 35 see also asset values; exchange values; social value; use values value added 79, 83 Veblen, Thorstein: Theory of the Leisure Class 274 Venezuela 123, 201 Vietnam, labour in 108 Vietnam War 290 violence 53, 57, 72, 204–5, 286 against children 193 against social movements 266 against women 193 colonial 289–90, 291 and contemporary capitalism 8 culture of 271 of dispossession 58, 59 in a dystopian world 264 and humanism 286, 289, 291 of the liberation struggle 290 militarised 292 as the only option 290–91 political 280 in pursuit of liberty and freedom 201 racialised 291 state’s legitimate use of 42, 44, 45, 51, 88, 155, 173 of technology 271 and wage labour 207 virtual ecological transfer 256 Volcker, Paul 37 W wages 103 basic social wage 103 falling 80, 82 for housework 115, 192–3 low xii, 114, 116, 186, 188 lower bound to wage levels 175 non-payment of 72 and profits 172 reduction in 81, 103, 104, 135, 168, 172, 176, 178 rising 178 and unskilled labour 114 wage demands 150, 274 wage levels pushed up by labour 65 wage rates 103, 116, 172, 173 wage repression 158–9 weekly 71 see also income Wall Street criticised by a congressional committee 239–40 illegalities practised by 72, 77 and Lebed 195 new information-processing technologies 100 Wall Street Crash (1929) x, 47 Wall-E (film) 271 Walmart xii, 75, 84, 103, 131 war on terror 280 wars 8, 60, 229 currency 154 defined 44 monetisation of state war-making activities 44–5 privatisation of war making 235 resource 154, 260 and state aims 44 state financing of 32, 44, 48 and technology 93 trade 154 world 154 water privatisation 235 wave theory 70 wave-particle duality 70 wealth accumulation of 33, 34, 35, 157, 205 creation of 132–3, 142, 214 disparities of 164–81 distribution of 34, 167 extraction from non-productive activities 32 global 34 the house as a sign of 15–16 levelling up of per capita wealth 171 and poverty 146, 168, 177, 218, 219, 243 redistribution of 9, 234, 235 social 35, 53, 66, 157, 164, 210, 251, 265, 266, 268 taking it from others 132–3 see also common wealth weather futures 60 Weber, Max 122, 125 Weimar Republic 30 welfare state 165, 190, 191, 208 Wells Fargo 61 West Germany 153, 154, 161 Whitehead, Alfred North 97 Wilson, Woodrow 201 Wolf, Martin 304n2 Wollstonecraft, Mary: A Vindication of the Rights of Woman 285 women career versus family obligations 1–2 disposable populations 111 exploitation of 193 housework versus wage labour 114–15 oppression against 193 social struggle 168 trading of 62 violence against 193 in the workforce 108, 114, 115, 127, 174, 230 women’s rights 202, 218 workers’ rights 202 working classes and capital 80 consumer power 81 crushing organisation 81 education 183, 184 gentrified working-class neighbourhoods ix; housing 160 living conditions 292 wage repression and consumption 158–9 working hours 72, 104–5, 182, 272–5, 279 World Bank 16, 24, 100, 186, 245 World Trade Organization 138, 242 WPA programmes (1930s) 151 Wright, Frank Lloyd: Falling Water 16 Wriston, Walter 240 Y YouTube 236 Yugoslavia, former 174 Z Zola, Émile 7


pages: 131 words: 41,052

Why Europe Will Run the 21st Century by Mark Leonard

Berlin Wall, Celtic Tiger, continuous integration, cuban missile crisis, different worldview, European colonialism, facts on the ground, failed state, global reserve currency, Global Witness, invisible hand, knowledge economy, mass immigration, non-tariff barriers, North Sea oil, one-China policy, Panopticon Jeremy Bentham, pension reform, reserve currency, Robert Gordon, shareholder value, South China Sea, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, Washington Consensus

There are approximately 150 countries in the world that have exchange rate regimes tied to an anchor or reference currency: 51 currently use the euro, or have the euro as a major part of their reference basket.20 These still make up a small percentage of the world’s currencies, but the shift to the euro is accelerating: Russia increased its euro reserves in 2003 to approximately 25 per cent of its total reserve of $65 billion, and China has also recognized the growing importance of the euro as a reserve currency. Towards the end of 2003 rumours were circulating that the OPEC countries were considering switching the pricing of oil into euros, since the continued weakness of the dollar was substantially hurting their revenues and forcing them to increase production. Such a switch in currency pricing for the world’s largest physical commodity (12 per cent of world trade) would contribute significantly in raising the euro’s status to that of the world’s leading international currency through its increased use as a medium of exchange.

Romano Prodi told me that when he first met the Chinese President Jiang Zemin, his Chinese interlocutor was fascinated by the euro. Apparently, his parting words were: ‘We will switch our reserves to the euro for two reasons. Why? First because we believe in multipolarity. Second, because it will be good business.’ If the euro emerges as a global reserve currency, it will give the countries of the Eurozone much greater control over their economic futures. Europe will probably not mimic the American model of using its status as one of the world’s bankers to finance a huge current account deficit, but a massive injection of capital into the European economy would undoubtedly stimulate demand.


pages: 286 words: 82,970

A World in Disarray: American Foreign Policy and the Crisis of the Old Order by Richard Haass

access to a mobile phone, anti-communist, Berlin Wall, Bretton Woods, carbon footprint, carbon tax, central bank independence, colonial rule, cuban missile crisis, currency manipulation / currency intervention, deindustrialization, Doha Development Round, Donald Trump, Edward Snowden, energy security, European colonialism, failed state, Fall of the Berlin Wall, floating exchange rates, global pandemic, global reserve currency, guns versus butter model, hiring and firing, immigration reform, invisible hand, low interest rates, Mikhail Gorbachev, Monroe Doctrine, moral hazard, mutually assured destruction, no-fly zone, open economy, quantitative easing, RAND corporation, reserve currency, Ronald Reagan, South China Sea, special drawing rights, Steven Pinker, Suez crisis 1956, UNCLOS, UNCLOS, uranium enrichment, Yom Kippur War

To some extent this U.S. deficit was necessary, as it provided liquidity to the world; at the same time, it raised questions as to the future value of the dollar. Indeed, no progress was made on the tension arising from the U.S. dollar’s status as both the national currency of the United States and the global reserve currency, that is, the currency used for most international transactions, which required most countries to keep a store of it on hand. The U.S. Federal Reserve thus acted as both the country’s and the world’s central bank; the problem in the eyes of many resulted from the fact that the world had no oversight or control over the U.S. central bank or U.S. economic policy more broadly.

In other areas, a willingness to use military force may well be essential if terrorism is to be minimized and proliferation frustrated—although even here a degree of restraint will be required in when and how force is used. The United States needs to accept special obligations in the economic realm given the role of the dollar as the world’s de facto reserve currency. This means taking into account the views of others when deciding on interest rates or asset purchases (quantitative easing). Regular, serious consultations between the Federal Reserve and its central bank counterparts around the world are essential. Trade disputes should be taken to the WTO rather than acted on unilaterally, as well.

Keeping debt levels low enough to allow for a surge without triggering a debt crisis seems to be a prudent hedge and, as is the case with preventive medicine or insurance, worth paying a reasonable premium for. Let me just add one more prediction. Mounting debt will hasten the demise of the dollar as the world’s reserve currency. This will happen due to loss of confidence in U.S. financial management and the related concern that what the United States will need to do to finance its debt will be at odds with what it should be doing to manage the domestic and, indirectly, world economy. It is possible that such a move away from the dollar would have happened were it not for the EU’s problems and China not being prepared to free up the yuan.


pages: 275 words: 84,980

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

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

Most people, I imagine, think about money as $100 bills and gold in Fort Knox, €500 notes and plastic cards, £50 notes and the Bank of England. This is the present paradigm, so far as the public and the politicians are concerned. I think they are wrong. We are already living in the future, because the future of money began back in 1971 when the US government severed the link between the world’s reserve currency and anything physical at all (in that case, gold). We need to adjust our mental models of money and start exploring the future paradigm, both to shape it and to see where it might take us. Money existed before records began in ancient Babylon and money will continue to exist when Bitcoin is long forgotten.

It is interesting to note that the fledgling United States, which had strongly resisted the notion of a central bank (the Federal Reserve was not created until 1913 – a direct consequence of the banking collapse of 1907), was the home of the first great monetary experiment of the industrializing world and ended up with the world’s reserve currency. So can we continue with the story of the colonies to see if we can find any useful analogy between Britain’s view of North America in the early eighteenth century and our view of the virtual world today that might tell us something about future trends in money? How about this one? A superpower is bogged down in a distant guerrilla war.

The IMF was designed to regulate a system of convertible currencies but the prospect of such a scheme had been punctured by the British crisis immediately following World War II. (The United Kingdom, weighed down by its wartime debts, soon distinguished itself as ‘the most persistent troublemaker within the international monetary system’.) As the world’s reserve currency, the dollar became even more central to the system. The dollar was very literally as good as gold but, since the United States developed a massive current account deficit, there were lots of foreigners with dollars and lots of those foreigners wanted actual gold. In fact they wanted gold a lot, so they would also borrow dollars and use them to buy gold.


pages: 297 words: 84,009

Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen

"Friedman doctrine" OR "shareholder theory", 23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, Big Tech, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, company town, compensation consultant, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, driverless car, Elon Musk, employer provided health coverage, experimental economics, Fairchild Semiconductor, fake news, Filter Bubble, financial innovation, financial intermediation, gentrification, Glass-Steagall Act, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, junk bonds, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator

And so the Bretton Woods talks and the surrounding decisions created an international economic architecture with the U.S. dollar as the central reserve currency and the International Monetary Fund and World Bank as multilateral institutions to back up an overall liberal trade and currency order. Later came the General Agreement on Tariffs and Trade, which morphed into the World Trade Organization. And even after the fixed exchange rates of Bretton Woods broke down in the early 1970s, the world was still a place where the dollar was the central reserve currency and New York City the number-one banking center, today rivaled only by London, which evolved into part of the same broad Anglo-American axis for a liberal world trading order.

Furthermore, the fall of Britain as a world power and center of empire coincides pretty directly with the country losing its capital market heft and having to approach the International Monetary Fund to borrow money in the 1970s. The United States, by being a major financial center with a global reserve currency, can make (relatively) credible commitments abroad. When need be, America can finance a significant budget deficit; you may recall that when President Reagan “spent the Soviet Union into the ground” on military matters, he did it, for better or worse, largely with borrowed money. Because of the central financial role of New York City and other parts of the country, America has significantly more economic independence than other countries, and that translates into greater international independence.


pages: 289 words: 86,165

Ten Lessons for a Post-Pandemic World by Fareed Zakaria

"there is no alternative" (TINA), 15-minute city, AlphaGo, An Inconvenient Truth, anti-fragile, Asian financial crisis, basic income, Bernie Sanders, Boris Johnson, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon tax, central bank independence, clean water, cloud computing, colonial rule, contact tracing, coronavirus, COVID-19, Credit Default Swap, David Graeber, Day of the Dead, deep learning, DeepMind, deglobalization, Demis Hassabis, Deng Xiaoping, digital divide, Dominic Cummings, Donald Trump, Edward Glaeser, Edward Jenner, Elon Musk, Erik Brynjolfsson, failed state, financial engineering, Francis Fukuyama: the end of history, future of work, gentrification, George Floyd, gig economy, Gini coefficient, global pandemic, global reserve currency, global supply chain, green new deal, hiring and firing, housing crisis, imperial preference, income inequality, Indoor air pollution, invention of the wheel, Jane Jacobs, Jeff Bezos, Jeremy Corbyn, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, junk bonds, lockdown, Long Term Capital Management, low interest rates, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, means of production, megacity, Mexican peso crisis / tequila crisis, middle-income trap, Monroe Doctrine, Nate Silver, Nick Bostrom, oil shock, open borders, out of africa, Parag Khanna, Paris climate accords, Peter Thiel, plutocrats, popular capitalism, Productivity paradox, purchasing power parity, remote working, reserve currency, reshoring, restrictive zoning, ride hailing / ride sharing, Ronald Reagan, secular stagnation, Silicon Valley, social distancing, software is eating the world, South China Sea, Steve Bannon, Steve Jobs, Steven Pinker, Suez crisis 1956, TED Talk, the built environment, The Death and Life of Great American Cities, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tim Cook: Apple, trade route, UNCLOS, universal basic income, urban planning, Washington Consensus, white flight, Works Progress Administration, zoonotic diseases

So many of America’s recent efforts—from the occupation of Iraq to the simple extension of subway lines—have been costly disasters. For decades now, compared with citizens of other advanced countries, Americans have put up with a government that is second-rate at all levels. The country can compensate. Washington has the world’s reserve currency and can print trillions of dollars. It still boasts the largest military on the planet. America has a huge tech industry, dominating the digital world. The country’s vast internal market means that it can ignore many of the pressures of trade and external competition. But these are crutches.

In the World Economic Forum’s Global Competitiveness Index, the US ranks second (to tiny Singapore). In Deloitte’s most recent rankings for Global Manufacturing Competitiveness, it nearly ties China for first place. The United States hosts a majority of the world’s largest and most technologically advanced companies. The world’s reserve currency remains the US dollar, which has only expanded its reach in recent years, now accounting for almost 90% of all currency transactions. The economist and investor Ruchir Sharma observes that if China and the US “maintained their officially reported 2019 nominal GDP growth rates—around six percent and four percent, respectively—China would not catch up to the United States until around 2050.”

In them, he advocated a new kind of diplomacy to ensure peace among the great powers, a novel approach based on restraint, the “equal rights of all nations,” and “the love of freedom.” It wasn’t just words. Britain played a crucial role protecting global sea-lanes, while the British pound sterling served as the global reserve currency. The UK’s naval hegemony preserved a modicum of international stability. To be sure, this era still saw intense economic competition, rising powers, domestic revolutions at home, and aggressive imperialism abroad. Gladstone’s “love of freedom” was selectively applied: Britain itself was enthusiastically imperialistic, crushing rebellions from India to Ireland.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

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

Mullaney, “Voters Will Assess Nixon’s Game Plan to Revive Economy,” New York Times, November 1, 1970, p. 139. 5 William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Simon and Schuster, 1987), p. 67. 6 Ibbotson Associates, Stocks, Bonds, Bills and Inflation, 2000 Yearbook, Market Results for 1926–1999, 2000, p. 226, Table A-15. How the United States Inflated the World After the United States discarded the gold standard, the dollar remained the world’s reserve currency. Trade around the world was still conducted in dollars even though it had depreciated against most currencies. This created havoc. Exporters to the United States received the depreciated dollars for their goods. OPEC (the Organization of Petroleum Exporting Countries), an exporter of oil to the United States, received less value for each gallon of oil exported.

Whatever claims Greenspan might make (or Paul Volcker had made) about the stability and resiliency of the American financial system, former Fed Chairman William McChesney Martin would find it unrecognizably frenetic. Finance and financial institutions were more fluid than when the gold standard existed. Alan Greenspan explained the traditional reserve currency’s balancing properties in “Gold and Economic Freedom” (discussed in Chapter 2). The world bond market increased from less than $1 trillion in 1970 to $23 trillion by 1987.24 Without a gold standard, there was no ultimate settlement, so unredeemable currency and bond claims grew. Asset inflation and concentration of credit gave those who possessed “native cunning and access to leverage” an opportunity to apply their skills.

.: Yale University Press, 2004), p. 425. 5 There are calls today for a return to a Bretton Woods gold standard. This is posed as an agreement that worked for nearly 30 years (1944–1971). However, it was already failing in the 1950s. It was failing because the United States did not live within the limits imposed on the reserve currency. It was able to fail because, as with the CDO trade, there were no market prices. Only governments could redeem currency for gold. This led to subterfuges, which were hidden from the people when it was thought better to do so. In 1934, Simone Weil, a young French philosopher, expressed how capitalism had changed.


pages: 471 words: 124,585

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

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

This doctrinal volte-face represents a widespread disillusionment resulting from the destructive behaviour of these movements in the interwar years.54 At Bretton Woods, in New Hampshire’s White Mountains, the soon-to-be-victorious Allies met in July 1944 to devise a new financial architecture for the post-war world. In this new order, trade would be progressively liberalized, but restrictions on capital movements would remain in place. Exchange rates would be fixed, as under the gold standard, but now the anchor - the international reserve currency - would be the dollar rather than gold (though the dollar itself would notionally remain convertible into gold, vast quantities of which sat, immobile but totemic, in Fort Knox). In the words of Keynes, one of the key architects of the Bretton Woods system, ‘control of capital movements’ would be ‘a permanent feature of the post-war system’.55 Even tourists could be prevented from going abroad with more than a pocketful of currency if governments felt unable to make their currencies convertible.

And, in so far as it allowed countries to subordinate monetary policy to the goal of full employment, it created potential conflicts even between options 2 and 3 of the trilemma. In the late 1960s, US public sector deficits were negligible by today’s standards, but large enough to prompt complaints from France that Washington was exploiting its reserve currency status in order to collect seigniorage from America’s foreign creditors by printing dollars, much as medieval monarchs had exploited their monopoly on minting to debase the currency. The decision of the Nixon administration to sever the final link with the gold standard (by ending gold convertibility of the dollar) sounded the death knell for Bretton Woods in 1971.59 When the Arab-Israeli War and the Arab oil embargo struck in 1973, most central banks tended to accommodate the price shock with easier credit, leading to precisely the inflationary crisis that General de Gaulle’s adviser Jacques Rueff had feared.60 With currencies floating again and offshore markets like the Eurobond market flourishing, the 1970s saw a revival of non-governmental capital export.

Davis, Jefferson 93 Dawkins, Richard 356 Dearborn 242 death, causes of 183-4 debt/debts: debtors’ prisons 60 debt vs. income balance 282 moratoria 301 mountain image 71 origins of see credit securitization see securitization transferability (pay the bearer) 30 unreliability and hostility of debtors 2 decimal system 32 defence see arms deficits, government 118 deflation 106 Defoe, Daniel 145-6 Delane, John 95 Delors, Jacques 312 democracies see property-owning democracies; representative governments Department of Housing and Urban Development (HUD) 266-7 deposit insurance 57 depreciation 263 depressions 163 absence of after Second World War 164-6 Depression economics 313 see also financial crises; Great Depression Derenberg & Co. 299 derivatives 4-5 dangers of 228 ‘over-the-counter’ (OTC) 4-5 surge in 228 see also futures contracts; swaps Derry, Dr George H. 245-6 de Soto, Hernando 274-8 Detroit 234 Deuteronomy 36 developed countries 4 developing countries see emerging markets; ‘Third World’ Devonshire, Dukes of 235 diamonds 123 DiFatta, Joseph 178 ‘Disaster Capitalism Complex’ 182 disasters 6 hedge funds and 227-8 discount houses 301 discount window 164 discrezione 44 distribution curves 154-5 dividends 125 Dixon, Don 255 dollar: bills 27-8 China and 334 falling value 10 as international reserve currency 305 origin of word 25 pegs 300 dot.com mania 6. see also bubbles Douai 73 Double Eagle 319 Dow Jones Industrial Average 6 1929: 158 1987: 165-6 1995-7: 167 falls 6 and 9/11: 6 Druckenmiller, Stanley 319 drug addiction 292 Dunscombe, Thomas, MP 78 DuPont 160 Dutch East India Company see VOC Dutch East Indies 134-5 Dutch Empire 3. see also Netherlands, The; United Provinces Dutch Republic see United Provinces earthquakes 176 East Africa 38 East Asia 283. see also Asia Eastern Europe 112 East India companies 128. see also VOC East India Company (British) 129 East Indies 127 economic hit men 309-11 economies of scale and scope 352 economists: Chicago and Harvard theorists 214 economic forecasting 347 evolutionary economics 348 and Great Depression 163-4 and real humans 345 and stock market 126 Ecuador 2 Edinburgh 190-1 education 209 Japan 207 public expenditure on 220 Edward IV, King 47 Egibi family 31 Egypt 96 Eilbaum, Roberto 112 El Alto 278 El Dorado 21 electoral reform: in Britain 99 in Europe 100 see also property-owning democracies electricity industry 169-72 electronic herd see investors electronic money 29-30 El Salvador 219 emergency currency 301 emerging markets/developing countries 4 emerging market bonds 6 .


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The Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leonard

2021 United States Capitol attack, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, collateralized debt obligation, coronavirus, corporate governance, COVID-19, Donald Trump, Dutch auction, financial engineering, financial innovation, fixed income, Ford Model T, forensic accounting, forward guidance, full employment, glass ceiling, Glass-Steagall Act, global reserve currency, Greenspan put, hydraulic fracturing, income inequality, inflation targeting, Internet Archive, inverted yield curve, junk bonds, lockdown, long and variable lags, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Money creation, mortgage debt, new economy, obamacare, pets.com, power law, proprietary trading, quantitative easing, reserve currency, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Silicon Valley, stock buybacks, too big to fail, yield curve

The reserve accounts discussed in this book tend to be those of the primary dealers, who can sell assets to the Fed and collect new dollars in their reserve accounts. RESERVE CURRENCY: The U.S. dollar has been the global reserve currency since the end of World War II, meaning that it is the currency that nations and national banks use to conduct international transactions with one another. This is what gives the dollar its supreme place in the global economic system. In times of stress, everyone needs dollars because so much debt and trade is denominated in dollars. Being a reserve currency helps shield the dollar from market pressures faced by other national currencies, which can see their value plummet if other nations or banks decide they don’t want to own that currency any longer.

., 153–56, 161, 270 Duke and, 125, 127–28, 142–43 early life of, 126, 151–52 economics conference speech of, 256 Fed’s image and, 286 golfing of, 167 growth of influence of, 222 Hoenig compared with, 222 Hoenig’s meeting of, 200 listening tours of, 286, 290 Mnuchin and, 275, 277–78, 299 news conference of, 236–37 normalization process and, 221, 224–25, 233, 234, 236–37, 243, 245, 256 physical appearance of, 156 political alliances of, 233 political standing of, 298 as pragmatist, 153 quantitative easing and, 121–22, 127–29, 132, 141–44, 148–49, 221–22, 236 reversal of opinion on quantitative easing and ZIRP (Powell Pivot), 225–27, 236–37 Rexnord and, 163–70, 185, 186, 199 Salomon Brothers and, 159–61 speeches of, 225–26, 256, 290 at Treasury Department, 126, 156–61, 290 Trump and, 229, 233–34 warning of, 272 wealth of, 169 Williams and, 246 Powell, Patricia, 151 Power and the Independence of the Federal Reserve, The (Conti-Brown), 132 prices of assets, see asset prices and value controls on, 62 deflation of, 96n, 223–24, 237 of gasoline, 17, 50, 54, 72, 73, 83, 84 of gold, 235 of housing, 92, 93, 100 inflation of, see inflation spread in, 268–69 of stocks, 84, 119, 131, 212, 235 primary dealer(s), 26, 101, 115–16, 285, 350 defined, 349 Salomon Brothers as, 159, 160 private equity firms, 97, 116, 122, 149, 156, 161–64, 166, 168–70, 174, 178–82, 187, 202, 221, 291 Apollo Management, 168–70, 173–74, 180, 186, 191 Carlyle Group, 126, 161–63, 165–69, 174, 178–80, 182, 185, 186 put contracts, 345–46 Fed Put, 237, 257, 272, 279, 345–46 Qualcomm, 86 quantitative easing (QE), 8–11, 114–15, 126–49, 154, 170, 173, 182, 225, 247, 249, 251, 252, 262, 292, 295, 302, 304n, 305, 344, 350–52 allocative effect of, 27, 28 asset price inflation and, 119, 132, 148, 182, 300 basic mechanics and goals of, 26 Beck on, 110 Bernanke and, 10, 25–34, 105, 112–13, 118n, 121, 126–30, 132–34, 136, 140–46, 148, 182, 247 bonds in, 101, 110, 139, 227, 231–34, 236, 267, 280 coronavirus pandemic and, 267, 279–80, 297 defined, 349 developing nations and, 216–17 difficulty of undoing, 32–33, 128, 130, 140, 143, 258 Duke and, 127–28, 141–44 end of, 147–48, 227 European Central Bank’s version of, 235 excess bank reserves and, 248 Fed’s research on, 30 Feldstein on, 133 in financial crisis of 2008, 25, 101 FOMC debates on, 9, 10, 16, 27–34, 112, 121, 126–30, 132, 134, 137, 140, 142, 143 FOMC presentation on, 136–39 FOMC voting on, 3, 8–11, 18, 21, 29, 32–34, 105, 107–9, 112, 113, 134, 136–37, 141, 148 forecasting errors and, 138–40 growth-boosting channels of, 148 Hoenig’s critiques of, 27–28, 31–33, 62, 112, 120 Hoenig’s predictions about, 34, 200 Hoenig’s public condemnation of, 29, 34 Hoenig’s vote on, 3, 8–11, 18, 21, 32, 34, 105, 107–9, 112, 258, 280 inflation and, 33, 112–13, 119–20 interest rates and, 116–19, 133, 137–39 job creation and, 119, 139, 182 media and, 108–12, 144–45 money supply and, 113, 115–16, 120–21, 177, 211 negative-interest-rate bonds and, 218 normalization (reversal) of, 221, 223–25, 227–29, 231, 233–37, 243, 245, 249, 256 as normal tool of monetary policy, 127 NQE (non-QE) program, 256–57 open-ended program of, 136, 141 open market operations and, 247–48 Operation Twist, 127, 348–49 policy options in, 128–29, 132, 136, 141 political backlash against, 144 Powell and, 121–22, 127–29, 132, 141–44, 148–49, 221–22, 236 Powell’s reversal of opinion on (Powell Pivot), 225–27, 236–37 public perceptions of, 119–20, 136 risk seesaw and, 145–46 risks of, 32–33, 130, 132, 143, 226 risky loans and, 27, 33 second round of, 32, 114–15, 118n, 144, 173, 349 stock prices and, 119, 212 Taper Tantrum and, 145–47, 217 unemployment and, 121 Yellen and, 130 quantitative tightening, 233, 237 defined, 349–50 Quarles, Randal, 229, 230, 280n Reagan, Ronald, 80, 156, 158–59 real estate, 50, 51, 55, 91, 92, 262 in Florida, 54–55, 86 quantitative easing and, 117–19 and search for yield, 214–16 see also housing real estate investment trusts (REITs), 147 recessions, 8, 22, 24, 50, 56, 60, 72, 73, 75, 80, 81, 136, 186, 225, 236, 302, 347 reconciliation, 158–59 Reddy, Sudeep, 34 Reifschneider, David, 148 relative-value funds, 253–54 repo market, 243–58, 264, 265 Republican Party, 21, 80, 101, 103, 135, 197, 201, 203, 233, 276, 304 Tea Party movement in, 14, 103, 109, 135, 206, 286 see also conservatives reserve accounts, 26 defined, 350 reserve currency, 350 revolving credit facility, 170 Rexnord, 163–70, 171–73, 176–79, 183, 185–99, 281 Adams at, 186–88, 191, 192, 194, 195, 198 Apollo Management and, 168–70, 172, 173, 186, 191 Carlyle Group and, 163, 165–69, 185, 186 closure of factory and move of production to Mexico, 196–99 Feltner at, 188–91, 196–99, 293, 295 labor unions and, 190, 194–96 Powell and, 163–70, 185, 186, 199 Rexnord Business System (RBS), 186–87 SCOFR plan of, 195–96, 198, 199 stock buyback of, 193–94 ZIRP and, 187–88 Rickards, James, 111 Riksbank, 218 risk parity funds, 265 risk seesaw, 145–46, 304, 305 Robinhood, 289, 290, 300 Roblox, 297–98 Romney, Mitt, 133 Roosevelt, Franklin Delano, 79–80, 100, 204 Rubenstein, David, 161 Russia, 85, 111, 238 Sahm, Claudia, 267, 286 Salomon Brothers, 157–61 SARS epidemic, 261, 263 Saudi Arabia, 263 Saxton, Jim, 76, 78 Secondary Market Corporate Credit Facility (SMCCF), 281 Secrets of the Temple (Greider), 47 Securities and Exchange Commission (SEC), 155, 159, 160, 162, 175, 215, 348 securitization, 63 September 11 attacks, 88, 91 S.


pages: 496 words: 131,938

The Future Is Asian by Parag Khanna

3D printing, Admiral Zheng, affirmative action, Airbnb, Amazon Web Services, anti-communist, Asian financial crisis, asset-backed security, augmented reality, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Basel III, bike sharing, birth tourism , blockchain, Boycotts of Israel, Branko Milanovic, British Empire, call centre, capital controls, carbon footprint, cashless society, clean tech, clean water, cloud computing, colonial rule, commodity super cycle, computer vision, connected car, corporate governance, CRISPR, crony capitalism, cross-border payments, currency peg, death from overwork, deindustrialization, Deng Xiaoping, Didi Chuxing, Dissolution of the Soviet Union, Donald Trump, driverless car, dual-use technology, energy security, European colonialism, factory automation, failed state, fake news, falling living standards, family office, financial engineering, fixed income, flex fuel, gig economy, global reserve currency, global supply chain, Great Leap Forward, green transition, haute couture, haute cuisine, illegal immigration, impact investing, income inequality, industrial robot, informal economy, initial coin offering, Internet of things, karōshi / gwarosa / guolaosi, Kevin Kelly, Kickstarter, knowledge worker, light touch regulation, low cost airline, low skilled workers, Lyft, machine translation, Malacca Straits, Marc Benioff, Mark Zuckerberg, Masayoshi Son, megacity, megaproject, middle-income trap, Mikhail Gorbachev, money market fund, Monroe Doctrine, mortgage debt, natural language processing, Netflix Prize, new economy, off grid, oil shale / tar sands, open economy, Parag Khanna, payday loans, Pearl River Delta, prediction markets, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, Ronald Reagan, Salesforce, Scramble for Africa, self-driving car, Shenzhen special economic zone , Silicon Valley, smart cities, SoftBank, South China Sea, sovereign wealth fund, special economic zone, stem cell, Steve Jobs, Steven Pinker, supply-chain management, sustainable-tourism, synthetic biology, systems thinking, tech billionaire, tech worker, trade liberalization, trade route, transaction costs, Travis Kalanick, uber lyft, upwardly mobile, urban planning, Vision Fund, warehouse robotics, Washington Consensus, working-age population, Yom Kippur War

Asians are working hard to expand access to energy supplies from the Arctic, Russia, Central Asia, and Africa, as well as to invest in their own alternative and renewable energy sources such as natural gas, nuclear power, solar power, wind power, and biomass. The US dollar is still the world’s main reserve currency, but Asians have started denominating ever more trade in their own currencies, as well as shedding some of their dollar reserves. And from Amazon to Apple, US corporate profits depend considerably on sales in Asia, but Asian regulators and companies will stop at nothing to capture greater market share for themselves, both in Asia and worldwide.

From Underwriting the United States to Financing Asia Foreign capital from the United States and Europe was a critical driver of Asia’s economic ascent during the first and second waves of East Asian growth, from Japan’s economic miracle to China’s breakneck industrialization. East Asians then lent their prodigious savings to the United States and Europe in the form of buying their Treasury bonds. Asian capital thus became a driver of the US dollar’s stability and status as a global reserve currency. China and Japan remain the two largest foreign holders of US Treasuries, with more than $1 trillion each, and Hong Kong and Taiwan also rank in the top ten with nearly $200 billion each in US dollar reserves. All of the top ten foreign holders of US dollar reserves—including Saudi Arabia, South Korea, India, and Singapore—are Asian economies, collectively holding more than 55 percent of US Treasuries.19 Furthermore, Asian foreign investment in the US economy, led by Japan, totals more than $1 trillion (compared to Europe’s $2 trillion FDI in the United States), especially in industries such as energy, manufacturing, and real estate.

Over the past decade, the US standard of living, as measured by median income, has actually fallen, while education, health care, public safety, and other areas are weakening. According to the social psychologist Steven Pinker, the United States is “backward” compared to most of the rest of its Western peers. The exorbitant privilege of controlling the world’s leading reserve currency affords the US monetary stability despite twin deficits, but it cannot mask either the country’s deep inequalities or the lack of meaningful remedies for them.5 In politics, the United States suffers from an abundance of representation and a deficit of administration. There is a great excess in the power of representatives—congressmen and senators—and a deep shortfall in the power of administrators—governors and mayors.


Super Continent: The Logic of Eurasian Integration by Kent E. Calder

"World Economic Forum" Davos, 3D printing, air freight, Asian financial crisis, Bear Stearns, Berlin Wall, blockchain, Bretton Woods, business intelligence, capital controls, Capital in the Twenty-First Century by Thomas Piketty, classic study, cloud computing, colonial rule, Credit Default Swap, cuban missile crisis, deindustrialization, demographic transition, Deng Xiaoping, disruptive innovation, Doha Development Round, Donald Trump, energy transition, European colonialism, export processing zone, failed state, Fall of the Berlin Wall, foreign exchange controls, geopolitical risk, Gini coefficient, high-speed rail, housing crisis, income inequality, industrial cluster, industrial robot, interest rate swap, intermodal, Internet of things, invention of movable type, inventory management, John Markoff, liberal world order, Malacca Straits, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, new economy, oil shale / tar sands, oil shock, purchasing power parity, quantitative easing, reserve currency, Ronald Reagan, seigniorage, Shenzhen special economic zone , smart cities, smart grid, SoftBank, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, Suez canal 1869, Suez crisis 1956, supply-chain management, Thomas L Friedman, trade liberalization, trade route, transcontinental railway, UNCLOS, UNCLOS, union organizing, Washington Consensus, working-age population, zero-sum game

Those rates were to be set by reference to the price of gold and the US dollar, the key currency of the entire system, whose value was to be fixed at US$35/ounce of gold. Since the price of gold was to be fixed, nations were free to hold their international reserves in dollars, in gold, or in a limited number of alternative reserve currencies, most prominently the British pound sterling. Lord Keynes and Harry Dexter White also envisioned a multilateral body to regulate global trade, christened the International Trade Organization (ITO), to obviate the rampant protectionism that had so painfully ­exacerbated 208 chapter 10 the Great Depression of the 1930s.

The conflict made it hard for neutral nations to engage with British banks and to settle their accounts in sterling. They consequently began looking for alternatives. After World War I, economic growth slowed while unemployment erratically spiked in Britain.38 The UK’s troubled circumstances rendered the pound sterling less and less competitive vis-à-vis the dollar as a reserve currency. Home ownership also faced new financial challenges, as Britain worked desperately to defend the gold standard, generating political pressures to back away from the key-currency role.39 Meanwhile, as Britain faced mounting difficulties in maintaining its role, an alternative began to emerge across the Atlantic.

For more on the UK’s interwar unemployment situation, see James Denman and Paul McDonald, “Unemployment Statistics from 1881 to the Present,” Labor Market Trends, January 1996. 39. In the 1920s, the UK’s difficult domestic economic situation (falling demand, rising unemployment) made the pound less competitive vis-à-vis the dollar as a reserve currency. The British government nevertheless insisted on keeping to the gold standard, thus further weakening the strength of the pound. See Tajvan Pettinger, “The UK Economy in the 1920s,” Economics Help, October 16, 2012; and Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (Princeton, NJ: Princeton University Press, 1998), 78 – 83. 40.


pages: 310 words: 90,817

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown by Detlev S. Schlichter

bank run, banks create money, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, currency peg, fixed income, Fractional reserve banking, German hyperinflation, global reserve currency, inflation targeting, Kenneth Rogoff, Kickstarter, Long Term Capital Management, low interest rates, market clearing, Martin Wolf, means of production, Money creation, money market fund, moral hazard, mortgage debt, open economy, Ponzi scheme, price discovery process, price mechanism, price stability, pushing on a string, quantitative easing, reserve currency, rising living standards, risk tolerance, savings glut, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, We are all Keynesians now, Y2K

In 1933 President Roosevelt took the United States off the gold standard domestically. A tenuous connection to gold was sustained for a few decades after World War II, but in 1971 President Nixon took the dollar off gold internationally, too. Most other currencies had already severed direct links to gold and had only maintained an indirect one through the dollar as the global reserve currency. Since 1971, the entire world has thus been on a paper money standard for the first time in history. Money can now be created out of nothing, at no cost and without limit. When money was ultimately still gold, money-induced business cycles used to be fairly short, although still painful. The credit boom was limited by the inelasticity of bank reserves.

It is this internationally coordinated paper money production that explains all the phenomena that the savings glut theorists concern themselves with: the large United States current account deficit and the corresponding Asian surpluses; the concurrence of low savings and high levels of consumption with extensive investment in real estate in the United States, coupled with relatively low levels of official consumer goods inflation; and simultaneously, on the part of China, the extraordinary accumulation of foreign currency reserves and of Treasury securities holdings, and the explosion in domestic credit and in domestic investment activity. Whether this process was the outcome of the deliberate design of U.S. policy makers is immaterial. It may simply be that the dollar’s status as a global reserve currency and the importance of the U.S. goods market for the export sectors of other countries lead to policies that furthered a de facto globally coordinated money and credit boom. Summary In the context of the stylized history of state-sponsored fractional-reserve banking just described, the pinnacle of paper money production has now been reached.

See also money, paper money Enron equilibrium, economic European Central Bank (ECB) evenly rotating economy F Fannie Mae Federal Reserve establishment of fiat money fiduciary model Fisher, Irving foreign exchange market Foster, William Trufant fractional-reserve banking as Ponzi scheme controls of misconceptions about stability of state and understanding franc France, paper money and Freddie Mac Friedman, Milton functions of money G GDP. See gross domestic product Geldwertstabilisierung und Konjunkterpolitik The General Theory of Employment, Interest, and Money Germany, paper money and global foreign exchange market global reserve currency global state fiat money standard gold gold standard Nixon and resurrecting Roosevelt and goldsmiths Goldtheorie und Konjunkturtheorie goods production, money production versus government debt, monetization of government, funding Great Depression greenbacks Gresham’s law gross domestic product (GDP) effect of money injections on H Harrison, Henry Hayek, Fredrich August von hyperinflation I IMF.


pages: 284 words: 92,387

The Democracy Project: A History, a Crisis, a Movement by David Graeber

Bretton Woods, British Empire, company town, corporate personhood, David Graeber, deindustrialization, dumpster diving, East Village, feminist movement, financial innovation, George Gilder, John Markoff, Kim Stanley Robinson, land bank, Lao Tzu, late fees, Money creation, Murray Bookchin, Occupy movement, Paul Volcker talking about ATMs, payday loans, planetary scale, plutocrats, radical decentralization, Ralph Nader, reserve currency, Ronald Reagan, Savings and loan crisis, seigniorage, too big to fail, trickle-down economics, unpaid internship, We are the 99%, working poor

It maintains at least two and a half million troops in 737 overseas military bases, from Paraguay to Tajikistan, and, unlike any other military power in history, retains the power to direct deadly force anywhere on earth. • The U.S. dollar is the currency of global trade, and since the 1970s has replaced gold as the reserve currency of the global banking system. • Also since the 1970s, the United States has come to run an ever-increasing trade deficit whereby the value of products flowing into America from abroad far outweighs the value of those America sends out again. Set these facts out by themselves, and it’s hard to imagine they could be entirely unrelated.

.), even in staunch U.S. allies like Germany, the fact that the world’s financial architecture was created by, and is sustained by, U.S. military power is simply assumed as a matter of course. This is partly because people outside the United States have some knowledge of the relevant history: they tend to be aware, for instance, that the current world financial architecture, in which U.S. Treasury bonds serve as the principal reserve currency, did not somehow emerge spontaneously from the workings of the market but was designed during negotiations between the Allied powers at the Bretton Woods conference of 1944. In the end, the U.S. plan prevailed, despite the strenuous objections of the British delegation, led by John Maynard Keynes.k Like the “Bretton Woods institutions” (the IMF, World Bank) that were created at that same conference to back up the system, these were political decisions, established by military powers, which created the institutional framework in which what we call the “global market” has taken shape.

The Third World fought back: a global popular uprising (dubbed by the media the “anti-globalization movement”) made such an issue out of such policies that by 2002 or 2003, the IMF had been effectively kicked out of East Asia and Latin America, and by 2005 was itself on the brink of bankruptcy. The financial crisis of 2007 and 2008, which struck as U.S. military forces remained embarrassingly quagmired in Iraq and Afghanistan, has led, for the first time, to a serious international discussion of whether the dollar should remain the international reserve currency. At the same time, the formula the major powers once applied to the Third World—declare a financial crisis, appoint a supposedly neutral board of economists to slash social services, reallocate even more wealth to the richest 1 percent, and open the economy to even more pillaging by the financial services industry—is now being applied at home, from Ireland and Greece to Wisconsin and Baltimore.


pages: 741 words: 179,454

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

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

The gold standard was not feasible for the post-war economy. There was insufficient gold to meet the demands of growing international trade and investment. The communist Soviet Union, emerging as a rival to the United States in the post-war order, also controlled a sizeable proportion of known gold reserves. Keynes’ bold solution was a world reserve currency (the bancor) administered by a global central bank. White rejected the proposal: “We have been perfectly adamant on that point. We have taken the position of absolutely no.” The United States was the undisputed preeminent economic and military great power as well as the world’s richest nation and the biggest creditor.

The British and the French, devastated by two world wars, needed American money to rebuild their economies. White’s view prevailed. Bretton Woods established a system of fixed exchange rates where countries would establish parity of their national currencies in terms of gold (the peg). All countries would peg their currencies to the U.S. dollar as the principal reserve currency and, after convertibility was restored, would buy and sell U.S. dollars to keep market exchange rates within plus or minus 1 percent of parity (the band). The U.S. dollar was to have a fixed relationship to gold ($35 an ounce). The U.S. government would convert dollars into gold at that price.

The dollar became overvalued relative to the German Deutsche Mark and the Japanese yen. Faced with the choice of devaluing the dollar or imposing protectionist measures, President Johnson argued: “The world supply of gold is insufficient to make the present system workable—particularly as the use of the dollar as a reserve currency is essential to create the required international liquidity to sustain world trade and growth.”19 It was the Triffin dilemma, identified by Belgian-American economist Robert Triffin in the 1960s. As the dollar was the global reserve and trade currency, the United States had to run large trade deficits to meet the world’s demand for foreign exchange.


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

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

Keynes explained that no country needed to be in possession of a credit balance ‘unless it deliberately prefers to sell more than it buys (or lends)’.69 So no creditor country would suffer injury by having its credit balance actively employed. Keynes’s long-term aim was to replace gold by an international reserve currency, which he called ‘bancor’. By increasing or reducing the quantity of bancor, the clearing bank’s managers would be able to vary it contracyclically and ensure enough global money for trade expansion.70 The General Theory divided the economics profession. Older economists thought Keynes was wrong, or had nothing new to say.

The Belgian-American economist Robert Triffin identified his ‘Triffin paradox’ in 1960.42 In a gold–exchange-rate system, a growing world economy needed continuous growth in reserves which only dollars could provide; but in exporting more dollars than it was receiving the US government was undermining confidence in the dollar as a reserve currency. The unfolding of this ‘paradox’ might have been postponed had America not got involved in the Vietnam War. But vast military spending overseas, coming on top of President Johnson’s ‘Great Society’ policy, made the fixed exchange-rate system unviable. Once inflationary expectations got built into the global system, fiscal policy was disabled.

Under the gold standard, this accumulation of reserves would have amounted to a big increase in deflationary pressure, because these reserves would have been held in gold – buried in the vaults of the central banks. However, the pre-crash position was dominated by the ‘exorbitant privilege’ of the US dollar as the principal reserve currency. The fact that the reserves were held mainly in dollars allowed the US to avoid deflation, and instead run an expansionary monetary policy.* The reserve position of the dollar formed the link connecting reserve accumulation by China and expansionary monetary policy in the US. V. S av i ng Glu t v e r sus Mon e y Glu t Now consider the proposition CA A ≡ −CA B This says that country A’s surplus is exactly the same as country B’s deficit.


pages: 831 words: 98,409

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, assortative mating, bank run, barriers to entry, Bear Stearns, Bernie Sanders, Black Swan, Blythe Masters, 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, digital divide, diversification, Dunbar number, East Village, eat what you kill, Elon Musk, eurozone crisis, fake it until you make it, family office, financial engineering, financial repression, Gini coefficient, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, Jim Simons, John Meriwether, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Roose, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, Money creation, money market fund, Myron Scholes, NetJets, Network effects, no-fly zone, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Ponzi scheme, power law, public intellectual, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, rolodex, Satyajit Das, search costs, shareholder value, Sheryl Sandberg, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, subprime mortgage crisis, systems thinking, tech billionaire, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, Tyler Cowen, women in the workforce, young professional

N333513 2017 (print) | LCC HG3881 (ebook) | DDC 332/.042--dc23 LC record available at https://lccn.loc.gov/2016034403 Hardback ISBN 978-1-85788-664-1 Trade paperback ISBN 978-1-85788-665-8 U.S. eBook ISBN 978-1-85788-979-6 U.K. eBook ISBN 978-1-47364-511-0 Nicholas Brealey Publishing Carmelite House 50 Victoria Embankment London EC4Y 0DZ Tel: 020 3122 6000 Nicholas Brealey Publishing Hachette Book Group Market Place Center, 53 State Street Boston, MA 02109, USA Tel: (617) 523 3801 www.nicholasbrealey.com www.beyond-global.com Dedicated to My Parents and Grandparents in Gratitude Contents Foreword Introduction Genesis About This Book The Financial Industry and the Power of Networks Applying the Lens of Network Science: Systems Thinking Crisis Alert Author’s Note CHAPTER 1 THE FINANCIAL UNIVERSE: AN INNATELY HUMAN SYSTEM The Stratosphere of Power: Davos The Orbit of the Financial Elite: The Gravitational Force of Networks The Financial System: Applying the Lens of Network Science The Human Factor: The Power of Personal Connections Introduction: Meet the “Superhubs” Fault Lines: The Fragility of Our Financial System CHAPTER 2 SUPERHUBS: THE FINANCIAL ELITE AND THEIR NETWORKS The Superhub Prototype: Hedge Fund Titan George Soros A Blueprint for Networks: Nodes, Hubs, and Superhubs—Bankers, Executives, and CEOs Financial Superhubs: Network Equals Networth Network Geography: Location Matters Location: Reputation Matters, Reputation: Access Matters Access: Social Capital Matters CHAPTER 3 THE LINKS THAT CONNECT SUPERHUBS: MONEY, INFORMATION, AND OPPORTUNITIES Network Nucleus: Larry Fink Network Power: Money The Printing Presses: Central Banks Federal Reserve Chairman: In Charge of the World’s Reserve Currency Central Bank of Central Banks: The Bank for International Settlements A Primer on Banks: Regular and Shadow Banks The Perpetual Crisis Manager: The International Monetary Fund Network Currency: Information The Influence of Personal Connections Information Access and Proximity The Benefit of Connections in Tumultuous Times Thought Leaders—Superhubs of Valuable Information Network Investments: Social Capital Money + Information + Social Capital = Infinite Opportunities CHAPTER 4 THE MATRIX: DECODING THE SUPERHUB DNA The Alpha Personality: Jamie Dimon EQ: Connecting Emotionally Master Closers: Steve Schwarzman Inquiring Minds Inventing Ideologies The Cult of Failure CEOs—Chief Ego Officers: Bill Gross On a Monomaniacal Mission: Ray Dalio CHAPTER 5 HOMOPHILY: SIMILARITY BREEDS CONNECTION The Charitable Superhub Network: The Robin Hood Gala A Law of Nature: Why the Rich Get Richer Global Conquest: The Transnational Financial Elite Meeting of the Minds: Circle of Trust The Hegemony of Homogeneity The IQ Elite: A Master’s Degree in Networking Network Plutocracy: “The Old Boys’ Club” That’s Rich: Superhubs and Super-Riches The “Flocking Effect”: The Superhub Habitat CHAPTER 6 EXECUTIVE NETWORKING: RELATIONAL CAPITAL The Superhub of Superhubs: Klaus Schwab Friends with Benefits: Capital Networks = Network Capital More an Art than a Science: Attraction + Interaction = Transaction Digital Bits versus Human Touch Beyond Networking: How to Win Friends and Influence People The Alchemy of Chemistry: Charm Offensive The Lords of Networks and Their Creations Negative Notions on Networking Think Tanks: Network Motherboards INET: Connecting the Connected at Bretton Woods CHAPTER 7 MEMBERS ONLY: THE EXCLUSIVE NETWORKING PLATFORMS OF THE GLOBAL SUPER-ELITE A Dinner of Consequence: Attack on the Euro Conspiracy Theories: An Explanation for Attempted Explanations Why Networks Need Platforms: Connectivity The Annual Power Circuit: Dispatch from Davos The Global Financial Power Center: The International Monetary Fund Washington, D.C.: The Financial Shadow Capital IMF Meetings in Istanbul: Dancing on the Titanic Power Summit: The Bilderberg Conference Stealth Power: Family Office Gatherings Feeding Off Power: Power Lunches Power Workout: Networking, Working, and Working Out “Superhub-Nobbing”: Private Parties The Higher Purpose of Networking: The Charity Circuit CHAPTER 8 OPPORTUNITY COSTS: THE DOWNSIDE OF THE UPSIDE Missing Out on Memorable Moments Stress Test: When Being a Superhub Is Not So Super Married to Their Jobs: Work-Family Life Imbalance Media Madness: Living Under a Microscope Super-Sick: Paying the Ultimate Price Clash of the Titans: Close Combat and Coups d’État Triumph and Defeat: A Turbulent Career CHAPTER 9 “WOMENOMICS”: THE MISSING LINK The Gender Gap: Women Missing in Action The Access Gap: Exclusive Means Excluding The Networking Gap: Schmooze or Lose The Assessment Gap: Performance versus Potential The Wage Gap: Selling Women Short The Failure Gap: Demoting Promotions The Mentoring Gap: Missing Out on Mentoring The Sexism Gap: The Wolves of Wall Street on the Prowl The Resilience Gap: Male Might and Female Feebleness Closing the Gender Gap: Superhub Christine Lagarde CHAPTER 10 REVOLVING SUPERHUBS: CREATING NETWORK MONOPOLIES Psychological Kidnapping The Revolving Door The Oscillating Megahub: Robert Rubin Open Doors: Tony Blair Cross-Connections: Cooperating Constructively in Times of Crises Launching a President “Legalized Corruption”: The Best Democracy Money Can Buy Purchasing Political Protection Relationship Power: Diffusing the Euro Time Bomb Super-Entity: The Capitalist Network That Runs the World CHAPTER 11 DE-LINKED: EXPULSION AND COMEBACK Sent into Exile: Dick Fuld Shock-Resistant: Larry Summers’s Network Meteoric Rise Against All Odds The Bull in Charge of the China Shop Den of Thieves: Mike Milken Complete Network Collapse: Dominique Strauss-Kahn Ponzi Schemes and Sex Scandals: Buddy Fletcher and Ellen Pao Omni-Connected: Michael Klein CHAPTER 12 SUPER-CRASH: “EXECUTIVE CONTAGION” The Crash of a Titan: John Meriwether The Big Picture: Capitalism in Crisis Debt and Financialization Wealth Gap and Inequality Globalization Winners versus Globalization Losers Approaching the Tipping Point When an Irresistible Force Meets an Immovable Object: Brexit The Next Crisis: Systemic Failure and Contagion The Culprit: The Superhubs or the System?

In between all those meetings, they are in constant contact and consult with each other. The increased interconnectedness of our world and constant crises and emergencies have shaped a transnational central banker identity, further homogenizing an already fairly uniform group. Federal Reserve Chairman: In Charge of the World’s Reserve Currency The chairman of the central bank of the U.S., the Federal Reserve, is perhaps the most powerful person in the country besides the president. Unelected, independent, and accountable to Congress and the public, she or he has immense power with implications for both the U.S. and the world as a whole.

By invitation only, the meetings were governed by the Chatham House Rule, meaning that information could be used but not attributed to any particular person. Amidst a worsening crisis in Europe, the meetings featured tense debates on the reform of the international monetary system. Panel presentations on capital flows, reserve currencies, and global liquidity provisions were followed by controversial discussions between speakers and the participants. Christine Lagarde, elegant and energetic, keynoted during the luncheon, and Michel Camdessus of the Banque de France spoke during a traditional Swiss dinner at Zunfthaus zur Meisen in the old part of town.


pages: 364 words: 99,613

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

air traffic controllers' union, Alan Greenspan, back-to-the-land, Bear Stearns, benefit corporation, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, call centre, centre right, classic study, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, disruptive innovation, falling living standards, financial deregulation, financial innovation, full employment, Glass-Steagall Act, guns versus butter model, high-speed rail, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kickstarter, lake wobegon effect, Long Term Capital Management, low interest rates, market fundamentalism, Martin Wolf, McMansion, medical malpractice, Michael Milken, military-industrial complex, Minsky moment, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, open immigration, Paul Samuelson, plutocrats, price mechanism, price stability, private military company, public intellectual, radical decentralization, Ralph Nader, reserve currency, rising living standards, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, school vouchers, Silicon Valley, single-payer health, Solyndra, South China Sea, statistical model, Steve Jobs, Suez crisis 1956, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War, you are the product

But the world’s supply of gold depended on how much was produced rather than how much money the world needed to finance growth. As nations industrialized and expanded in the nineteenth century, gold production could not keep pace. The British pound sterling, the currency of the world’s greatest creditor, was redeemable for gold and was therefore a substitute. So it functioned as the world’s reserve currency; that is, along with gold, it could be used to support the value of other nation’s money. But World War I sapped Britain’s economic strength and destroyed its capacity to play the role of world creditor. As a result, the world had no new source of credit when the private banking sector collapsed in the 1930s.

This raises the price—and reduces the demand for—imports, and it causes the opposite effect for exports. So, goes the argument, exports will rise faster than imports, and eventually trade balance will be restored. The conventional wisdom is not wrong, but the case of the United States is different, in part because the U.S. dollar is still the most important reserve currency for the world’s central banks and for writing contracts in oil and other globally traded goods. It is also seen as a safe political haven in times of turmoil and economic stress. Demand for the dollar is therefore somewhat independent of the U.S. trade balance. In addition, the central banks of nations whose currency is not freely traded often manipulate the value of their currency to keep it low relative to the dollar and thus keep their exports more competitively priced.

In Wall Street’s case, this means foreign business assets. In the Pentagon’s, a higher valued dollar makes it less costly to maintain its bases, its foreign missions, and its wars. Sooner or later, as the U.S. economy naturally shrinks in importance, the dollar will have to give way as the world reserve currency. Already, the leaders of the BRIC nations—Brazil, Russia, India, and China—have called for a new global credit system managed by the International Monetary Fund (IMF) or a new institution and based on a basket of currencies, which would diminish the dollar’s global importance. But this would be an enormously complex process that would take at least a decade of negotiation among the world’s two hundred and some nations—starting with a commitment from the United States.


pages: 349 words: 102,827

The Infinite Machine: How an Army of Crypto-Hackers Is Building the Next Internet With Ethereum by Camila Russo

4chan, Airbnb, Alan Greenspan, algorithmic trading, altcoin, always be closing, Any sufficiently advanced technology is indistinguishable from magic, Asian financial crisis, Benchmark Capital, Big Tech, bitcoin, blockchain, Burning Man, Cambridge Analytica, Cody Wilson, crowdsourcing, cryptocurrency, distributed ledger, diversification, Dogecoin, Donald Trump, East Village, Ethereum, ethereum blockchain, Flash crash, Free Software Foundation, Google Glasses, Google Hangouts, hacker house, information security, initial coin offering, Internet of things, Mark Zuckerberg, Maui Hawaii, mobile money, new economy, non-fungible token, off-the-grid, peer-to-peer, Peter Thiel, pets.com, Ponzi scheme, prediction markets, QR code, reserve currency, RFC: Request For Comment, Richard Stallman, Robert Shiller, Sand Hill Road, Satoshi Nakamoto, semantic web, sharing economy, side project, Silicon Valley, Skype, slashdot, smart contracts, South of Market, San Francisco, the Cathedral and the Bazaar, the payments system, too big to fail, tulip mania, Turing complete, Two Sigma, Uber for X, Vitalik Buterin

They saw people were already starting to create their own alternative currencies, so they would create a platform that would give liquidity to any coin, no matter how small. They called this new project Bancor. Any currency that joins the Bancor network would have to hold a small balance of a reserve currency in its smart contract, and that reserve currency would be used to trade between any other token. There was a lot of debate among the team about whether they should make the reserve currency be ether, or if they should create a specific token with that purpose. They decided to create a platform-specific token called BNT so that, over time, many blockchains, not just Ethereum, could use the Bancor network.


pages: 352 words: 98,561

The City by Tony Norfield

accounting loophole / creative accounting, air traffic controllers' union, anti-communist, Asian financial crisis, asset-backed security, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, capital controls, central bank independence, colonial exploitation, colonial rule, continuation of politics by other means, currency risk, dark matter, Edward Snowden, Fall of the Berlin Wall, financial innovation, financial intermediation, foreign exchange controls, Francis Fukuyama: the end of history, G4S, global value chain, Goldman Sachs: Vampire Squid, interest rate derivative, interest rate swap, Irish property bubble, Leo Hollis, linked data, London Interbank Offered Rate, London Whale, Londongrad, low interest rates, Mark Zuckerberg, Martin Wolf, means of production, Money creation, money market fund, mortgage debt, North Sea oil, Northern Rock, Occupy movement, offshore financial centre, plutocrats, purchasing power parity, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Ronald Reagan, seigniorage, Sharpe ratio, sovereign wealth fund, Suez crisis 1956, The Great Moderation, transaction costs, transfer pricing, zero-sum game

As mentioned earlier, after the Asian financial crisis of 1997–98, many countries in the region – and elsewhere – built up their currency reserves as an insurance policy: if there were another flight of capital in a crisis, they could try to offset the impact by selling these reserves. The US dollar was the reserve currency of choice not only because it was the principal means of payment for trade and finance, but also because many countries had currencies linked to the dollar. During the 2000s, a growing US current account deficit was funded in this way by huge inflows of finance, especially from Asian central banks that bought US Treasury securities and other US dollar-denominated assets.17 From 2000 to 2007, the US current account deficit totalled a massive $4.7 trillion, with the annual deficit peaking at 6 per cent of US GDP in 2006.

A rough indication would be from around 2 per cent in the 1960s to around 6 per cent in 2014, when 2014 was an economic ‘recovery’ year. 2Philip Armstrong, Andrew Glyn and John Harrison, Capitalism Since World War II: The Making and Breakup of the Great Boom, London: Fontana, 1984, p. 320. 3Barry Eichengreen, ‘Sterling’s Past, Dollar’s Future: Historical Perspectives on Reserve Currency Competition’, text of the Tawney Lecture delivered to the Economic History Society, Leicester, 10 April 2005, Table 2, p. 29, at emlab.berkeley.edu. 4Svante Karlsson, Oil and the World Order: American Foreign Oil Policy, UK: Berg Publishers Limited, 1986, p. 249. 5David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets, New York: Cornell University Press, 1999, pp. 107–9. 6Ibid., p. 148.

See also financial power; economic power price fixing 118, 120–1 privatisation 120 production 77, 78, 86 productive capital 90 productivity 69, 148–9, 150 profit and profitability 21–2, 77, 129–39 American rate of 153–9, 154, 157 amount 149, 150 comparing 136–9 and costs 149–50 drivers 135–6 equalising 137 and financial crisis 135 and financial returns 135 and fixed assets 137 global 156 and interest rates 156–7 investment location 152 and labour costs 155–6 leverage 130–6, 133, 134 measurement 153 moribund 159–60 and productivity 148–9, 150 rate of 130, 147–50 restoration of 152, 154–5 return on equity (RoE) 129–30 role of financial assets 137 sources 129, 139–47, 143 volatility 131 property bubbles 151 proprietary positions 79 quantitative easing 65, 152, 157–9 Radcliffe Report 35 Reagan, Ronald 65 real economy, the 5 reform agenda 214 regulation 9, 215–16 American 39–40 state 115–16 Regulation Q (US) 39, 48 regulatory arbitrage 42 rentiers 98 repo borrowing 46 return on assets 132 return on equity (RoE) 129–30, 132 returns, distribution of 102–3 revenue-earning assets, bank creation of 137, 137–8 Rich, Marc 122 risk 130 rivalry 28 Robin Hood tax 215–16 Rolling Stone 161 Rome, Treaty of 33, 57, 58, 69 Royal Bank of Scotland 4 Royal Dutch/Shell Group plc 3, 112–13, 220 Rubin, Robert 16 Russia 18, 93, 106, 107, 109, 113–14, 154, 171, 216, 222, 223, 224 SABMiller 121 Samsung 118, 120, 121–2 sanctions 113–14, 172, 216 San Francisco 37 Saudi Arabia 55–6, 109, 208, 220 Scotland, independence referendum 217–18 Second World War 26–8, 151 seigniorage 43, 163–6 Shanghai 18, 182, 222–3 shareholders, power 88 share issues 179 shares 139 value 86–7 share swaps 179, 199 Sharpe ratio 131 Shell 114 Shenzhen 18 Sherman Antitrust Act (US) 119 short-term money-market instruments 79, 144 Simon, William 55–6 Singapore 177–8, 179, 206, 209 Snowden, Edward 59 South Africa 18, 222, 224 South Korea 101, 120 Soviet Union 29, 30 Spain 65 speculation, madcap 135–6 stamp duty 48 Standard Chartered 225 Standard Oil 119 state, the and capitalism 111–15 and finance 115–17 and imperialism 119 imperialist 126 power 115, 126 sterling collapse, 1992 62 convertibility 31 devaluation, 1949 31 Sterling Area, the 31–3, 35, 58 stock exchange prices 182 stock market crash, 1987 xi, 68 stock swaps 179 Suez crisis 27–8, 60 supply-chain links 77 surplus labour 149 surplus value 90, 140 appropriation of 173–4 creation of 149 global system 161 and securities 144–6 transfer of 97 Sveriges Riksbank 116 Sweden 4, 9, 116 Swiss Bankers’ Association 176 Switzerland 4, 9, 165, 175–6, 178, 184 Taibbi, Matt 161 Taiwan 18 Tanzanian groundnut scheme 33 tariffs 114 tax and taxation 114, 215–16 tax avoidance 48 tax havens 2, 22, 71, 184, 193, 209, 211 Temasek 177 Thailand 101 Thatcher, Margaret xi, 63, 65, 69 Tokyo 49, 50 Toyota 121 trade gap 188 trade patterns 6, 60–1, 61 trading revenues 146–7 Treasury, the 48 UK Independence Party 219 unemployment 53 Unilever 112–13 United Kingdom anti-monopoly policies 119–21 appropriation of value 187 balance of payments 187, 188, 200, 203 bank assets and liabilities 4, 141–4, 143 bank borrowing 206–8 bank deficits 206–10 bank lending 208–10 bank leverage data 134 banking centre status 50 banks 4, 116, 134, 191–7, 192, 194, 196, 206–10, 214 borrowing 201–2, 204–5 China policy 225–6, 227 colonial exploitation 30–3 colonialism 30–1 credit rating 204–5 current account balance 188–90, 189, 190 current account deficit 200, 202, 211, 217 current account surplus 33, 34, 69 debt costs 204–5 decolonisation 30 direct investment returns 202–3, 203 domination 162 earnings from financial services 43–4 economic power 2 economic weakness 35 Empire protectionism 30, 33 equity holdings 102–3 equity market capitalisation and turnover 181, 182 and the EU 16–17, 21 European policy 53–4 FDI 107, 200, 205 financial account 197–200, 199 financial machine 22 financial market share 70–1, 71 financial operations 185–212 financial policy 14, 44–7, 65–70 financial position, 1950s 34–5 financial power 2, 3, 64–5 financial sector benefits 185 financial sector employment 186 financial sector tax revenues 186 financial services assets location 205–6, 207 financial services exports 174 financial services revenues 190–7, 192, 194, 196 financial wealth 103 foreign direct investments 3, 66 foreign exchange trading 109 foreign exchange turnover 193–5, 194 foreign investment income 189–90 freedom of action 63, 64 GDP 4, 106, 107, 155–6 Gowan’s analysis 11–12 Helleiner’s analysis 13–14, 70 Hilferding’s analysis 93, 94 imperialism 7–8, 186, 228 imperial strategy 59–65 inflows of foreign money-capital 69 international banking index 108 international banking position 191–2, 192 international banking share 70–1, 71 international financial revenues 10 international investment position 200–1, 201 investment income 200–4, 203 investment income, 1899–1913 98 invisible empire 7–8 joins EEC 34, 57–8 Lend-Lease debts 29, 36 liabilities 204–5, 206–7 military interventions 1–2 military spending 110 monetary policy 66 OPEC’s investment in 57 pension fund assets 103 quantitative easing 158–9 relationship with America 21, 27–8, 29–30, 36, 59, 73 relationship with Europe 62 return to gold standard 23–6 seigniorage 165–6 status 1–2, 3–4, 27–8, 30, 30–5, 52, 73–4, 110, 111, 196, 204, 210, 213, 214, 216–17, 227–8 tax havens 193 trade currency pricing 163 trade deficit 44, 188–9, 189, 211 trade gap 22 trade pattern 60–1, 61 wealth distribution 102–3 United Nations 3–4, 123 United Nations Security Council 109 United States of America 2, 205 aftermath of First World War 24 anti-monopoly policies 119–21 attitude to Bretton Woods 31 bank Eurodollar deposits 41–2 bank leverage data 132–3 bank regulation 36 banking system fragmented 40 banks 132–3, 193 capital flows from 38 capital markets 55 China policy 226, 227 Chinese challenge to 17–18 corporate rate of profit 153–5, 154 cost of living 155 credit bubble 156 credit restrictions 42 current account deficit 167–8 domestic market 28 domination 3, 7, 10, 11, 26–7, 35, 162, 183–4, 223 equity holdings 102 equity market capitalisation and turnover 181–2, 181 exorbitant privilege 166–9 FDI 107 Federal Reserve System 40 financial business split 37 and financial crises 12 financial market regulations 39–40 financial policy 11, 65–6, 67–8 financial power 6, 11–12, 14–15, 55, 170–3, 183 financial services exports 173–4 financial services revenues 190 financial system 36–40 foreign direct investments 3, 42 foreign exchange trading 108–9, 109 foreign exchange turnover 194, 194 foreign investment revenues 9–10 foreign investment stock position 169 foreign securities market 48 GDP 106, 107 gold reserves 39 gold standard abandoned 54 Gowan’s analysis 11–12 hegemony 21, 105 Helleiner’s analysis 12–14 Hilferding’s analysis 93 imperial advantage 164 imperialism 12, 14–15, 166–9 interbank money market 46 interest rates 168 international banking index 108 international banking position 192, 192 international banking share 50, 71, 71 international capital outflows 66 investment income 169 leverage ratios 131 military spending 109 millionaires 99 mortgage-backed securities 140 mortgage debt 56 Panitch and Gindin’s analysis 14–17 privileged position 22 quantitative easing 157–8 rate of profit 153–9, 154, 157 relationship with Britain 21, 27–8, 29–30, 36, 59, 73 relationship with Saudi Arabia 55–6 role in the world economy 12–14, 14–17 role of 111 seigniorage 163–5 status 105, 110, 111 UK-based lending 209–10 UK debt 29 working-class living standards 154–5 United Technologies 121 unsecured loans, interbank 46 US–China Economic and Security Review Commission 18 US Commerce Department 56 US dollar, the 6, 15, 30 Chinese foreign exchange reserves 167 domination 55, 164–5 exchange rate 68, 163 exorbitant privilege 166–9 financial power 170–3 global role 170–3 glut 38–9 gold standard abandoned 54 imperial advantage 164 privileged position 22 as reserve currency of choice 166 status 35, 108–9 UK colonies surplus 33 US Federal Reserve 14, 41, 42, 44, 116, 157–8, 157, 172–3, 185 US Treasury 14 value xi–xiii appropriation of 187 creation 76, 104, 150–1 extraction 77, 104 relations 90 surplus 90, 97, 144–5, 149 transfer of 164–5 Vietnam War 54, 105 Vodafone Group plc 3, 180 Volcker, Paul 156 Volkswagen 121 wages 77, 144, 148, 152, 155–6 Wal-Mart 77, 155 waste, elimination of 152 wealth concentration of 91–2 distribution 102–3 fictitious capital 88, 147 UK household 103 West, Admiral Lord 1–2, 3, 4 West African Marketing Boards 32 WhatsApp 91 Wilson, Harold 32 Wolf, Martin 214 working-class, living standards 154–5 working hours 38 World Bank 14, 27, 29, 73, 223 world economy 2, 9–10 American role 14–17 world hierarchy 105–11, 111 world monetary system 10 ‘zero hour’ contracts 152 zero sum games 145 Zuckerberg, Mark 91


pages: 329 words: 99,504

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

When we accept pieces of paper with funny markings on them (or numbers on computer screens connected to databases run by credit card companies and banks) in exchange for goods or services, that’s what we are doing: relying on a shared social consensus. In the United States, the nation with the largest economy in the world—as well as the issuer of the world’s reserve currency since 1944, the US dollar—we often take this consensus for granted. Everyone wants dollars, especially in times of crisis. Consensus and faith—as well as the trust built off that consensus and faith—lie at the heart of our modern economic system. Think of the close historical link between a society’s faith in their government and in their nation’s currency.

They’re honestly not scammers, but they are difficult people. And I think the FT article on Giancarlo is an amazing article . . .” In July of 2021, the Financial Times published an article on Giancarlo Devasini, the CFO of Tether and the exchange Bitfinex (“Tether: the former plastic surgeon behind the crypto reserve currency”). The story included many juicy details: Devasini’s brief career as a plastic surgeon before he quit the profession (“All my work seemed like a scam, the exploitation of a whim”), his settlement with Microsoft, and his selling of used electronics (one buyer complained that he paid $2,000 for memory chips and instead received “a large block of wood”).

.”: Dan Davies, Lying for Money: How Legendary Frauds Reveal the Workings of the World (Scribner, 2018), p. 94. 35 multiple conflicts of interest: Bennett Tomlin, “Tether’s Executives are Deeply Conflicted,” Bennett’s Blog, September 13, 2021, https://bennettftomlin.com/2021/09/13/tethers-executives-are-deeply-conflicted/. 35 Giancarlo Devasini: Kadhim Shubber and Siddharth Venkataramakrishnan, “Tether: the former plastic surgeon behind the crypto reserve currency,” Financial Times, July 15, 2021. 36 The “fraud triangle” has three components: Donald Cressey, Other People’s Money: A Study in the Social Psychology of Embezzlement (Free Press, 1953). 37 Razzlekhan: Zeke Faux, “Did Razzlekhan and Dutch Pull Off History’s Biggest Crypto Heist?,” Bloomberg, June 29, 2022. 37 In a scholarly paper: John M.


pages: 338 words: 104,684

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 11, Asian financial crisis, bank run, Bernie Madoff, Bernie Sanders, blockchain, bond market vigilante , book value, Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, collective bargaining, COVID-19, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, decarbonisation, deindustrialization, discrete time, Donald Trump, eurozone crisis, fiat currency, floating exchange rates, Food sovereignty, full employment, gentrification, Gini coefficient, global reserve currency, global supply chain, green new deal, high-speed rail, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, Jeff Bezos, liquidity trap, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, Mason jar, Modern Monetary Theory, mortgage debt, Naomi Klein, National Debt Clock, new economy, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, open economy, Paul Samuelson, Phillips curve, Ponzi scheme, Post-Keynesian economics, price anchoring, price stability, pushing on a string, quantitative easing, race to the bottom, reserve currency, Richard Florida, Ronald Reagan, San Francisco homelessness, shareholder value, Silicon Valley, Tax Reform Act of 1986, trade liberalization, urban planning, working-age population, Works Progress Administration, yield curve, zero-sum game

., taking on debt) in a currency that isn’t their own.3 When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty.4 Countries with monetary sovereignty, then, don’t have to manage their budgets as a household would. They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy. Sometimes, people ask me whether MMT applies to countries outside the United States. It does! Even though the US dollar is considered special because of its status as the global reserve currency, lots of other countries have the power to make their monetary systems work for their people. So, if you’re reading this book outside the USA, don’t assume there are no important lessons here for you and your country. On the contrary, MMT can be used to describe and improve the policy choices available to any country with a high degree of monetary sovereignty—the US, Japan, the UK, Australia, Canada, and many more.

In short, just as Uncle Sam’s budget deficit arises from American businesses’ and households’ desires to accumulate a surplus of US dollars, America’s trade deficit arises from the rest of the world’s desire to accumulate a surplus of US currency. The global hunger for dollars is largely why we’ve been running a trade deficit nonstop for decades. In this regard, the United States does sit in a powerful position compared to the rest of the world—for both good and ill. Thanks to the US dollar’s unique role as a global reserve currency, Uncle Sam never has to borrow in anything but his own currency (and he doesn’t even have to do that!). This gives the US something of an advantage, but it does not mean that the United States is the only country with the power to carry out its domestic policy agenda. Any country with a high degree of monetary sovereignty has the ability to pursue a domestic policy agenda aimed at keeping its economy operating at full employment.

A modest amount of external debt does not compromise a country’s monetary sovereignty. 4. We should note that MMT does not consider monetary sovereignty a binary thing. It is best to think of a spectrum of monetary sovereignty, with some countries having more and others less. Because the US dollar is at the center of the global financial system—that is, it is the reserve currency—the United States has unparalleled monetary sovereignty. But countries like Japan, the UK, and Australia have a high degree of monetary sovereignty as well. Even China, which manages the value of the yuan, has substantial monetary sovereignty. 5. Margaret Thatcher, Speech to Conservative Party Conference, Winter Gardens, Blackpool, UK, October 14, 1983, Margaret Thatcher Foundation, www.margaretthatcher.org/document/105454. 6.


pages: 215 words: 64,460

Shadows of Empire: The Anglosphere in British Politics by Michael Kenny, Nick Pearce

battle of ideas, Berlin Wall, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, colonial rule, corporate governance, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, global reserve currency, imperial preference, informal economy, invention of the telegraph, Khartoum Gordon, labour mobility, Les Trente Glorieuses, liberal capitalism, Mahatma Gandhi, mass immigration, Monroe Doctrine, Neal Stephenson, Nixon shock, public intellectual, quantitative easing, reserve currency, Ronald Reagan, Steve Bannon, Suez canal 1869, Suez crisis 1956, trade route, Washington Consensus

The election of a committed pro-European Conservative prime minister and the death of De Gaulle in 1970 would pave the way for Britain finally to enter the EEC. The third round of negotiations for entry would hinge on the position of the new French president, Georges Pompidou. The Commonwealth remained a sticking point. The French were concerned that sterling balances held in London and sterling's reserve currency status were a risk to the EEC, since they exposed the UK to global obligations and to balance of payments and exchange rate crises that might drag in the Six if the UK joined the Common Market (under the terms of the Treaty of Rome, exchange rates were a matter of common concern). The global status of the dollar and sterling, and the associated problems of balance of payments between the USA and the UK as deficit countries, on the one hand, and the Six as surplus countries, on the other, had been a longstanding source of friction in the 1960s, and the sterling issue had proved a headache in each of the previous British applications to join the EEC.

Moving within the circumferences of Churchill's three circles made sense to policy-makers and remained the most viable approach available to them. Only when Britain's worldwide role had become an encumbrance it could no longer afford; when the ‘stop–go’ economic policies of maintaining a global reserve currency and pre-war trade patterns had led to relative economic decline; when the failure to invest in the modernisation of British industry had led to weakening productivity relative to the rest of the advanced capitalist world; and when decolonisation and the gradual break-up of the old Anglo-world had stripped the Commonwealth of any meaningful political or economic unity did Britain's thinking about its place in the world change.


pages: 597 words: 172,130

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

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

Japanese bonds, meanwhile, are bought primarily by the nation’s own citizens as a savings vehicle, almost as a patriotic duty. That allows Japan, too, to borrow on much larger scale than its fiscal situation would seem to justify. (That same summer, Japanese government debt was 210 percent of GDP.) But the pound isn’t the world’s reserve currency the way the dollar is, and Britons don’t invest in their own government’s bonds the same way the Japanese do. Investors would readily dump UK government bonds—or “gilts,” for the gilt edges the securities once had—if they concluded that the nation’s finances were at the breaking point. The low interest rates that Britain was paying to borrow money were little solace.

The PBOC has also been one of the most consistent promoters of renminbi internationalization, the idea that China’s currency should one day stand alongside the dollar, the euro, and the yen as an important currency of global trade. In an essay published in early 2009, Zhou openly pondered what “kind of international reserve currency we need to secure global financial stability and facilitate world economic growth,” suggesting that the supremacy of the dollar was a major factor in the world financial crisis. The statement reflected a general angst among Chinese leaders—evident after the Fed’s QE2 announcement—that their massive holdings of U.S. debt had left them uncomfortably exposed to the vicissitudes of the American economy.

Given the fragile economic recovery, relatively high unemployment rate, low inflation rate, and the U.S. federal funds rate close to zero, it is understandable that the Fed has adopted the quantitative easing monetary policy.” Then Zhou explained the Chinese position: that because the dollar is the international reserve currency, the United States has a special responsibility, one that it hadn’t upheld in the run-up to the megacrisis. “The U.S. dollar has global impacts,” Zhou said. And even if QE2 is in the best interest of the United States, “it may not necessarily be optimal for the world, and may have some side effects.”


pages: 411 words: 114,717

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

"World Economic Forum" Davos, 3D printing, affirmative action, Alan Greenspan, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, book value, BRICs, British Empire, business climate, business cycle, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, commodity super cycle, corporate governance, creative destruction, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, financial engineering, Gini coefficient, global macro, global supply chain, Goodhart's law, high-speed rail, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, junk bonds, Kenneth Rogoff, knowledge economy, labor-force participation, land reform, low interest rates, M-Pesa, Mahatma Gandhi, Marc Andreessen, market bubble, Masayoshi Son, mass immigration, megacity, Mexican peso crisis / tequila crisis, middle-income trap, Nelson Mandela, new economy, no-fly zone, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, public intellectual, quantitative easing, reserve currency, Robert Gordon, rolling blackouts, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Tyler Cowen, Watson beat the top human players on Jeopardy!, working-age population, zero-sum game

Americans became so accustomed to listening to Treasury secretaries defend the “strong dollar” that perhaps it was inevitable that its decline over the last decade would be interpreted as a national defeat. The big fear has been that the rise of the emerging markets will ultimately persuade countries that they would rather hold savings in Chinese yuan or other star emerging-market currencies than in dollars, ending the status the greenback has held for a century: the world’s reserve currency. This status is, indeed, a huge benefit to Americans, and its loss would be painful. The fact that foreigners are eager to store money in dollars (often in Treasury bills) lowers the cost of borrowing for the government and for consumers. Over many years, according to Berkeley political economist Barry Eichengreen, cheap borrowing costs have effectively raised U.S. income levels by as much as 3 percent.

Over many years, according to Berkeley political economist Barry Eichengreen, cheap borrowing costs have effectively raised U.S. income levels by as much as 3 percent. For all the worried talk about the dollar’s demise, the facts show that its status has not slipped in decades, with the dollar share of the global reserve holding steady at more than 60 percent. It is very difficult to gain reserve currency status, but that status is also difficult to lose. In theory, reserves should be held in various currencies in proportion to their weight in the global economy, and the U.S. share of the world economy is obviously nowhere near 60 percent, but old habits and relationships make governments slow to adjust.

In theory, reserves should be held in various currencies in proportion to their weight in the global economy, and the U.S. share of the world economy is obviously nowhere near 60 percent, but old habits and relationships make governments slow to adjust. Officials seeking a safe, secure haven do not move their national treasure lightly. The United States surpassed Britain as the world’s largest economy in the 1870s, but British sterling held on to its reserve status for another fifty years. To become the world’s reserve currency holder, a nation needs to have a large economy that dominates global transactions. It also has to offer a vast pool of ways to hold its currency that pose essentially zero risk of loss through confiscation or revolution, an example being U.S. government bonds. Right now, Europe has a large economy with no safe or vast pool of Eurobonds.


pages: 192 words: 72,822

Freedom Without Borders by Hoyt L. Barber

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, banking crisis, diversification, El Camino Real, estate planning, fiat currency, financial engineering, financial independence, fixed income, high net worth, illegal immigration, interest rate swap, money market fund, obamacare, offshore financial centre, passive income, quantitative easing, reserve currency, road to serfdom, selective serotonin reuptake inhibitor (SSRI), subprime mortgage crisis, too big to fail

The launch of this “Bancor” could come at anytime, maybe, even in the very near future. They are working on it now as a means to stabilize exchange rates, balance trade payments, and stabilize the global economy. Of course, centralized power is their main interest. A gold-backed currency in the world sounds positive, and likely it would become the reserve currency of Global Investing and Investment Opportunities 57 the world. Initially, 19 countries may utilize it, but the globalists are likely to try to get 40 or more countries to join in. It will take some time for it to work, but the fact that it’s gold-backed will give it a greater chance for acceptance and success.

The only thing that makes a bond valuable is if it’s issued by a very solid, creditworthy borrower, of which there are fewer and fewer these days, whether corporate or government issuers. Let’s start at the top. Do you consider the largest economy and most powerful country in the world, whose currency is the reserve currency of the world, a safe bet? The economy is still looking for the recovery, the United States is involved in three wars and more are on the horizon, the total national debt exceeds $130 trillion, our currency is not backed by anything of value, we are monetizing the debt by printing new worthless money to pay off old debts such as T-bills and T-bonds, because we can’t pay back the money we already borrowed without creating more, and our lenders, such as China, are about to stop investing in our government Treasuries for this very reason.


pages: 226 words: 65,516

Kings of Crypto: One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street by Jeff John Roberts

4chan, Airbnb, Alan Greenspan, altcoin, Apple II, Bernie Sanders, Bertram Gilfoyle, Big Tech, bitcoin, blockchain, Blythe Masters, Bonfire of the Vanities, Burning Man, buttonwood tree, cloud computing, coronavirus, COVID-19, creative destruction, Credit Default Swap, cryptocurrency, democratizing finance, Dogecoin, Donald Trump, double helix, driverless car, Elliott wave, Elon Musk, Ethereum, ethereum blockchain, family office, financial engineering, Flash crash, forensic accounting, hacker house, Hacker News, hockey-stick growth, index fund, information security, initial coin offering, Jeff Bezos, John Gilmore, Joseph Schumpeter, litecoin, Marc Andreessen, Mark Zuckerberg, Masayoshi Son, Menlo Park, move fast and break things, Multics, Network effects, offshore financial centre, open borders, Paul Graham, Peter Thiel, Ponzi scheme, prediction markets, proprietary trading, radical decentralization, ransomware, regulatory arbitrage, reserve currency, ride hailing / ride sharing, Robert Shiller, rolodex, Ross Ulbricht, Sam Altman, Sand Hill Road, Satoshi Nakamoto, sharing economy, side hustle, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, smart contracts, SoftBank, software is eating the world, Startup school, Steve Ballmer, Steve Jobs, Steve Wozniak, transaction costs, Vitalik Buterin, WeWork, work culture , Y Combinator, zero-sum game

The People’s Republic has already tasked its central bank with creating a digital version of its currency, the renminbi. For the Communist Party, the advantages are twofold: digital currency can be used to surveil Chinese citizens more closely than ever, and it will be a tool to pressure other countries to abandon the US dollar as the world’s main reserve currency. If this begins to take place, it’s a safe bet Congress and the United States will look at Facebook’s Libra in a different light. • • • Governments may have greeted Facebook’s digital currency plans with surprise and alarm, but in crypto circles, Project Libra mostly generated guffaws. This wasn’t real cryptocurrency but a debased version, one that would be controlled by a cabal of powerful companies.

Tapscott, the Blockchain Revolution author, says big tech giants—not just Facebook but Amazon and Apple too—could just as easily dominate crypto. Then there are national governments. Authoritarian regimes like China or Venezuela, Tapscott points out, are developing cryptocurrencies. Their strategic goals involve not only undermining the US dollar’s role as the world’s reserve currency but using crypto to surveil and control their citizens. “There’s a lot of forces coming together in crypto—tech companies, banks, upstart financial companies, and authoritarian governments. It’s going to be a heck of a fight,” says Tapscott. Ironically, it’s possible that the winner of this fight will be none of these players.


pages: 265 words: 74,941

The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work by Richard Florida

"World Economic Forum" Davos, Alan Greenspan, banking crisis, big-box store, bike sharing, blue-collar work, business cycle, car-free, carbon footprint, collapse of Lehman Brothers, company town, congestion charging, congestion pricing, creative destruction, deskilling, edge city, Edward Glaeser, falling living standards, financial engineering, financial innovation, Ford paid five dollars a day, high net worth, high-speed rail, Home mortgage interest deduction, housing crisis, if you build it, they will come, income inequality, indoor plumbing, interchangeable parts, invention of the telephone, Jane Jacobs, Joseph Schumpeter, knowledge economy, Lewis Mumford, low skilled workers, manufacturing employment, McMansion, megaproject, Menlo Park, Nate Silver, New Economic Geography, new economy, New Urbanism, oil shock, Own Your Own Home, pattern recognition, peak oil, Ponzi scheme, post-industrial society, postindustrial economy, reserve currency, Richard Florida, Robert Shiller, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, social intelligence, sovereign wealth fund, starchitect, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, total factor productivity, urban decay, urban planning, urban renewal, white flight, young professional, Zipcar

As a result of the crisis, “the United States will lose its status as the superpower of the global financial system.”1 In September 2009, World Bank president Robert Zoellick told an audience at Johns Hopkins School of Advanced International Studies that “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency.” “Looking forward,” he added, “there will increasingly be other options to the dollar.”2 You don’t have to strain too hard to see the financial crisis as the death knell for a debt-ridden, overconsuming, underproducing American empire—the fall long ago prophesied by Yale historian Paul Kennedy.3 Big international economic crises—such as the crash of 1873 and the Great Depression—have a way of upending the geopolitical order and hastening the fall of old powers and the rise of new ones.

While some Chinese observers seem to be cautiously optimistic about their financial prospects, others are less so—a fact conveyed in this headline from the China Digital Times: “Shanghai as World Financial Capital? Maybe Next Century.”7 Helmut Reisen, a professor of International Economics at the University of Basel, predicts that it will be quite a while before China’s currency displaces the dollar. “[T]he Chinese renminbi can be expected to replace the US dollar as a reserve currency around 2050.”8 He adds that in the interim, the Chinese will have to solve some problems. They will need to lift the current restrictions on money leaving and entering the country and ensure that the currency is fully convertible, meaning it can be freely bought and sold around the world without the permission of a central bank.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

"World Economic Forum" Davos, Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamond, Bob Geldof, borderless world, BRICs, British Empire, call centre, carbon footprint, carbon tax, charter city, clean tech, clean water, cloud computing, commoditize, congestion pricing, continuation of politics by other means, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, export processing zone, facts on the ground, failed state, financial engineering, friendly fire, global village, Global Witness, Google Earth, high net worth, high-speed rail, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Kickstarter, Kiva Systems, laissez-faire capitalism, Live Aid, Masdar, mass immigration, megacity, Michael Shellenberger, microcredit, military-industrial complex, mutually assured destruction, Naomi Klein, Nelson Mandela, New Urbanism, no-fly zone, off grid, offshore financial centre, oil shock, One Laptop per Child (OLPC), open economy, out of africa, Parag Khanna, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Salesforce, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, Ted Nordhaus, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

When Treasury Secretary Timothy Geithner went to China and told an audience that their holdings of U.S. bonds were safe, they laughed. The United States wants a “Buy American” policy, and China is buying America. Soon America will be borrowing just to pay the interest on its debt, hardly in tune with its officials’ frequent touting of their responsibility in managing the world’s main reserve currency. China is leading the charge toward the next monetary order with calls for a stable neutral currency dominated by no one nation. Some believe the IMF should manage this most delicate transition—and even become something of a Global Central Bank. During the past decade’s commodities boom, the IMF’s role was reduced to that of a lifeguard watching an empty pool, but in the aftermath of the 2008 financial crisis, its funds were tripled by G-20 countries.

The global economy is very much still in uncharted territory: The state has an uncertain role, a precarious imbalance exists between savers and consumers, global trade reform is a stalled process, and the role of international financial institutions is unclear. Even as economies recover, they face huge public deficits that can be redressed only through default, inflation, higher taxes, or tighter spending—all politically volatile options. From banking regulations to reserve currencies, building the next global architecture won’t happen through grand design but rather, in the words of financial journalist Moisés Naím, by “focusing on the plumbing and wiring.” Human nature is hard to regulate. Not just greed but other equally human traits such as creativity were in play to bring about the massive privatized gains and socialized losses that Western economies experienced in the financial crisis.


pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

Alan Greenspan, asset-backed security, bank run, banking crisis, Bernie Madoff, bond market vigilante , bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, deal flow, disintermediation, diversification, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Greenspan put, Home mortgage interest deduction, inverted yield curve, Isaac Newton, joint-stock company, junk bonds, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, low interest rates, margin call, market clearing, mass immigration, Money creation, money market fund, moral hazard, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Phillips curve, plutocrats, Ponzi scheme, profit maximization, proprietary trading, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, Suez canal 1869, systems thinking, tail risk, The Great Moderation, the long tail, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, We are all Keynesians now, Y2K, yield curve

The Fed Demystified A WORLD RESTORED: THE DOLLAR BECOMES THE NEW GOLD The Conference held at the Bretton Woods Hotel in New Hampshire during 1944 was a blend of British brain and American brawn acting to put the world economy back together. Keynes had the plan, and the United States had the money. The big idea was to turn the U.S. dollar into the global reserve currency, meaning the money that all central banks paid each other in to settle the ‘‘balance of payments’’ mismatches that always arose from cross-border trade and investment. Under the old gold standard, the global reserve currency was the British Pound but only because it was fully convertible to gold at a fixed rate. The new Bretton Woods system pegged each country’s currency to the U.S. dollar within a fixed range and in turn pegged the dollar to gold.


pages: 434 words: 77,974

Mastering Blockchain: Unlocking the Power of Cryptocurrencies and Smart Contracts by Lorne Lantz, Daniel Cawrey

air gap, altcoin, Amazon Web Services, barriers to entry, bitcoin, blockchain, business logic, business process, call centre, capital controls, cloud computing, corporate governance, creative destruction, cross-border payments, cryptocurrency, currency peg, disinformation, disintermediation, distributed ledger, Dogecoin, Ethereum, ethereum blockchain, fault tolerance, fiat currency, Firefox, global reserve currency, information security, initial coin offering, Internet of things, Kubernetes, litecoin, low interest rates, Lyft, machine readable, margin call, MITM: man-in-the-middle, multilevel marketing, Network effects, offshore financial centre, OSI model, packet switching, peer-to-peer, Ponzi scheme, prediction markets, QR code, ransomware, regulatory arbitrage, rent-seeking, reserve currency, Robinhood: mobile stock trading app, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, smart contracts, software as a service, Steve Wozniak, tulip mania, uber lyft, unbanked and underbanked, underbanked, Vitalik Buterin, web application, WebSocket, WikiLeaks

Tether The most well-known project built on Omni is Tether. It encompasses a use case that is incredibly important in the cryptocurrency world: how to represent a stable asset class in an ecosystem of volatile tokens. Tether is a digital blockchain cryptocurrency, and its aim is to provide a stable reserve currency pegged to the US dollar. According to the Tether whitepaper, one Tether token is pegged to one US dollar. Real-world assets do present a problem when represented on a blockchain. That is, how do you actually peg the value of that asset in tokenized form? Tether claims to be backed by the US dollar, but unfortunately other than its website listing balances, there is little evidence that there really is one US dollar in a bank account for every tether in circulation.

One thing that’s for sure is that Satoshi mined the Genesis block of Bitcoin, so in theory the easiest proof would be to uncover evidence of the identity behind that address. Crypto-Based Stablecoins In the previous chapter, we discussed a few examples of stablecoins, which use blockchain technology to peg a cryptocurrency to another, more stable asset. For the most part, stablecoins are pegged to the US dollar, since it is known as a global reserve currency, but other assets have been used too, including gold, agricultural commodities, and the euro. Many stablecoins are unregulated in the cryptocurrency world, although there are several stablecoin projects that are working with regulators and banks to foster a future where stablecoin assets are a large part of the ecosystem.


pages: 245 words: 75,397

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

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

In any event, the strategy’s modern roots really began after the Great Depression and WWII, when the international monetary system first left the gold standard, creating more trading variables in the fixed income and currency markets. In 1944, the Bretton Woods Conference addressed the financial order following WW2 to identify a replacement to the gold standard. This all resulted in a new system of exchange rates backed by the US dollar as its reserve currency. This new system all blew up in the early ‘70s. President Nixon killed the Bretton Woods Agreement and then a guy named Paul Volcker had to clean up the mess. The net result was that all major currencies began to float against each other. This really opened things up for the global macro guys.

He was chairman of the Fed under Jimmy Carter and Ronald Reagan from ‘79 to ‘87, back when you could work for both a Democratic and Republican boss. It was a messy time. America was dealing with oil shocks, the fallout from the Vietnam War, the end of the Bretton Woods system, and then massive tax cuts. Inflation spiked when Nixon decided to leave Bretton Woods, the gold standard. The US dollar’s status as the reserve currency of the world was in serious doubt. Investors were convinced that inflation would never come down and were dumping Treasuries at any price. They bought as much gold as they could. Volcker made a huge bet to fight inflation. He didn’t just hike rates; he fucking ran them as high as he could—to over 20%.


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

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

In a decentralized system, the different banks of issue pursue independent discount policies, and those that discount too liberally face immediate gold (or legal tender) losses as a result of regular interbank settlements. A systematic overissuance of notes is therefore unlikely to continue to the point of causing inflation.29 It would not be long before events proved Owen’s confidence misplaced, while vindicating Root’s pessimism. Although Federal Reserve currency did indeed prove more elastic than national bank notes had been, its elasticity was far from being the sort needed to achieve financial stability. Although the Federal Reserve avoided inflation at first, it proved far less successful than its proponents promised it would be in accommodating seasonal peaks in the demand for currency and credit, and in thereby reducing the tendency for interest rates to rise every autumn.

The change in Great Britain’s status from creditor to debtor nation, the loss of its empire, and its more general postwar economic decline greatly limited sterling’s anticipated role as a reserve or “key” currency. After Great Britain devalued the pound in November 1967, it effectively ceased to be an important reserve currency. 17. See Bordo (1993: 39, Chart 1.10). The claim of several authorities (cited in Bordo 1993: 68) that “the growth of the monetary gold stock was insufficient to finance the growth of world output and trade,” rather than that the quantity of dollars had been allowed to grow excessively, is belied by the behavior of U.S. and other dollar-area annual inflation rates and Federal Reserve liabilities.

Fricker, M. (2011) “Let’s Get Going on the Real Story of the Financial Crisis: Securitized Banking.” Society of American Business Editors and Writers (31 May): http://sabew.org/2011/05/let’s-get-going-on-the-real-story-of-the-financial-crisis-securitized-banking. Friedman, M. (1953) “Commodity Reserve Currency.” In Essays in Positive Economics, 204–50. Chicago: University of Chicago Press. ——— (1960) A Program for Monetary Stability. New York: Fordham University Press. ——— (1961a) “Real and Pseudo Gold Standards.” Journal of Law and Economics 4: 66–79. ——— (1961b) “The Lag in Effect of Monetary Policy.”


pages: 903 words: 235,753

The Stack: On Software and Sovereignty by Benjamin H. Bratton

1960s counterculture, 3D printing, 4chan, Ada Lovelace, Adam Curtis, additive manufacturing, airport security, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Amazon Mechanical Turk, Amazon Robotics, Amazon Web Services, Andy Rubin, Anthropocene, augmented reality, autonomous vehicles, basic income, Benevolent Dictator For Life (BDFL), Berlin Wall, bioinformatics, Biosphere 2, bitcoin, blockchain, Buckminster Fuller, Burning Man, call centre, capitalist realism, carbon credits, carbon footprint, carbon tax, carbon-based life, Cass Sunstein, Celebration, Florida, Charles Babbage, charter city, clean water, cloud computing, company town, congestion pricing, connected car, Conway's law, corporate governance, crowdsourcing, cryptocurrency, dark matter, David Graeber, deglobalization, dematerialisation, digital capitalism, digital divide, disintermediation, distributed generation, don't be evil, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Snowden, Elon Musk, en.wikipedia.org, Eratosthenes, Ethereum, ethereum blockchain, Evgeny Morozov, facts on the ground, Flash crash, Frank Gehry, Frederick Winslow Taylor, fulfillment center, functional programming, future of work, Georg Cantor, gig economy, global supply chain, Google Earth, Google Glasses, Guggenheim Bilbao, High speed trading, high-speed rail, Hyperloop, Ian Bogost, illegal immigration, industrial robot, information retrieval, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Jacob Appelbaum, James Bridle, Jaron Lanier, Joan Didion, John Markoff, John Perry Barlow, Joi Ito, Jony Ive, Julian Assange, Khan Academy, Kim Stanley Robinson, Kiva Systems, Laura Poitras, liberal capitalism, lifelogging, linked data, lolcat, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, McMansion, means of production, megacity, megaproject, megastructure, Menlo Park, Minecraft, MITM: man-in-the-middle, Monroe Doctrine, Neal Stephenson, Network effects, new economy, Nick Bostrom, ocean acidification, off-the-grid, offshore financial centre, oil shale / tar sands, Oklahoma City bombing, OSI model, packet switching, PageRank, pattern recognition, peak oil, peer-to-peer, performance metric, personalized medicine, Peter Eisenman, Peter Thiel, phenotype, Philip Mirowski, Pierre-Simon Laplace, place-making, planetary scale, pneumatic tube, post-Fordism, precautionary principle, RAND corporation, recommendation engine, reserve currency, rewilding, RFID, Robert Bork, Sand Hill Road, scientific management, self-driving car, semantic web, sharing economy, Silicon Valley, Silicon Valley ideology, skeuomorphism, Slavoj Žižek, smart cities, smart grid, smart meter, Snow Crash, social graph, software studies, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Startup school, statistical arbitrage, Steve Jobs, Steven Levy, Stewart Brand, Stuxnet, Superbowl ad, supply-chain management, supply-chain management software, synthetic biology, TaskRabbit, technological determinism, TED Talk, the built environment, The Chicago School, the long tail, the scientific method, Torches of Freedom, transaction costs, Turing complete, Turing machine, Turing test, undersea cable, universal basic income, urban planning, Vernor Vinge, vertical integration, warehouse automation, warehouse robotics, Washington Consensus, web application, Westphalian system, WikiLeaks, working poor, Y Combinator, yottabyte

An internal Cisco white paper describes Planetary Skin as “an open network platform for real-time, highly distributed mass remote sensing, authentication, risk-profiling, certification and monitoring of carbon stocks and flows that generates trust and enables collaboration between actors in all three sectors (industry, government, academia).” Its ultimate ambition is to provide an open and comprehensive multiconstituent platform for monitoring and governing planetary biological-ecological systems, with particular emphasis on water distribution and carbon quantification (ultimately to support pricing of these reserve currencies, we imagine). One early pilot project, Rainforest Skin, would measure the total quantity of carbon contained within the planet's rain forests, perhaps the most immediately leverageable carbon governance opportunity and where carbon dioxide sinks are concentrated but threatened by land misuse.

DOS,” even as exemplars of alternative techno-theological programs.46 In sequence, we'll examine the models posed by Facebook, Apple, Amazon, and perhaps the most significant for this stage of the argument, Google.47 29.  Facebook Facebook's Cloud Polis is built directly on its Users’ personal lives and their interest in each other's personal lives. Its reserve currency is what the theory of symbolic interactionism in sociology calls the “presentation of self-identity.”48 In the reconstruction of the social networks that link the social-psychological capital of hundreds of millions of people, Facebook represents a voluntary and highly limited simulation of human culture, and for this, it is a singular achievement.

Nevertheless, as the geopolitics of climate change–related energy production and consumption effects looms larger, the questions of energy provision, dissemination, transparency, monitoring, alliance, and allegiance will (as discussed in the Earth chapter) drive realignments of jurisdictional loyalties around common predicaments, whether we prefer them to do so or not. Going forward, there is no Earth layer without the Cloud layer, and vice versa. Because energy is so essential and its calculative rationalization so attractive, it may drive the determining variables—its planetary limits, its antagonistic territories, its reserve currencies, and its included and excluded populations of Users—not just for Google's model of the Cloud Polis, but for the political geographic alignments of the entire Stack. 33.  Future Cloud Polis and Platforms The geopolitical design question for the Cloud layer of The Stack circulates around what forms different Cloud polities will take in the near future and how they will draw on alternative organizational logics in their emergence.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

But of crucial importance to Graeber’s analysis is that, quite unlike previous credit money regimes, the post-1971 period has been far from peaceful. The foundations of trust that credit money has hitherto relied upon have been replaced by an asymmetrical regime in which one country (the United States) enjoys a unique status. At the heart of this system is the dollar, which has been acting as the world’s reserve currency since World War II. Even before Nixon abandoned the dollar–gold peg in 1971, the international monetary system rested on U.S. debt. The phrase “exorbitant privilege” was used by Valéry Giscard d’Estaing to describe the position of the United States under the gold standard, denoting the advantages that accrue to any country when others are bound (or merely inclined) to use its currency for their international trade.

Meanwhile, other major unions, such as one among Gulf states, are being discussed (Rutledge 2009). Monetary union seems desirable for such states because of the scale of the threat posed by unrestricted capital flows to most existing national currencies when their exchange rates are not fixed (Eichengreen 2008).9 Fourth, there is the decline of the U.S. dollar as the world’s reserve currency, and relatedly, the “currency wars” and the strengthening of the Chinese renminbi, along with other BRIC (Brazil, Russia, India, and China) currencies (Cohen 2011; Fratzscher and Mehl 2011; Rickards 2011). Fifth, in the wake of that decline, there is the prospect of a global currency such as the special drawing rights (SDRs) issued by the IMF (Cohen 2011; Mundell 2012).

In the next section, I turn to an example of “transnational” money, an empirical case that illustrates and operationalizes these dilemmas. This case is the hybrid, seemingly “post-Deleuzian” landscape of the Eurozone. EUROLAND When the euro was introduced on January 1, 1999, it was the world’s second largest reserve currency, after the U.S. dollar. The Eurozone itself—often referred to as “Euroland” in its earliest days, with a mixture of affection and irony—was probably the clearest (and certainly the biggest) example of a formally homogeneous transnational monetary space. With no central political authority but only a central bank with a strict legal mandate to focus on only the technical efficiency of its currency, this was arguably deterritorialized money par excellence.


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

"World Economic Forum" Davos, affirmative action, air traffic controllers' union, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, business cycle, California energy crisis, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, gentrification, George Gilder, Gini coefficient, global reserve currency, Great Leap Forward, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low interest rates, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, megaproject, Mexican peso crisis / tequila crisis, military-industrial complex, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, Silicon Valley, special economic zone, structural adjustment programs, Suez crisis 1956, the built environment, The Chicago School, Tragedy of the Commons, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, We are all Keynesians now, Winter of Discontent

Free trade in goods was encouraged under a system of fixed exchange rates anchored by the US dollar’s convertibility into gold at a fixed price. Fixed exchange rates were incompatible with free flows of capital that had to be controlled, but the US had to allow the free flow of the dollar beyond its borders if the dollar was to function as the global reserve currency. This system existed under the umbrella protection of US military power. Only the Soviet Union and the Cold War placed limits on its global reach. A variety of social democratic, Christian democratic and dirigiste states emerged in Europe after the Second World War. The US itself turned towards a liberal democratic state form, and Japan, under the close supervision of the US, built a nominally democratic but in practice highly bureaucratic state apparatus empowered to oversee the reconstruction of that country.

At the least hint of such a switch away from monetarism (in effect declaring neoliberalism dead), however, central bankers everywhere would almost certainly create a run on the dollar and thus prematurely precipitate a crisis of capital flight that would be unmanageable by US financial institutions alone. The US dollar would lose all credibility as a global reserve currency and lose all the future benefits (for example of seignorage—the power to print money) of being the dominant financial power. That mantle would then be assumed either by Europe or East Asia or both (the world’s central bankers are already exhibiting a preference to hold more of their balances in euros).


pages: 258 words: 83,303

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

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

Those who financed the deficits from the Korean War weren’t as badly fleeced, but, nevertheless, the resulting rise in inflation knocked 5 percent off their real return. And twenty years later, investors were once again swindled out of the return from financing the Vietnam War. They lost nearly a third. Monetizing deficits is particularly attractive for a country like the United States, whose greenback is still the reserve currency of the world. The fact that other countries want to hold your money allows you to sell them bonds that are denominated in your own currency. That gives the borrower a huge advantage, because the creditor is at the mercy of the borrower’s currency’s exchange rate. The easiest way to stiff a foreign creditor is to simply devalue your currency.

That probably didn’t go over well with all the Japanese financial institutions that held Treasury bonds over that period. Just as the domestic bondholder loses his return to inflation, inflation robs the foreign bondholder of his return through the fall in the value of the US dollar against the currency of the lender. That’s the beauty of being a reserve currency. You get to devalue at other people’s expense. Better to rip off some foreign central bank than your own taxpayers. And it’s an option that has become far more important to monetizing Washington’s deficits than at any time in the past. Back at the time of the OPEC oil shocks, only about 10 percent of the Washington’s debt was owned abroad.


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

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

., accepted in payment of taxes). A community can be geographically disparate, such as Internet users; it can exist in virtual realities, such as Second Life; or it can include large segments of the global population, as is the case with the U.S. dollar in its role as the international reference and reserve currency. Therefore, money really lives in the same space as other social constructs, like marriage, club memberships, and business contracts. These constructs are real, even if they exist only in people’s minds. A monetary covenant can be made formally or informally, freely or by coercion, consciously or unconsciously.

See Short-termism Immigration, 156 Income, 51, 108 255 Industrial Age, 2, 15, 203; Information Age and, 120; Third Industrial Revolution, 218; values, 28 Inflation, 91– 93; of creditos, 184–185; hyperinflation, 70, 176, 178–179 Information Age, 50, 120, 201 Infrastructure, 15, 20–21, 103, 194 Inheritance, 18 Innernet, 223 InspirePay, 116 Instability, 134 Insurance, 114, 121–122, 216 Interconnectivity, 32, 62 Interest, 37– 42; bankruptcy and, 39, 41; competition and, 37– 40; compound, 42– 43; JAK and, 110; regio and, 191; scarcity and, 37– 40; short-termism and, 45– 46, 52– 53, 85– 86; wealth transfer via, 49– 50; WIR and, 99–100 Intergenerational thinking, 44 Intern, 16–17, 120 International Architecture Exhibition, 85 International Monetary Fund (IMF), 144, 182, 184 International reserve currency, 57– 58 Internet: community, 57– 58; technologies, 115–116. See also Mobile phone Internet access: enabling currencies, 60– 61, 117; Human Right, A, and, 165–166, 166; in multicurrency world, 55 Internship, 16–17 Intolerance, 182 Intrinsic risk, 45 Intrinsic value, 64 Investing class, 193–194 Ireland, 96– 98 Irrigation, 187 Isolation, 19 Ithaca Health Alliance (IHA), 163, 164 Ithaca Health Fund (IHF), 164 Ithaca HOURS, 162–165, 163 Job: creation, 119, 145–146, 216; satisfaction, 18; work and, 219–220 John Galt, 113 Jord Arbete Kapital (JAK), 109–113, 111 256 INDEX Junk mail, 152 Jury duty, 83 Juvenile justice, 80, 83 Keynesian stimulus, 23–24, 145–146 Keynesian School of Economics, 35 Knowledge exchange network, 184 Krama, 190 KTA, 157 Kukuyu, 209 !


pages: 586 words: 159,901

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

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

The designers of the Bretton Woods system feared floating rate systems were unstable, undermining trade through uncertainty and market over-reactions. Keynes wanted a much more elastic system than the U.S. paymasters would permit; ironically, though, the emergence of the dollar as the central reserve currency meant that world reserves were essentially a matter of U.S. monetary policy, and the U.S. did not stint on supplying these. From soon after the war was over until today, the U.S. has acted as the final source of world demand. There was the Marshall Plan, global military expansion, investment abroad by newly globalizing U.S. multinationals, and always more and more imports — all of which scattered dollars around the world.

Part of this dominance, however, is the result of "vehicle trading" — the practice of using the dollar as an intermediary currency. Instead of someone who wants to buy lire for D-marks waiting to find someone eager to sell D-marks for lire, the trader exchanges D-marks for dollars, and then dollars for lire. The dollar is also the world's main reserve currency — according to the IMF, 59% of world foreign exchange reserves were held in dollars in 1996, up from 1990's low of 50%. As the European Union moves towards its single currency, the euro is likely to account for a larger share of world reserves, making it a rival to the dollar as the world reserve and vehicle currency.

., dismal returns, 117 disclosure requirements, corporate, 91 discounting, interest rates and, 119-120 distribution Gini index, 115 income CEO vs. worker pay, 239 Manhattan's inequality, 79 polarization in 1920s, 200 wealth, 4, 64-68 dividends, 73, 135 changes in, and excess volatility, 175 payout ratios, and investment, 154 retention ratio, 75 unexpected changes in, 169 yields, 125 dollar, U.S. market share, 46 policy, 44, 54 as reserve currency, 43-44 during trading week, 130-131 Dow Jones Industrial Average, 21 downsizing, 4 rentier responsibility for, 290 unthinkabiliry in Golden Age, 259 Drexel Burnham Lambert, 83, 100, 101, 271 Jensen mourns collapse, 286-287 Drucker, Peter, 306 dumb money, 53 Dutch East India Co., 13 Eastman Kodak, 130 econometrics, 139 failures of, 142 theory precedes observation, 140 economic forecasting, poor results, 141-142 economics appeal to privileged, 183 banality of, 138 assumption of rationality, 175; see also assumptions centrality of self-interest, 143 devolution from political economy, 139 institutional limits of, 250 radical, 250-251 lack of interest in institutions, 247 radical/"heterodox," math-happiness, 183 role of firm in, 248 study of, makes you meaner, 143 supply-side, 47, 103, 274 transaction-cost, 248-251 economic statistics imprecision of, 139 privatization of, 136 revisions of, 133, 179 Wall Street vulgarization of, 133 We Economist, 102, 103, 168 economists.


pages: 475 words: 155,554

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

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

And by 2012, GM was planning an extensive foreign sales push and sponsorship of the world’s biggest football team. In America, the Stimulus Party was winning the austerity war. The Apprentice Chancellor and the spending cuts Right from the beginning of his tenure as chancellor, George Osborne was asked why he was pursuing austerity while the US government was not. ‘I don’t have the world’s reserve currency,’ was his answer to me in early 2011. The chancellor was referring to what French presidents have called the ‘exorbitant privilege’ enjoyed by the USA of getting a large flow of global savings, rather cheaply, on the back of the dollar’s status as world currency. What worked for Washington would not necessarily work for Britain.

. – those high priests of Western globalisation – calculate that there is a $20 trillion investment shortfall in infrastructure around the world, as Western countries have drastically slashed their investment budgets. Leading Chinese officials such as Justin Lin point the finger of blame for this, and for the imbalances generally, firmly at the USA. There are three reasons, the Chinese argue: lax regulation of Wall Street, super-low interest rates from 2001, and the role of the dollar as the global reserve currency. China, they point out, has trade deficits with other East Asian countries. Over the past twenty-five years, China has simply replaced Japan as the main contributor to the US trade deficit. As much as 60 per cent of China’s exports are made by foreign-owned companies, many from the USA. The iPad and iPhone are the most famous US-invented contributors to the USA–China trade deficit.

In this situation, the USA does appear to have obliged China to become a forced lender, a type of bonded banker for its ever-growing debts. It is a form of international financial repression. China’s currency policy, in effect, holds down the living standards of its people, obliging them, and the nation generally, to lend its hard-earned dollars back to the USA. This arises because the dollar is the world reserve currency, and US Treasury bonds are a trusted form of liquid international mega-cash to be swapped with other nations, banks and pensions funds. For the past decade China has had nowhere else to go to park its massive reserves. The USA enjoys what France has referred to for half a century as the ‘exorbitant privilege’ of being the world reserve.


pages: 105 words: 25,871

A Nation of Takers: America’s Entitlement Epidemic by Nicholas Eberstadt, Nick Eberstadt

Affordable Care Act / Obamacare, corporate governance, family office, income inequality, informal economy, Kenneth Rogoff, labor-force participation, military-industrial complex, moral hazard, reserve currency, women in the workforce, working-age population

According to the Federal Reserve Bank’s estimate, as of 2011, three-quarters of all U.S. credit market debt had been contracted for private purposes (mortgages, business investments, and the like).75 Thus there remains plenty of room for diminishing the role of such transactions in American economic life—or perhaps for crowding them out almost altogether. The U.S. dollar is still the world’s reserve currency, so there is plenty of scope for taking financial advantage of that privilege. As a practical matter, there is no realistic international alternative to the dollar—at least for now. It could take many years—maybe decades—for the United States to sacrifice this status by undermining the dollar’s credibility as an international medium of exchange.76 Debasing the dollar to finance continuing expansion of domestic spending could eventually look like an option worthy of serious consideration—at least, in an America addicted to and enslaved by entitlements.


pages: 291 words: 91,783

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

addicted to oil, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bear Stearns, Bernie Sanders, Bretton Woods, buy and hold, carried interest, classic study, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, military-industrial complex, money market fund, moral hazard, mortgage debt, Nixon triggered the end of the Bretton Woods system, obamacare, passive investing, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, quantitative easing, reserve currency, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

When the Chinese proposed replacing the dollar as the international reserve currency, Bachmann apparently thought this meant that the dollar itself was going to be replaced, that Americans would be shelling out yuan to buy six-packs of Sprite in the local 7-Eleven. So to combat this dire threat she sponsored a bill that would “bar the dollar from being replaced by any foreign currency.” When reporters like me besieged Bachmann’s office with calls to ask if the congresswoman, a former tax attorney, understood the difference between currency and reserve currency, and to ask generally what the hell she was talking about, her spokeswoman, Debbee Keller, was forced to issue a statement clarifying that “she’s talking about the United States … The legislation would ensure that the dollar would remain the currency of the United States.”


pages: 369 words: 94,588

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

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

A more acceptable solution to the US, worked out in a series of complicated international accords between 1968 and 1973, was for the fixed exchange rate with gold to be abandoned. All the major currencies of the world would then float against the dollar. While this introduced both flexibility and volatility into the international trading system, the global reserve currency remained under US control. The effect was to displace one challenge to US hegemony by another. If the dollar was to remain strong, the US productive economy had to perform as well as, if not better than, its rivals. By the 1980s it was clear that the economies of Japan and West Germany were way ahead of the US in terms of productivity and efficiency and that there were other competitive threats lurking in the wings.

The US has been borrowing at the rate of around $2 billion a day for several years now and while the lenders – such as Chinese and other East Asian Central banks along with those of the Gulf States – have so far kept lending because the US economy is far too big to fail, the increasing power of the lenders over US policy is palpable. Meanwhile, the position of the dollar as the global reserve currency is threatened. The Chinese have resurrected Keynes’ original suggestion and urged the creation of a global currency of special drawing rights to be managed by a presumably democratised IMF (in which the Chinese would have an important voice). This threatens US financial hegemony. The end of the Cold War has also rendered military protection against the communist menace irrelevant, even as the ex-Soviet Bloc countries, along with China and Vietnam by very different paths, have become integrated into the global capitalist economic system.


pages: 324 words: 90,253

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

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

US regulators have increasingly extended their reach over dollar transactions, threatening to revoke US banking licences for institutions carrying out allegedly illicit dollar transactions between customers outside of America's borders. In time, the implied restrictions on cross-border dollar-based financial activity outside American jurisdiction may encourage the emergence of other reserve currencies to rival the dollar: China, likely to become the biggest economy in the world and with a foreign policy indifferent to the behaviour of other regimes, may find that, as it deregulates its own capital markets, the renminbi will grow to rival the dollar as a major international currency. As Western debtors and creditors continue their dispute over who, ultimately, should foot the bill for the financial crisis, the centre of gravity for the world economy and its financial markets will shift east and south, marking the end of Western dominance.

Japan is a net creditor, having built up a vast array of foreign assets thanks to its persistently high level of domestic savings relative to its domestic investment. For years, the US and the UK have run current account deficits, implying exactly the opposite. For the US, it helps to have the world's reserve currency, allowing easy access to the world's capital markets: its deficit has been persistently higher than the UK's. Japan's position is remarkable for the simple reason that savings are high enough not only to fund a huge level of government debt but also to acquire an extraordinary range of foreign assets.


pages: 91 words: 26,009

Capitalism: A Ghost Story by Arundhati Roy

activist fund / activist shareholder / activist investor, Bretton Woods, corporate governance, feminist movement, Frank Gehry, ghettoisation, Howard Zinn, informal economy, land bank, land reform, Mahatma Gandhi, means of production, megacity, microcredit, Nelson Mandela, neoliberal agenda, Occupy movement, RAND corporation, reserve currency, special economic zone, spectrum auction, stem cell, The Chicago School, Washington Consensus, WikiLeaks

Rockefeller bought the land on which the United Nations’ New York headquarters stands.36 All eleven of the World Bank’s presidents since 1946—men who have presented themselves as missionaries to the poor—have been members of the CFR. (The exception was George Woods. And he was a trustee of the Rockefeller Foundation and vice president of Chase Manhattan Bank.)37 At Bretton Woods, the World Bank and IMF decided that the US dollar should be the reserve currency of the world, and that in order to enhance the penetration of global capital it would be necessary to universalize and standardize business practices in an open marketplace.38 It is toward that end that they spend a large amount of money promoting Good Governance (as long as they control the strings), the concept of the Rule of Law (provided they have a say in making the laws), and hundreds of anticorruption programs (to streamline the system they have put in place).


pages: 135 words: 26,407

How to DeFi by Coingecko, Darren Lau, Sze Jin Teh, Kristian Kho, Erina Azmi, Tm Lee, Bobby Ong

algorithmic trading, asset allocation, Bernie Madoff, bitcoin, blockchain, buy and hold, capital controls, collapse of Lehman Brothers, cryptocurrency, distributed ledger, diversification, Ethereum, ethereum blockchain, fiat currency, Firefox, information retrieval, litecoin, margin call, new economy, passive income, payday loans, peer-to-peer, prediction markets, QR code, reserve currency, robo advisor, smart contracts, tulip mania, two-sided market

Besides that, Ether is also used to pay for the fee that allows smart contracts and Dapps to run on the Ethereum network. You can think of executing smart contracts on the Ethereum network as driving a car. To drive a car, you require fuel. To execute a smart contract on Ethereum, you need to use Ether to pay a fee known as Gas. Ether is slowly evolving to become its own unique reserve currency and store of value. Currently, within the DeFi ecosystem, Ether is the preferred asset choice used as the collateral underlying many DeFi Dapps. It provides safety and transparency to this financial system. If this confuses you, do not worry as we will be covering this topic in further depth throughout this book


The Empire Project: The Rise and Fall of the British World-System, 1830–1970 by John Darwin

anti-communist, banking crisis, Bretton Woods, British Empire, capital controls, classic study, cognitive bias, colonial rule, Corn Laws, disinformation, European colonialism, floating exchange rates, full employment, imperial preference, Joseph Schumpeter, Khartoum Gordon, Kickstarter, labour mobility, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Mahatma Gandhi, Monroe Doctrine, new economy, New Urbanism, open economy, railway mania, reserve currency, Right to Buy, rising living standards, scientific management, Scientific racism, South China Sea, Suez canal 1869, Suez crisis 1956, tacit knowledge, the market place, The Wealth of Nations by Adam Smith, trade route, transaction costs, transcontinental railway, undersea cable

In fact, the torrent of administrative minutiae enthusiastically supplied by Calcutta dulled parliamentary curiosity about India to the point of anaesthesia – and was meant to.56 The formal debates on the Indian budget were notoriously ill-attended. Despite this pattern of devolution by accident and design, there were many issues that rose ‘above the line’ and required a decision in London. Any serious breakdown of internal order would mean reinforcing the colonial garrison from the pool of British infantry battalions – the reserve currency of imperial power. Using up this scarce resource (much of it already deployed in India) raised awkward questions about the balance between British commitments in Asia, North America, the Mediterranean and Southern Africa. Any constitutional alteration had to be inspected in case it implied new costs for the British taxpayer or had implications for other dependencies or imperial defence.

The 1959 Radcliffe Report on the British monetary system gave a ringing endorsement of ‘the general harmony of interest between the United Kingdom economy and that of the rest of the sterling area’,56 and insisted that it was in Britain's interest to invest more and more in the economic development of the Commonwealth countries.57 But it also warned that sterling's role as a reserve currency had been displaced by the dollar, and that the UK's reserves still formed only a fraction of sterling's liabilities. The only solution, as Cherwell had argued some seven years earlier, was to press on in the hope that export growth would build up the margin of safety to protect the domestic economy, make sterling secure and fund the export of capital to non-industrial countries.

Well before the crisis broke, he had mused on the perils of a long confrontation. ‘It is absolutely vital to humiliate Nasser…We must do it quickly or our M[iddle] East friends…will fall. We must do it quickly, or we shall ourselves be ruined.’60 Macmillan was keen to restore sterling's status as an international reserve currency by making the pound freely convertible. To strengthen the export economy, he pressed on with the struggle to cut defence spending (‘It is defence expenditure that has broken our backs’, he had told Eden in March 1956),61 and the demands it imposed on the wider economy, not least through conscription.


pages: 391 words: 102,301

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

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, carbon tax, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, Glass-Steagall Act, global reserve currency, Global Witness, Golden arches theory, Great Leap Forward, greed is good, Greenspan put, Hernando de Soto, illegal immigration, income inequality, invisible hand, It's morning again in America, Jeff Bezos, laissez-faire capitalism, Live Aid, low interest rates, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, Oklahoma City bombing, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Savings and loan crisis, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, Timothy McVeigh, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

Taken as a whole the European Union single market that was put together in the mid-1980s is now the world’s largest economy—bigger than the United States or China. And for all its troubles, the euro, the European single currency, is so far the only plausible alternative to the U.S. dollar as a global reserve currency. At the beginning of the 1980s, however, communism was still a force even in Western Europe. In April 1981, in my gap year between school and university, I traveled to Paris to watch a mass rally for Georges Marchais, the French Communist Party leader, who was running in the presidential election that year.

Iran and Venezuela have often talked of changing the way in which oil is priced, so that it is no longer automatically quoted in dollars. This would be an important symbolic move, although its practical effect is questionable. China has also spoken with increasing urgency of the need to find an alternative global reserve currency to the dollar. Any such move is likely to be the work of many years. But China’s growing importance as a market, customer, and source of cash is already increasing its global influence. The Beijing government’s willingness to extend aid to African nations without imposing the political conditions that Western nations liked to insist on has made China a favored partner for a range of African governments from Zimbabwe to Sudan and Angola.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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

Mark Blyth South Boston, Massachusetts December 2012 AUSTERITY 1 A PRIMER ON AUSTERITY, DEBT, AND MORALITY PLAYS Why Austerity? On Friday, August 5, 2011, what used to be the fiscally unthinkable happened. The United States of America lost its triple A (AAA) credit rating when it was downgraded by the ratings agency Standard & Poor’s (S&P’s). This is a bit of a problem since the US dollar is the world’s reserve currency, which means (basically) that the dollar is treated as the emergency store of value for the rest of the world; practically all tradable commodities, for example, are valued in relation to the dollar, and the dollar serves as the anchor of the world’s monetary system. The following Monday, August 8, 2011, the Dow Jones Industrial Average (DJIA) lost 635 points, its sixth worst loss ever.

If the United States ever gets to the point that it cannot roll over its debt, the supposed big fear, we can safely assume that all other sovereign debt alternatives are already dead. The United States prints the reserve asset (the dollar) that all other countries need to earn in order to conduct international trade. No other country gets to do this. Regardless of ratings agency downgrades, the US dollar is still the global reserve currency, and the fact that there are no credible alternatives (the Europeans are busy self-immolating their alternative, the euro) tilts the balance even more in favor of the United States. US debt is still the most attractive horse in the glue factory, period. Second, we tend to forget that budget deficits (the increase in new debt accrued—the short-term worry that piles up and becomes “the Debt”) follow the business cycle: they are cyclical, not secular.


pages: 7,371 words: 186,208

The Long Twentieth Century: Money, Power, and the Origins of Our Times by Giovanni Arrighi

anti-communist, Asian financial crisis, barriers to entry, Bretton Woods, British Empire, business climate, business logic, business process, classic study, colonial rule, commoditize, Corn Laws, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, declining real wages, deindustrialization, double entry bookkeeping, European colonialism, Fairchild Semiconductor, financial independence, financial intermediation, floating exchange rates, gentrification, Glass-Steagall Act, Great Leap Forward, income inequality, informal economy, invisible hand, joint-stock company, Joseph Schumpeter, Kōnosuke Matsushita, late capitalism, London Interbank Offered Rate, means of production, Meghnad Desai, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, oil shock, Peace of Westphalia, post-Fordism, profit maximization, Project for a New American Century, RAND corporation, reserve currency, scientific management, spice trade, Strategic Defense Initiative, Suez canal 1869, the market place, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, trade route, transaction costs, transatlantic slave trade, transcontinental railway, upwardly mobile, vertical integration, Yom Kippur War

The main difference from the pre-war situation was that US claims on incomes produced abroad now balanced foreign claims on incomes produced at home, so that the trade surplus translated into a significant net current account surplus (see figure 4.1). Thanks to this surplus and to its war credits, the United States joined but did not displace Britain in the production and regulation of world money. The US dollar became a full-fledged reserve currency like the British pound. But neither the dollar nor the pound alone accounted for a majority of the foreign exchange holdings of central banks (Eichengreen 1992:3581 Trade balance l l ——— Current account k 3.000 ~— f ' 2.1110 ' 1.000 " \ \ '54 I \w\A 1 1 1 1 1 1 l l 1 1 1 1J 18961900 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50 '551956 Source: Williamson (1964: 249). 4.1 US Trade Balance and Current Account, 1896-1956 (millions of dollars) More importantly, US capabilities to manage the world monetary system remained distinctly inferior to Britain’s own residual capabilities.

The immediate response of the US government to the resurgence of private high finance in the production and regulation of world money was to reaffirm with a vengeance the centrality of Washington in the supply of world liquidity. Since there was no viable alternative to the dollar as the principal international reserve currency and medium of exchange, the abandonment of the gold-dollar exchange standard resulted in the establishment of a pure dollar standard. Instead of decreasing, the importance of the US dollar as world money increased, and what had previously existed informally was now established formally (Cohen 1977: 232-8).

Although the ECU was not a genuine currency THE LONG TWENTIETH CENTURY 329 but primarily a unit of account, it had the potential to constitute a viable alternative world money should the crisis of confidence in the US dollar deteriorate any further (cf. Parboni 1981: chs. 4 and 5). The threat of the demise of the US dollar as world money (either through a catastrophic collapse of the US domestic and global credit system or through the rise of an alternative reserve currency such as the ECU) was in itself a good enough reason for the US government to show greater respect for the canons of sound money than it had done in the 1970s, or indeed since F.D. Roosevelt had lashed out at the “old fetishes of so-called international bankers.” There were none the less other compelling reasons for seeking accommodation with the US-led cosmopolitan community of bankers that controlled the Eurocurrency market.


pages: 395 words: 116,675

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

"World Economic Forum" Davos, adjacent possible, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, AltaVista, altcoin, An Inconvenient Truth, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Boeing 747, Boris Johnson, British Empire, Broken windows theory, carbon tax, Columbian Exchange, computer age, Corn Laws, cosmological constant, cotton gin, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, driverless car, Eben Moglen, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, Ethereum, ethereum blockchain, facts on the ground, fail fast, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, flying shuttle, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Glass-Steagall Act, Great Leap Forward, Greenspan put, Gregor Mendel, Gunnar Myrdal, Henri Poincaré, Higgs boson, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, information security, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Japanese asset price bubble, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, low interest rates, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta-analysis, military-industrial complex, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, precautionary principle, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, rising living standards, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, scientific management, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, Stuart Kauffman, tacit knowledge, TED Talk, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, twin studies, uber lyft, women in the workforce

As investors around the world digested the arbitrary power of governments, bitcoin’s price rose from about $120 in September 2013 to almost $1,200 in December of that year. It has since slowly declined. At the time of writing, about $6 billion worth of money is held in bitcoins. But it is still a long way from taking over as the world’s reserve currency. It does not yet work as a unit of account. The volatility and bubble-like behaviour of bitcoins are not encouraging for a world reserve currency, and nor is its relatively small supply. It is also still not easy to get many traders, even online, to accept bitcoins. The first bitcoin exchange, Mt. Gox, collapsed in a pile of fraud. Moreover, bitcoins have proved very popular with drug dealers, especially via an online exchange called Silk Road.


pages: 429 words: 120,332

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, export processing zone, failed state, financial deregulation, financial engineering, financial innovation, Fractional reserve banking, full employment, Glass-Steagall Act, Global Witness, Golden arches theory, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Londongrad, Long Term Capital Management, low interest rates, Martin Wolf, Money creation, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, Suez crisis 1956, The Spirit Level, too big to fail, transfer pricing, vertical integration, Washington Consensus

A U.S. congressional committee report in 1975 expressed amazement at how it had flourished so far beneath the political radar for so long.68 Yet there is a bigger reason why the United States ultimately colluded with Britain in letting Wall Street banks roam offshore. The U.S. dollar is the world’s main reserve currency. Less privileged nations are periodically constrained from spending by shortages of foreign exchange, but the nation with the dominant currency can borrow in its own currency—and it can print money to acquire real resources and live beyond its means for a long time. This “exorbitant privilege” helped America fight and pay for the Vietnam War; more recently it helped President George W.

., 89 Pasqua, Charles, 4 Patnaik, Prabhat, 56 PATRIOT Act, 225 patriotism, 39–43 Peck, Polly, 204 Peron, Juan, 35 Picciotto, Sol, 42, 147, 239n13 Pindling, Lynden, 90, 98 Ping, Jean, 2 Pinochet, Augusto, 179 Pitman, Shona, 190 Pitman, Trevor, 188 “plausible deniability,” 166–7 political power, 7, 13, 31, 65, 151–3, 178–82 post-colonial: See Omar Bongo political theory, 86, 151 Portillo, José Lopez, 143 Portugal, 17, 206 poverty, 1–2, 9, 16, 20, 28–9, 34, 57, 73, 104, 126, 131, 140, 143–4, 164, 175, 189, 192, 223–4, 229, 231 power distribution, 8–10, 86 PricewaterhouseCoopers (PWC), 25, 202, 209 private equity, 103, 132, 216, 230 Privy Council in London, 18, 94, 103, 148 progressive taxation, 162–3 Public Choice Theory, 151 Putin, Vladimir, 156 Qualified Intermediary Program, 119–20 Queen Victoria of England, 104 Quinlan, Andrew, 150, 162 Rahn, Richard, 163–4 Rally for the Republic (RPR), 4 Ramsay, Robin, 69–70 Raw, Charles, 96, 98 Rawls, John, 86 Reagan, Ronald, 32, 84, 113–14, 116–17, 151, 195, 197–8, 204 redistribution, and taxation, 164 reform, 221–31 Reinhardt, Carmen, 60 Repo 105, 67–8 representation, and taxation, 145, 164 Republican party, 31, 54, 58, 121, 123, 140, 150–1, 159, 195, 254n4 “rehypothecation,” 68 reinvoicing, 25, 182–3 repricing, and taxation, 164 reserve currency, 83–4 reserves, banking, 98 revenue, and taxation, 164 revocable trusts, 46 Ricardo, David, 16 the rich: See elites; les grandes Ridley, Tim, 181 Riggs Bank, 179 “ring-fence,” 12, 199, 250n25 The Rise and Fall of the House of Vestey (Knightley), 35 Robbins, Lionel, 59 Roberston, James, 79 Robinson, Jeffrey, 79, 88–9 Rockefeller, David, 107–8 Rodrik, Dani, 59–60, 165, 240n22 Rogoff, Kenneth, 60 Roosa, Robert, 80 Roosevelt, Franklin Delano, 31, 54, 97, 239n9 Roosevelt, James, 97 Rosenbloom, David, 117–18, 120, 148 Roth, William, 150 Rothwell, John, 207–8 “round-tripping,” 148 Routier, Airy, 4 “Rs” of taxation, 164 Rubin, Robert, 119 Rushdie, Salman, 178–9 Russell, Bertrand, 51 Russia, 27, 36–7, 58, 68–9, 99, 104, 111, 120, 131, 137–9, 199, 206, 217, 225, 249n18, 250n21 Sampson, Anthony, 64 Sands, Stafford, 89–90 Sarbanes-Oxley, 68 Sarkozy, Nicolas, 5, 24–5 Saudi Arabia, 10, 69, 131, 133, 157, 217 saucissonage, 27–8 Savimbi, Jonas, 136 Scriven, Martyn, 104–5 secrecy jurisdictions: See tax havens securitization, 26, 70, 125, 200–1, 209 September 11, 2001, 167, 173, 225 Sharife, Khadija, 22, 236n31 Sharman, Jason, 24, 162 shell banks/companies, 29, 111, 120–1, 172–3, 225–6 Sikka, Prem, 204–5, 207–9 Silverstein, Ken, 255n18 Singapore, 19, 27, 33, 106, 116, 121, 209, 234n12 Skidelsky, Robert, 49–50, 54 small business, 15, 38–9 Smith, Adam, 162, 165 Smith, Vernon, 151 social capital, 164 socialism, 4, 51, 150, 163 Salomon Brothers, 82 Snow, John, 140 Somalia, 16 South Africa, 19, 22, 37, 105, 147, 165, 183–4, 209 South Korea, 17, 85, 147, 251n37 Southern, Geoff, 188, 191, 206 sovereign debt funds, 143–4 sovereignty, 23, 84, 161, 196, 228 Soviet Union, 33, 49, 51, 75, 120, 131, 137, 206 Special Purpose Entities (SPEs), 125, 212, 256n40 Special Purpose Vehicles (SPVs), 26, 178, 180 Spencer, David, 8–9 Standard Oil, 23, 36, 39, 108 Stanford, Sir Allen, 218 Stanford Bank, 218 Sterling Area, 92–3 Stettinius, Jr., Edward, 23 Stop Tax Haven Abuse Act, 110 Strahm, Rudolf, 226 Subramanian, Arvind, 59–60, 240n22 Summers, Larry, 160 Suez Crisis (1956), 65–6, 86 Swayze, David, 194, 196–7, 199, 201 Swinging London, 80 Switzerland, 3, 4, 16, 24, 26, 33, 38, 43, 69, 80, 84, 88, 97–9, 109, 114, 117, 119, 122, 127–8, 129, 138–40, 143, 156–7, 161–2, 165, 169, 174, 176–8, 180, 191–2, 203, 212, 214–15, 226, 234n12,13, 236n23, 247n31, 250n20, 252n18 clients of, 26 secrecy law (1934), 16 See Geneva Sylla, Richard, 80 Syvret, Stuart, 187–8, 205, 207–8 Taliban, 121 Tavakoli, Janet, 125 Tax Analysts, 17, 161–2 tax/taxation, 144–56 capital gains tax, 155, 162–3 competition, 149–56 corporate tax, 155 deferrals, 112–13 four “Rs” of, 164 incentives, 156 income tax, 155, 162–3 land value, 224–5 multinational, 12–15 as offshore system: See offshore system progressive, 162–3 and property rights, 158 rates, 154–60 and reform, 223 statistics on, 15, 162–3 as theft, 158 treaties, 147–8 U.S. statistics on, 162–3 war, 156 in World War I, 40 zero, 12–15 tax avoidance, 25, 29, 33–4, 36, 40–1, 45, 47, 103, 130, 159, 216 tax competition, 149–56 tax deferrals, 112–13 tax evasion, 16–17, 25, 29, 44, 57, 76, 88, 101–2, 110, 118–19, 129, 133, 157–8, 160, 163, 167, 185, 230, 246n4 tax havens/secrecy jurisdictions “blacklist” of, 24–5, 150, 161–2, 168–9, 223 British: See British tax havens central, 16–23, 26 See British tax havens; European tax havens; U.S. tax havens and colonialism: See colonialism companies using, 20–2 defined, 6–8, 11–13 and denial, 12–13 and developing countries: See developing countries as easy to set up, 24 and elites: See elites European: See European tax havens features of, 12–13 and multinationals: See multinational corporations OECD blacklist of, 24–5 and ordinary citizens: See ordinary citizens rationalizations for, 156–8, 165–6 statistics on, 11, 16, 28–9, 32 U.S.: See U.S. tax havens Tax Justice Network (TJN), 28, 128, 170, 181, 234n4–5, 237n44 tax treaties, 147–8 terrorist financing, 22, 26, 29, 35, 121, 131, 133, 167, 173 Texas, 110, 115, 120–1, 204 Thatcher, Margaret, 32, 66, 84–5, 204, 252n16 Tiebout, Charles, 154 Time magazine, 83 “too big to fail,” 21, 31, 130, 217 Total group, 5 transfer pricing (or mispricing), 9, 14–15, 29, 42, 108, 123, 152, 215–16, 227, 239n10 defined, 14 transparency, 8–9, 12, 16, 24, 26, 33, 58, 110, 112, 119, 122, 126, 128, 140, 157–8, 160, 167–8, 170, 177, 179, 188, 190, 208, 221–3, 226, 228–30, 247n31,32, 248n44, 250n21 Transparency International (TI), 126–7 Travers, Anthony, 166–7, 182 trusts, 43–7, 64, 69, 90, 92, 99, 103, 105, 125–6, 133, 139, 173–6, 180, 201, 207, 223, 225–7, 235n19, 239n17,18, 248n34, 250n25 defined, 43–7 and retaining control, 45 Turks and Caicos (British overseas territory), 18–19, 23, 27, 87 UBS, 138, 140, 177, 249n18 Uganda, 145, 183 Union Cold Storage, 45–6 United Nations, 9, 136, 146, 161, 231–2 United States and Britain, 19–20, 49–50, 54–5 and corporate income tax, 40 deficits, 80, 84, 114, 116, 118–19, 194, 217 and financial regulation, 63, 67–70, 78–80, 100–3, 119–20 statistics on oil, 1, 32, 40, 52, 60, 162–3 tax havens: See U.S. tax havens and transfer pricing, 14–15 USAID, 22 U.S.


pages: 450 words: 113,173

The Age of Entitlement: America Since the Sixties by Christopher Caldwell

1960s counterculture, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Alvin Toffler, anti-communist, behavioural economics, Bernie Sanders, big data - Walmart - Pop Tarts, Black Lives Matter, blue-collar work, Cass Sunstein, choice architecture, classic study, computer age, crack epidemic, critical race theory, crony capitalism, Daniel Kahneman / Amos Tversky, David Attenborough, desegregation, disintermediation, disruptive innovation, Edward Snowden, Erik Brynjolfsson, Ferguson, Missouri, financial deregulation, financial innovation, Firefox, full employment, Future Shock, George Gilder, global value chain, Home mortgage interest deduction, illegal immigration, immigration reform, informal economy, James Bridle, Jeff Bezos, John Markoff, junk bonds, Kevin Kelly, Lewis Mumford, libertarian paternalism, Mark Zuckerberg, Martin Wolf, mass immigration, mass incarceration, messenger bag, mortgage tax deduction, Nate Silver, new economy, Norman Mailer, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, open immigration, opioid epidemic / opioid crisis, post-industrial society, pre–internet, profit motive, public intellectual, reserve currency, Richard Thaler, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Rosa Parks, Silicon Valley, Skype, South China Sea, Steve Jobs, tech billionaire, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transatlantic slave trade, transcontinental railway, W. E. B. Du Bois, War on Poverty, Whole Earth Catalog, zero-sum game

It cut deadwood out of the New Deal economy and guided American institutions as they began using computers, junk bonds, non-unionized labor, and outsourcing to re-establish the economy on different bases. It secured for another generation of Americans the exorbitant privilege of using the U.S. dollar as the world’s reserve currency and getting to write the rules of international commerce, an outcome that had seemed uncertain when Reagan took office. It helped end the Cold War. And it began a process that by the early years of the following century would render American society unrecognizably inegalitarian, even oligarchic.

“Drop a dime”: Kirsten A. Conover, “Drop-A-Dime Project Pays Off,” Christian Science Monitor, August 18, 1989. It secured for another generation: The phrase “exorbitant privilege” was used by French finance minister Valéry Giscard d’Estaing in the 1960s to describe America’s relationship to its reserve currency. “I like to think of fire”: Ayn Rand, Atlas Shrugged (New York: Dutton, 1992 [1957]), 684. “his hand moving over”: Ibid., 107. “absolutely bewitched”: Buckley on Charlie Rose, PBS, June 17, 2003. “I give out Atlas Shrugged”: Katherine Mangu-Ward, “Young, Wonky, and Proud of It,” Weekly Standard, March 17, 2003.


pages: 127 words: 51,083

The Oil Age Is Over: What to Expect as the World Runs Out of Cheap Oil, 2005-2050 by Matt Savinar

Alan Greenspan, Albert Einstein, clean water, disinformation, Easter island, energy security, hydrogen economy, illegal immigration, invisible hand, military-industrial complex, new economy, off-the-grid, oil shale / tar sands, oil shock, peak oil, post-oil, Ralph Nader, reserve currency, rolling blackouts, Rosa Parks, The Wealth of Nations by Adam Smith, Y2K

While the desire of the US to gain access to Iraqi oil shouldn't be underestimated, it was not the sole or even primary motivation for the invasion. The true target of the invasion was the European economy, not Saddam Hussein. The true weapon of mass destruction was the euro, not anthrax. For the past 60 years, the dollar has served as the international reserve currency for global oil transactions. This allowed the US to effectively control global oil transactions. The dollar's hegemony faced a serious threat in 88 The Oil Age is Over November 2000, when France persuaded Saddam to switch from the dollar to the euro as the currency for its oil transactions.


pages: 756 words: 120,818

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

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

A country’s currency reflects its place in the world, and the dollar has risen to a very particular place as the linchpin of the financial system. Indeed, one of the most important tenets of the twentieth-century world order and the rise of globalization has been the position of the dollar as the international reserve currency. In the postwar period, the predominance of the dollar prompted France’s then minister of finance Valéry Giscard d’Estaing to pronounce the “exorbitant privilege” of the dollar that let the United States both print dollars and require the rest of the world to buy them, to put it very simply.

(Joe Stiglitz is scathing of the mind-set of the IMF senior management.)22 Also, many international financial institutions—such as the Bundesbank (Germany’s central bank), a significant chunk of the Japanese financial system, and economic restructuring programs in Latin America, to name just a few—can claim Americans as their architects. The dollar remains the world’s reserve currency, the US Federal Reserve is considered the most powerful central bank in the world, and, importantly, the investment banks that drive activity in the global financial system are American. The financial crisis has done little to dent this position, and most international equity markets follow the pulse of Wall Street rather than follow the beat of Frankfurt or Shanghai.


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

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

In Guinea, just days after the army had shot citizens and raped women on the streets of the capital, the military-backed government, a pariah on the continent and around the world, announced it was in talks with China on a billion-dollar resources and infrastructure deal. Beijing’s ambition and clout was being lit up by flashing lights in ways that would have been unthinkable a few years previously. The Chinese central bank called for an alternative to the US dollar as a global reserve currency in early 2009, and reiterated its policy as the year went on. France obediently re-committed to Chinese sovereignty over Tibet to placate Beijing’s anger over the issue, after Beijing had cancelled an EU summit in protest at Paris’s welcome for the Dalai Lama. Barack Obama spurned meeting the Tibetan spiritual leader in late 2009, to sweeten the atmosphere for his first visit to Beijing in November that year, although he did agree to meet him in early 2010.

., 43 Caijing on bankers, 68–9 Guo Shuqing’s interview, 51 on Rio-Tinto bid, 60 on Shanghai corruption cases, 161 car number-plates, of Party officials, 14 car sales, 2009, xvi Casino Royale (film), 238 Catholic Church, 11–12 CCTV, 185, 250 cell-phones, 39 censuses, 258–9 Central Commission for Discipline Inspection, 137–8 beneficiaries of, 147 failing of, 145–7 investigation procedure, 142–5, 168–9 on Shanghai corruption cases, 160–61, 164–6, 167–9 structure and staffing, 141–2 Central Committee, 12 Central Committee Taiwan Work Leading Small Group, 21 Central Guards Unit, 12 Central Military Commission, 107 Central Organization Department, 17 appointment and promotion, 81, 82–3 and ethnic minorities and other parties, 79 internal tension, 74–6 invisibility, 71–2, 73, 74, 280n against local authority, 90–93 members’ files, 77–8 nature of, 69 origin and historical background, 76–7 on Party’s disaster relief, 192–3 refined and tightened, 41 and state enterprises, 46, 72–4, 84–9 see also nomenklatura system Central Party School, 226–8 Central Politics and Law Committee, 25, 189, 190 Central Propaganda Department, 17, 229 media control, 184, 186, 237, 248–9; see also media, censorship military propaganda, 121–2 reinforced, 41 roles of, 235–7, 248–52, 253 in Sanlu case, 189 Taiwan mission, 122 centrally planned economy, metaphor for, 37 CEOs, 89 reshuffled, 84–5 status symbol, 8–9, 10 stock options of, 100–103 Chai Junyong, 164 Chan, Hon, 80, 81 Changchun Chen’s trial in, 166 corruption cases, 139 Changzhou, 220–22 Charter 08, 261–2 Chen Ailian, 5 Chen Deming, 83–4 Chen Jinhua, 55 Chen Liangyu, 135, 136, 161 background, 155–6 confronts Wen Jiabao, 163–4 defends Shanghai, 151 investigation on, 138, 164–6 trial and prison life, 166 Chen Shui-bian, 124 Chen Tonghai, 64 Chen Xiaodan, 65–6 Chen Xitong, 144, 168 Chen Yuan, 40, 64–5, 66 on communism, 34, 37 daughter of, 65–6 ideas of, 38–9 Chen Yun, 37–8, 200, 239 Chen Zhili, 140 Cheung, Steven, 41, 176–7 children, poisoned by milk powder, 172, 183, 184, 185, 186 China Construction Bank corruption cases, 145–6 mass lay-offs, 50 Party’s role in, 51, 52 China Development Bank, 59, 65 China Executive Leadership Academy, Pudong, 29, 30 China Inc. see state enterprises China Investment Corporation, x–xi China Mobile, 84, 85, 101 China National Petroleum Corp. see PetroChina China Netcom, 84, 86–8 China People’s Political Consultative Conference, 204 China Pudong Cadre College, 29, 30 China Telecom, 84, 87 China Unicom, 84, 85 China Youth Daily, 248, 250–51 Chinalco, 57–61, 62, 224–6 Chinese Academy of Social Sciences, 109 Chongqing, corruption cases, 139 Clinton, Hillary, xiv–xv CLSA, 199 CNOOC, 54, 62 Cole, Bud, 121 communism, 18, 35, 76 redefined, 34, 37 Confucius, 32–3 congress see National People’s Congress corruption see bribery/corruption COSCO, 102 cover-up strategy, 233–4 Crillon Ball, 66 Cultural Revolution, 14 launching of, 149 Party’s verdict, 234, 245 Dai Bingguo, xii, 277n Dai Guofang, 220–21, 222, 223 dairy industry, 181–2, 183 see also Sanlu Dalai Lama, xvi Dandong, 174–5 Daqing, 113, 115 decentralization, 177–8 defence budget, 111–12 democracy Chinese leader’s interpretation, 20 demand of, 31, 261 pro-democracy protests see Tiananmen Square massacre in Taiwan, 123–4, 125, 126, 128, 130 democratic parties, 15 Dench, Dame Judi, 238 Deng Xiaoping, 74, 239 on Idiot Seeds, 195 image of, 6 as leader of liberalizers, 34 on Mao, 245 new model of reform, 41–2 partnership with private sector, 197, 198 perfects socialism, 194, 196 photos of, 38 power behind the scenes, 154 priorities economy, 106 returns to Leninist roots, 14 rural reform, 200 Shanghai policy, 150 southern tour, 41, 201–2 stratagem, xv and Tiananmen Square Massacre, 105 Dickson, Bruce, 214, 218–19 Ding, James, 227 Ding Guan’gen, 17 direct sales industry, 209–13 Director of the Beijing Representative Office (Wang Xiaofang), 95–6 Dongfeng, 216–17 Downs, Erica, 63 Dukakis, Michael, 104 East Eight Blocks, 158 East Hope see Liu Yongxing economy impact of reform on, 42–3 unsustainability of, 269 education institutions Party control of appointment, 79 textbook censorship, 235, 245–6, 249–50 elite networks, 8–9 entrepreneurs Party membership, 31, 32 in Party schools, 226–8 rich list, 205–7 see also individual members environment as benchmark for promotion, 90 central vs. local, 90–93 Party policy on, 269 ethnic protests, 111, 264 European Union, xi Falun Gong, 82, 173, 211, 212, 264, 269 famine, 229–30, 231–4, 254, 255–60, 292n Fang Ning, 33 Far Eastern Economic Review,, 46 farmers, 200, 202 Feng Jun, 227 Fengyang, 258–9 Fewsmith, Joseph, 270 Fidelity, 101 financial system, 44–6 see also banks Fonterra, 182, 183, 186–7, 188 food safety, scandals, 183–5, 191 see also Sanlu foreign bankers, ix–xii, 277n foreign enterprises joint venture, 216–17 number of employees, 214 Fortune 500, 56 France elite networks, 9 Tibet issue, xvi Freezing Point, 248, 250–52 Friedman, Milton, 40–41 Fu Chengyu, 54, 56 Fu Furong, 213 Fu Jianfeng, 170, 186 Gang of Four, 149 global financial crisis, 266 banks’ response, 68, 269 Beijing’s response, 163, 269 global financiers, ix–xii, 277n global reserve currency, xv Global Times, 272–3 Goldman Sachs, 61, 181 golf, 145 Gome, 207 Gorbachev, Mikhail, 35 government imperial officialdom, 77 secret Party rule of, 14–17, 21–5, 33 see also public sector Great Leap Forward, 231–4, 254, 255–60, 292n Lushan verdict, 243 Gu Mingzhi, Major General, 104, 108–9 Guangdong, corruption cases, 139 Guinea, xv Guo Shuqing, 50–52, 53, 67 Gutierrez, Carlos, 83 Gymkhana Club, 9 Haier, 194, 198–9, 202–3 Han Dynasty (ad 25–220), Civil Service Ministry, 77 He Guoqiang, 279n He Weifang, 22–3, 26, 125 heavy industry, 219, 221 Henan, 255–8 history, Party’s verdict, 235, 236–9, 245–6, 248–51 Ho, Herbert, 211 Holwill, Richard, 210, 211 Hong Kong, 21 Hoogerwerf, Rupert, 157 rich list, 205–7 Hope, 215 HSBC, 52–3 Hu Angang, 40 Hu Haifeng, 148 Hu Jia, 25–6 Hu Jintao, 74–5, 108, 148, 248 claims to be elected, 4 on corruption, 138–9 development policies, 178–80 domestic problems, 272 and economy/military, 105, 106–7, 116, 117 image-management, 5–6 on Mao, 246 meets Abe, 271–2 political career, 7 rivalry with Jiang, 154–5 and Shanghai, 153 speech in congress, 8 succession, 153–4, 163 on Taiwan issue, 127, 129–31 theory of, 172 titles of, 15–16, 279n Hu Shuli, 51–2, 282n Hu Yaobang, 74, 154, 248 encourages political reform, 36 rural reform, 200 Hua Guofeng, 154 Huang, Alex, 130 Huang, Yasheng, 151, 199, 200 Huang Guangyu, 207 Huang Hongfang, 32 Huang Ju, 154 Huawei, 204 Hubei, 179 Hum, Sir Christopher, 157 ‘human flesh search engines’, 180–81 Human Organization Department see Organization Department, Human Hunan, 177 hybrid market economy, xiii Idiot Seeds, 194, 195, 201 India, elite networks, 9 Industrial & Commercial Bank of China, 45, 50 inequality, 266–7 International Monetary Fund, xv internet controlled for political events, 2 against corruption, 144, 180–81 on history textbook, 245–6, 252 lack of Party website, 20–21 on Sanlu, 185 search for democracy, 20 Iraq, 116 iron ore, 58 Japan, 271–2 elite networks, 9 protests against, 238–9, 269–70 Ji Haisheng, 102, 103 Jia Qinglin, 7–8, 25, 154, 279n Jiang Chaoliang, 52–3 Jiang Mianheng, 87, 283n Jiang Ping, 41 Jiang Qing, 149 Jiang Sixian, 205 Jiang Yanyong, 239 Jiang Zemin, 107–8, 269 at Beijing University centenary, 79 careers, 81 and Chen Xitong, 144 claims to be elected, 4 defends Zhou Zhengyi, 161 image of, 6 and military apparatus, 105–6, 116, 117 and private sector, 197, 200–201, 208–9, 217 rehearses his marching drills, 104 retires to Shanghai, 163 rivalry with Hu, 154–5 Selected Works, 165 and Shanghai gang, 148–9 Taiwan policy, 128–9 takes up and hands over power, 153–4 theory of, 172 on Zhu Rongji, 43 Jiang Zhenghua, 260 Jiangsu Tieben Iron & Steel, 220–23 Jin Zhong, 148 joint venture, 216–17 journalists, 184, 190, 252 and corruption reports, 160 demand freedom, 30, 80 on local officials, 180 judges, 15, 24, 25, 93, 114, 137 June 4 protest see Tiananmen Square massacre Justice Bureau, 190 Kremlinology, 18 Kuomintang, 123–5 labour law, 214 Ladany, Laszlo, 77 Lai Changxing, 159 law firms, Party control of, 23 lawyers, 15, 25, 30, 265 Party membership, 23 in Sanlu case, 189, 190, 193 leadership battles over, 3 succession, 153–4, 163 Lee Teng-hui, 127–8 Legal Daily, on Sanlu case, 187 legal professionals see judges; lawyers legal system Party control of, 15, 22–5 PLA members in, 114 see also judges; lawyers Lenin, Vladimir establishes Orgburo, 76 ruling model, xiii, 12, 14 Lenovo, 204 ‘les énarques’, 9 ‘Li Bu’, 77 Li Changchun, 279n Li Changjiang, 183, 191 Li Datong, 235, 248, 249–52 Li Fangping, 189, 190 Li Fanping, 264, 265 Li Gang, 70, 98–9 Li Jijun, Lieutenant-General, 245 Li Jinai, General, 107 Li Ka-shing, 158 Li Keqiang, 23–4, 279n Li Lihui, 53 Li Liming, 101, 102, 103 Li Peng, 81, 148, 239 Li Rucheng, 216 Li Rui, 240–41, 242–4, 247 Li Ruigang, 238 Li Ruihuan, 253 Li Weimin (fictional), 95–6 Li Wenyao, 257–8 Li Xiaopeng, 283n Li Yongzhong, 146 Li Youxing, 142 Li Yuanchao, 72, 75, 89–90, 91–2 Li Zhaoxing, 125 Liang Jing, 179 liberal economics, 28–9 Liberation Army Daily, 107–8 Liberation Daily, 242 life style of top-ranked party members, 10 of urban citizens, 27 The Lighthorseman, 242 Lin Chong-pin, 134 Linfen, 82 Liu Baiyu, 78 Liu Mingkang, 66–7 Liu Shihui, 265 Liu Xiaobo, 261–2 Liu Yonghao, 215 Liu Yongxing, 194, 219, 220, 223–5 Liu Zhihua, 138 Liu Zhongde, 229, 237 local economy, 174–5 localities vs. central, 90–93, 172–4, 180–81 competitiveness, 175–7, 178 and new tax policy, 179–80 Lou Jiwei, x–xi, 59–60 Lu Hao, 236 Lu Weidong, 20–21 Luo Gan, 25 Lushan meeting, 243 Ma De, 93–4, 97–8, 99–100, 103 Ma Jinlong, 218 Ma Ying-jeou, 126, 130 Mackenzie, Kelvin, 18 Major, Bob, 186 Mao Yushi, 261 Mao Zedong, 105, 253 and Central Organization Department, 76 death, body preservation and verdict on, 244–6, 247 and Gang of Four, 149 and Great Leap Forward, 231 image of, 6, 246–7 at Lushan meeting, 243 nominates successor, 154 on Party and people, 13–14 status of, 241–2 market reforms, outcomes of, 42 Marketing Dictatorship (Brady), 236 McKinsey & Co, 88, 181 meals, invitation for, 71 media on anti-Japanese protests, 271 censorship, 235–6, 237–8, 247–8, 250–52 on corruption, 144, 155, 160, 161, 166 focus of, 18–19 on food scandals, 183, 184 less restriction on, 268 official campaigns on military loyalty to Party, 107–9 Party’s guidelines for, 237, 248–9 Sanlu’s PR effect on, 185 on Taiwan issue, 127 uniformed announcement of new leadership, 4 melamine, 184–5 Mengniu, 181–2 Merrill Lynch, 47, 48–9 Miao Shouliang, 206 middle class, 205, 266 money worship, 132–3 rich list, 205–7 size of, 28 milk powder case see Sanlu Miller, Alice, 21 mining, 82, 192–3 Ministry of Personnel, 80 minying, 200 Mitsubishi, 54–5 Moeller Villa, 161 money worship, 132–4 Morgan Stanley, 52, 181 Mulvenon, James, 108 Murdoch, Rupert, 17 Naipaul, V.S., 30 name cards, 70 Namibia case, 148 Nanjing, 180–81 National Day parade, 263–4 National People’s Congress, 49 1977, 44 1987, 36 2002, 153, 154, 208 2004, 129 2007, 1–4, 11–12, 67, 125, 137 2009, 24, 25 Nationalist Party, 123–5 navy, xvi NCO system, 117, 118 new conservatives, 38–9 New York Times, 245 New Zealand, in milk scandal, 188 NGOs, 211 Ni Hanwei, 31 Nian Guangjiu, 194–6, 201 9/11, 270 Ningbo, 162 Nissan, 216–17 Niu Yuqing, 146 Nixon, Richard, 19–20 nomenklatura system, 78–81 North Korea, 174, 175 novels, genre of, 144 Obama, Barack, xvi oil legacy of Daqing, 113, 115 overseas interest, 116 shortage, 63 old boy network’, 9 Olympics, 170–71, 186 one-child policy, 280n O’Neill, Jim, 277n Organization Department, Human, 71 Orgburo, 76 Ouroussoff, Nicolai, 19 Ouyang Song, 192 Pan Junxiang, 234–5 Pan Yue, 39–40 Paris, Crillon Ball, 66 Party membership as a commitment, 11 change of political attire, 66 mid-2009, xiv personal files, 77–8 promotion of, 32 students and the rich expand, 31–2 Party schools, 29, 30, 226–8 patriotism campaign, 236, 270 Paulson, Hank, xi peanut products scandals, 191 Pei, Minxin, 267 Peking University, centenary, 79, 80 Peng Dehuai, 243 People’s Armed Police, 111 People’s Daily on banking system, xi on Japan, 238 People’s Liberation Army, 103 challenges of modern society, 111–12 commercial empire, 114 dual leadership system, 117–20, 121 founding principle of, 105 media campaigns on PLA’a loyalty to Party, 107–9 modernization of, 105–6, 111 officer class, 120–21 Party’s control of, 110 propaganda, 121–2 refuses Tiananmen Square crackdown, 109–10 security and domestic duty, 111, 113–14, 115 on Taiwan issue, 128–9 personal consumption, 269 pet food scandals, 183, 184–5 Petitioner’s Village, 2 PetroChina, 61–3, 116 Ping’an, 204–5 Politburo members above corruption investigation, 147 biography of, 7–8 responsibilities of, 13 selecting of, 12 similarity of appearance and career history, 1–2 structure, 278 9n political commissar system, 118–20 political liberals, 38 political opponents controlled for political events, 2–3 less confrontational treatment of, 268 marginalization of, xiv punishment of, 232 Political Struggles in the Age of China’s Reform and Opening Up (Yang Jisheng), 254 post-Maoist governing model, xii, xiii poverty definition, 278n number of poor declines, xvii, 28 power-worship, 96 private sector, 39, 194 confusion of status, 199–200, 203–4 relationship with Party, 31, 32, 79, 193, 196–8, 200–202, 206–9, 215–19 in Shanghai, 151 see also entrepreneurs; individual companies Procrustes, 235 protests anti-Japanese protests, 270–72 to Shanghai building development, 135–7, 164, 167–8 see also ethnic protests; Tiananmen Square massacre public sector appointment, 73–5, 81, 82–3, 284–5n; see also nomenklatura system bribery/corruption, 75, 93–100, 138–41, 172, 183, 191; see also Central Commission for Discipline Inspection system in history, 77 Pudong, 150 Qian Lieyang, 143, 222 Qian Qichen, 17 Qin Yu, 156, 165 Qingdao, 202–3 Qinheng prison, 166 raw materials, 219 see also oil real estate, 155, 179 scandals, 135–7, 158–60, 164, 167 Red Army see People’s Liberation Army ‘red machines’, 8–10, 13 religions, 211 Ren Zhengfei, 204, 206 Renminbi, xv, 244 rich list, 205–7 rich-poor gap, 30 Rio-Tinto, 58–61 Robinson, Tom, 37 rural free-market, 36, 200, 202, 267 Russia China’s loan to, xv cost of disintegration, 131 Sanlu, 169, 172, 181, 182, 264 cover-up strategy, 186–7, 233 emergency meeting, 170, 171 media appearance, 185–6, 187 parent complants, 184, 185, 188–9 Party’s control of, 193 product tests, 186 trial and verdicts, 190–91 Sapio, Flora, 141, 142–3 SARS, 16, 233, 239, 268 SASAC, 86 Schapira, Paul, 61 school textbooks, censorship, 235, 245–6 security, for political events, 2–3, 263 Seeking Truth, 107 Service, Robert, xiii Shagang steelworks, 207 Shambaugh, David, 121, 265–6 Shanghai city development, 29, 162–3 corruption cases, 135–7, 139, 144, 158–61, 164, 167–9 leadership compound, 14 past and present, 149–53, 234–5 status, 138 Shanghai gang, 149–53 crashed, 166–7 in Standing Committee, 154 see also Chen Liangyu Shanghai History Museum, 234–5 Shanghai Industrial, 101 Shanghai Petrochemical Corp., 47–9 Shanghainese, 152–3 land disputes, 135–7, 158–60, 164, 167 Shao Daosheng, 98 Shao Depeng, 217 Shen Ting, 159, 164, 167–8 Shen Wenrong, 207 Shenzhen corruption cases, 181 Deng’s tour to, 41 Shijiazhuang, 174 Shirk, Susan, 129 shuanggui (double regulation), 142–3 Sichuan corruption cases, 139 earthquake, 192 Singapore COSCO in, 102 Suzhou industrial park, 83 Sinified Marxism, 67 Sinology, 18–19 Sinopec, 63–4 society, infiltrates Party, 30 Song Ping, 36 Song Xiaojun, 119–20, 125, 132 southern tour, 41 Southern Weekend, 185–6 Soviet Union disintegration of, 35, 131 nomenklatura system, 78, 79 Orgburo, 76 Party’s verdict on collapse of, 237–8 succession, 154 Stalin, Joseph, 76 Standing Committee, 13, 278–9n above corruption investigation, 147 Shanghai gang in, 154 state assets debates over, 40 Deng’s model on, 42 new conservatives on, 35, 39 state enterprises competition and profitability, 53–6 Deng’s model on, 42 new conservatives on, 39 Party’s low profile in, 21–2, 49 pay structure for CEOs, 102–3 personnel control of, 46, 68–9, 73–4, 84–9 reform, 44, 67–8 split personalities of, 53, 64 stock options, 100–101 tax from, 267 workers lay-offs, 42–3, 50 see also individual enterprises steel industry, 220, 221, 222 Stewart, Jackie, 162 Storming the Barricades (Zhou Tianyong), 69 students loans, 173 money worship, 133 view of Party, 31–2 Su Shulin, 64 Su Zhiliang, 245, 246 Sudan, 62 Suihua, 97–9, 116 Sun Jingkan, 160 Suzhou, 83 corruption cases, 139–40 Tai lake (Taihu), 89, 90, 91–2 Taiwan issue Jiang and Hu’s policies, 106–7, 127–30, 134 nationalist stand on, 131–2 nature of, 122–3 one-China policy, 127–8 Taiwanese opinions, 125–8 see also Kuomintang Tang Dynasty (ad 618–907), official vetting, 77 tax policy, 178, 179 telecommunication, 233–4 telecoms companies, 84–9 terror, 265 textbook censorship, 249–50 Thatcher, Margaret, 202 38th Army, 109–10 Thornton, John, 88 Tian, Edward, 84, 86–9 Tian Fengshan, 98 Tian Wenhua charged, 172 downfall, 188 dual responsibility dilemma, 186 leads emergency meeting, 171 titles of, 182–3 trial and charge, 190–91 Tiananmen Square massacre, 105, 253, 262 discussion suppressed, 35 impact of, 34–5, 36, 201, 202 Party’s verdict, 239 post-event investigation, 36 splits Party and PLA, 109–10 Tibet, 111 Tieben see Jiangsu Tieben Iron & Steel The Times of Deng Xiaoping (Yang Jisheng), 253–4 Todai elite, 9 Tombstone (Yang Jisheng), 229, 230–31, 232 sourcing of, 254–5 trade union, 213–14 Tsai, George, 126–7, 130 Tsang Yok-sing, 21 21st-Century World Herald, 247 ‘Twenty-Seven Perfections’, 77 UBS, 199 Unhappy China (Wang and Song), 112, 132 United Front Department, 17 United Front department, 235 United Kingsom, elite networks, 9 United States aircraft carrier patrols seas around Taiwan, 128 elite networks, 9 official appointment, 74 patriotism, 270 pet food scandals, 183, 184–5 universities, 79–80 Unocal, 54 urban citizens, 27 Urumqi, 111, 139 Vatican, and China, 11–12 vertushka, 13 voting, 11–12 wages, 56 Wal-Mart, 213–14 Wan Yanhai, 3 Wang Jianzhou, 85 Wang Juntao, 23–4 Wang Minggao, 140, 144 on corruption cases, 148 interview with, 71, 72 lack of name card, 70–71 Wang Qishan, ix, xvi Wang Shengjun, 24 Wang Shenyi, 99 Wang Shi, 207–8 Wang Weizhi, 231, 258–60 Wang Xiaodong, 112 Wang Xiaofang, 95, 96 Wang Xuebing, 158 Wang Yang, 234 Watergate scandal, 164 Wen Jiabao, xvi, 7, 279n confronted by Chen Liangyu, 163 on democracy, 20 development policies, 178–80 solves Sinopec oil dispute, 63 on Tieben case, 221 titles of, 15–16 visits earthquake zone, 192 wife and son of, 147–8 on Zhang Enzhao’s case, 145 Wen Wei Bao, 21 Wenzhou, 215, 217–18 ‘west mountain meeting’, 22–3 Wolf, Martin, 237, 269 World Trade Organization, 202, 266 Wrath of Heaven, 144, 168, 169 writers/artists, 96 Wu, Joseph, 123, 124 Wu Bangguo, 7, 279n Wu Lihong, 90–91 Wu Si, 74 Wu Xiaobo, 209 Xi Jinping, 8, 228, 279n Xia Chuntao, 247, 251–2 Xia Jianming, 30 Xiamen, corruption cases, 139, 159 Xiang river, 92–3 Xiao Chaoxuan (fictional), 95–6 Xiao Yaqing, 57, 58, 60–61 Xinhua news agency interview with Zhang Ruimin, 198 on peanut product scandal, 191 secret internal reports, 230, 253 on Tian’s downfall, 188 Xinjiang, 111, 139 Xinjiang Soldier Corps, 114 Xintiandi, Shanghai, 29 Xinyang, 255–8 Xu Guanhua, 140 Xu Haiming, 135–6, 137, 153, 157, 160, 164, 167 Xu Kuangdi, 151, 156 Xu Qinxian, Lieutenant-General, 109–10 Yan Xuetong, 104 on diplomatic policy, 132 on Hu’s policies, 107 on military, 122 on money worship, 132–4 on Taiwan issue, 131–2 Yan’an rectification, 77–8 Yang, Andrew, 120 on Taiwan issue, 122, 126, 129 Yang Bin, 206 Yang Jiechi, 277n Yang Jisheng, 229–31, 232, 239–40, 252–6, 258, 259–61, 265 Yang Mianmian, 203 Yang Ping, 39, 40 Yang Rong, 206 Yang Shangkun, 239 Yang Yuanqing, 204 Yingkou, 175 You Ji, 121 Youngor, 216 Yu Dehong, 232, 255–7, 260 Yu Jianrong, 179 Yu Jie, 246–7 Yu Minhong, 227 Yu Qiuli, 113 Yuan Weishi, 70, 78–9, 249–50, 252 Yuanhua case, 7–8 Yung Chunchang, 119 Yunnan, 181 Zeng Qinghong, 74, 81–2 Zhang Baoqing, 170, 173 Zhang Chunjiang, 88 Zhang Dahong, 216 Zhang Dejiang, 208–9 Zhang Enzhao, 145–6 Zhang Peili, 147–8 Zhang Quanjing, 75 Zhang Ruimin, 194, 198, 203 Zhang Yimou, 121–2 Zhao Ziyang, 80, 154, 254 encourages political reform, 36 image blackout, 35 rural reform, 200 Zhejiang, 209 Zheng Bijian, 106 Zheng Enchong, 135, 137, 159, 161, 167 Zheng Xiaoyu, 183 Zhengtai Group, 218 Zhou Enlai, 113, 123, 253 Zhou Qiren, 220, 223 Zhou Ruijin, 31, 154 Zhou Tianyong, 69 Zhou Yongkang, 24–5, 81–2, 279n Zhou Zhengyi, 157–8, 159, 161–2, 167 Zhu Feng, 62–3 Zhu Peikun, 32 Zhu Rongji, 148 careers, 81 financial system reform, 44–6 misread by Western leaders, 43 state enterprise reform, 44 visits Huawei, 204 Acknowledgements Journalists rely on the charity, goodwill and democratic impulse of people the world over.


pages: 725 words: 221,514

Debt: The First 5,000 Years by David Graeber

Admiral Zheng, Alan Greenspan, anti-communist, back-to-the-land, banks create money, behavioural economics, bread and circuses, Bretton Woods, British Empire, carried interest, cashless society, central bank independence, classic study, colonial rule, commoditize, corporate governance, David Graeber, delayed gratification, dematerialisation, double entry bookkeeping, financial innovation, fixed income, full employment, George Gilder, informal economy, invention of writing, invisible hand, Isaac Newton, joint-stock company, means of production, microcredit, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, oil shock, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, place-making, Ponzi scheme, Post-Keynesian economics, price stability, profit motive, reserve currency, Right to Buy, Ronald Reagan, scientific management, seigniorage, sexual politics, short selling, Silicon Valley, South Sea Bubble, subprime mortgage crisis, Thales of Miletus, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transatlantic slave trade, tulip mania, upwardly mobile, urban decay, working poor, zero-sum game

(Henry Ford once remarked that if ordinary Americans ever found out how the banking system really worked, there would be a revolution tomorrow.) What is remarkable for present purposes is not so much that American dollars are created by banks, but that one apparently paradoxical result of Nixon’s floating the currency was that these bank-created dollars themselves replaced gold as the world’s reserve currency: that is, as the ultimate store of value in the world, yielding the United States enormous economic advantages. Meanwhile, the U.S. debt remains, as it has been since 1790, a war debt: the United States continues to spend more on its military than do all other nations on earth put together, and military expenditures are not only the basis of the government’s industrial policy; they also take up such a huge proportion of the budget that by many estimations, were it not for them, the United States would not run a deficit at all.

Because of United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon’s floating of the dollar was that foreign central banks have little they can do with these dollars except to use them to buy U.S. treasury bonds.12 This is what is meant by the dollar becoming the world’s “reserve currency.” These bonds are, like all bonds, supposed to be loans that will eventually mature and be repaid, but as economist Michael Hudson, who first began observing the phenomenon in the early ’70s, noted, they never really do: To the extent that these Treasury IOUs are being built into the world’s monetary base they will not have to be repaid, but are to be rolled over indefinitely.

The effect, though, is that American imperial power is based on a debt that will never—can never—be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept. At the same time, U.S. policy was to insist that those countries relying on U.S. treasury bonds as their reserve currency behaved in exactly the opposite way as they did: observing tight money policies and scrupulously repaying their debts. As I’ve already observed, since Nixon’s time, the most significant overseas buyers of U.S. treasury bonds have tended to be banks in countries that were effectively under U.S. military occupation.


pages: 891 words: 220,950

Winds of Change by Peter Hennessy

anti-communist, Beeching cuts, Berlin Wall, Bletchley Park, Bretton Woods, British Empire, centre right, Corn Laws, creative destruction, cuban missile crisis, Dr. Strangelove, Etonian, Fall of the Berlin Wall, floating exchange rates, full employment, government statistician, Great Leap Forward, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, land tenure, liberal capitalism, meritocracy, Mikhail Gorbachev, Nelson Mandela, Norman Macrae, North Sea oil, oil shock, reserve currency, rising living standards, Robert Gordon, Scramble for Africa, Suez canal 1869, Suez crisis 1956, Ted Sorensen, The Rise and Fall of American Growth, total factor productivity, upwardly mobile, uranium enrichment

He could also have done with that most supple of minds to help him with the financial problems created by an overextended defence budget (itself partly the product of residual colonial responsibilities and a string of costly imperial bases still girdling the globe), the burden of sustaining the world’s second reserve currency and a sterling area the funding of whose wartime-accumulated sterling balances brought on a perpetual migraine in the Treasury, and the risk of inflation. Keynes had died at Easter 1946 without leaving any characteristically subtle yet practical plan for dealing with the problems of wages and salaries in a full-employment economy.

It looks as if another £100 [million] will go from the reserves in July … I fear that now sterling (being the weakest world currency) is taking all the strain of the rapidly worsening international situation [the Berlin crisis].58 The following day, after a poor night’s sleep and a working lunch with Lloyd, his Chief Economic Adviser, Alec Cairncross, David Hubback (Lloyd’s Principal Private Secretary), William Armstrong (the rising star in the Treasury then one of its Third Secretaries) and Lord Cromer (the new Governor of the Bank of England), a weary Macmillan placed on the page the exhausted reluctance of an expansionist economic temperament confronted by the need to deflate to appease unforgiving money markets, prop up a shaky world reserve currency and compensate for a resistant and relatively unproductive domestic economy: Selwyn has made good progress with his statement, but we are not very happy about the Government expenditure aspect. If we are to get our ‘drawings’ from the International Monetary Fund [$1.5 billion], we shall have to make – or pretend to make – large savings on Govt expenditure.

Maudling thought of floating the pound but it was too difficult for the UK to go it alone in the era of fixed exchange rates under the Bretton Woods system. He thought, too, of a two-tier interest rate system: one for home, one for abroad. The Treasury and the Bank of England told him this was not a runner because the UK was responsible for sterling as the world’s second reserve currency.66 Thus, wrote Maudling, in a very characteristic paragraph, we went for expansion, quite deliberately, with our eyes open, recognizing the dangers. The prize to be obtained, the prospect of expansion without inflation, the end of stop-go and a break-out from the constrictions of the past, was a glittering one.


pages: 160 words: 46,449

The Extreme Centre: A Warning by Tariq Ali

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

Between 2002 and 2008, the dollar steadily devalued under the burden of the balance of payments and the government deficit, losing 40 per cent of its value. The slide was briefly checked by the recession, but by March 2009 it had resumed. In an ominous move for the US, in 2009 China suggested that the dollar be phased out as the world’s reserve currency, to be replaced by a basket of currencies. There is already a currency war underway with China, accused by the US – and to a lesser extent the EU – of keeping the renminbi artificially low to boost exports. In 2011, as the crisis showed few signs of abating at home and with the interrelationship of the global economy on public display, Admiral Mike Mullen, the retiring chairman of the Joint Chiefs of Staff, declared that US debt was now the most serious threat to national security.


pages: 193 words: 46,052

Modern China: A Very Short Introduction by Rana Mitter

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

Chinese media and academics are subject to increasing restrictions on what they can discuss, and in the South and East China Seas, Chinese claims on territorial and maritime boundaries are becoming more insistent. Yet there are also signs of forward thinking, although often in directions that the liberal world will find uncomfortable. The power of China’s currency, the yuan (renminbi), will grow if it moves towards full convertibility and becomes a significant global reserve currency. The Chinese government has proposed a new ‘Silk Road’ which may bring China closer to central Asia, Iran, and the Middle East. In addition, the Chinese presence in Latin America and Africa continues to grow. Meanwhile, the Party embeds itself further into all aspects of business and social change, particularly since it has adapted to the technology of the 21st century with some aplomb.


pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, classic study, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

Most policy-makers believed that the unsustainable pattern of spending and saving, and the mirror image pattern of external surpluses and deficits, would end with a collapse of the US dollar, as lenders started to doubt the ability of the United States, the United Kingdom and other borrowers to repay. But the political commitment of emerging economies to their export-led growth strategy was extremely strong. And the US dollar – as the world’s reserve currency – was a currency in which China, and other emerging markets, were happy to invest, not least because its own currency, the renminbi, was not convertible into other currencies. There seemed no limit to China’s willingness to accumulate US dollars. And that has continued unabated – by the end of 2014, China’s foreign exchange reserves exceeded $4 trillion.28 So the dollar remained strong and it was the fragility of bank balance sheets that first revealed the fault lines.

., 308 resolution mechanisms, 256, 279 Richardson, Gordon, 176 risk, 84, 121–2, 123, 124, 126–9, 143, 254; implicit taxpayer subsidy for, 191–2, 207, 254–5; maturity and risk transformation, 104–15, 117–19, 250–1, 254–5; ‘optimising’ model, 129–31, 132, 134, 138, 309, 311; risk premium, 32–3, 115, 183; risk weights, 138–9, 258–9, 277 Robinson, Joan, 12, 292–3 Rodrik, Dani, 348 Rogoff, Kenneth, 44, 308 Rome, ancient, 59, 164, 216 Roosevelt, President Franklin, 91, 316 Royal Bank of Scotland (RBS), 37, 89, 118, 206, 243 Russia, 121, 159 saving, 101–2, 155, 308–17, 362–3; in emerging economies, 22–3, 27–8, 29, 30; ‘paradox of thrift’, 297, 326; ‘savings glut’, 28, 29, 30, 46, 319, 325; as source of future demand, 11, 46, 84–5, 185, 325–6, 356 Schacht, Hjalmar, 341–2, 343 Schäuble, Wolfgang, 211 Scholes, Myron, 120–1 Schumpeter, Joseph, 152 Schwartz, Anna, 192, 328 Scotland, 218, 243–7, 248 Second World War, 20, 21, 219, 242, 317, 342 secular stagnation theory, 44, 291–2, 355 Seneca, 123–4 11 September 2001 terrorist attacks, 124 ‘shadow’ banking system, 107, 112–14, 256, 262, 274 Shiller, Robert, 151 Silber, William, 206 Simons, Henry, 262 Sims, Christopher, 79 Slovakia, 216 Smith, Adam, 17–18, 54–5, 79–80, 163 Smith, Ed, 124 sovereign debt (government bonds), 32, 65, 92, 138, 182–4, 196–7, 203, 258, 259, 338–40; bond yields, 29, 183–4, 224, 227, 228, 231, 299, 336; in euro area, 162, 190, 224, 226–31, 258, 338, 339–40, 342–4; framework for restructuring, 346–7; need for export surplus before payment, 339–40, 341–3; WW1 reparations, 340–2, 343, 345–6 Soviet Union, 27, 68, 216 Spain, 47, 93, 159, 216, 221, 222, 227–8, 229, 257–8, 355, 363–4 special purpose vehicles, 113–14 stock markets, 102, 125–6, 133, 151–4, 194, 195, 200, 347 Stresemann, Gustav, 219 Summers, Larry, 44 Sweden, 159, 166, 173, 179, 216–17, 279, 335 Swift, Jonathan, ‘Thoughts on Various Subjects’ (1703), 250, 290 Switzerland, 33, 70, 100, 118, 184, 216, 335 Syed, Matthew, 124 Taylor, John, 168 technological change, 83–4, 127, 129, 153–4, 281, 291, 354, 355, 365 Tequila crisis (1994), 367 Thaler, Richard, 132 Thornton, Henry, 188 Tobin, James, 262 trade surpluses and deficits, 33, 34, 46, 319, 321–2, 329, 352, 356, 364; in emerging economies, 27–8, 30, 329; in EMU, 222, 232–3, 236, 363–4; and exchange rates, 22–3; and interest rates, 23, 30, 46, 319–20; likely re-emergence of, 48–9 trading, financial, 3, 24, 64, 99–100, 257; bonuses, 99, 101, 117, 144, 147; erosion of ethical standards, 100–1, 288; ‘front-running’, 153–4, 284 Transatlantic Trade and Investment Partnership (TTIP), 361 Trans-Pacific Partnership (TPP), 361 Trichet, Jean-Claude, 225 trust, 10, 81–3, 106; and monetary unions, 220, 232, 237; and money, 8, 55, 57, 66–71, 82–3, 155 Tsipras, Alexis, 230, 231 Tuckett, Professor David, 133–4 Turner, Adair, 324 Tversky, Amos, 132 unemployment, 38, 292, 293, 294, 297–9, 302, 326–7, 329, 330; in euro area, 45, 226, 228, 229–30, 232, 234, 345; and inflation targeting, 168, 169; and interest rates, 169, 298–300; ‘stagflation’ (1970s), 5, 302–3, 318 United Kingdom: Acts of Union (1707), 215; alternative strategies for pre-crisis period, 328–32; Banking Act (2009), 40; Banking and Joint Stock Companies Act (1879), 109; Banking Reform Act (2013), 40; ‘Big Bang’ (1986), 23; City of Glasgow Bank failure (1878), 108–9; commercial property market, 47, 118; Currency and Bank Notes Act (1914), 198; Labour government (1964-70), 20; as monetary union, 215; need for export sector support, 357, 364; return to gold standard (1920s), 76; Scottish independence referendum (2014), 218, 243–5, 248; trade deficits, 30, 321, 322, 329, 364; tradition of national branch banking, 116; see also Bank of England United Nations, 214–15 United States: 1914 financial crisis, 192–201, 206; Aldrich-Vreeland Act (1908), 196, 206; Bureau of War Risk Insurance (1914), 200; Constitution, 286; Dodd-Frank Reform (2010), 40, 260; dollar and gold link, 73, 195, 200–1; dollar as world’s reserve currency, 25, 28, 34; ‘double liability’ (1865-1934), 107–8; ‘free banking’ era, 60–2, 77, 161; Glass-Steagall Act (1933), 23, 98, 260; gold reserves, 74, 77; Gramm-Leach-Bliley Act (1999), 23, 98; history of money in, 57–8, 67, 68, 160–1, 187, 188, 212, 215; as monetary union, 212, 215, 234; need for export sector support, 357, 364; New York becomes world money centre, 194–5, 200–1; notes and coins in, 281; Office of the Comptroller of the Currency, 137, 206; trade deficits, 30, 34, 46, 49, 319, 321, 329, 364 Van Court’s Counterfeit Detector and Bank Note List, 61 Vietnam War, 5, 20, 73, 306 Viniar, David, 123 Volcker, Paul, 176, 288 Voltaire, 126 Wall Street Crash (1929), 347 Walpole, Horace, 369 Walras, Léon, 79 Washington, George, 286 Weatherstone, Sir Dennis, 136–7, 278 weights and measures, 212, 286, 287 Wheeler, Judge Thomas C., 162 wholesale funding, 97 Willetts, David, 83 Wilson, Brigadier-General Henry, 89 Wimbledon tennis championships, 142, 187–8 Wolf, Martin, 96, 262 World Bank, 21, 350 World Trade Organisation, 361 Yellen, Janet, 176, 287 Yugoslavia, break-up of, 216 Zimbabwe, 68, 69–70 ABOUT THE AUTHOR Mervyn King was Governor of the Bank of England from 2003 to 2013, and is currently Professor of Economics and Law at New York University and School Professor of Economics at the London School of Economics.


pages: 561 words: 138,158

Shutdown: How COVID Shook the World's Economy by Adam Tooze

2021 United States Capitol attack, air freight, algorithmic trading, Anthropocene, Asian financial crisis, asset-backed security, Ayatollah Khomeini, bank run, banking crisis, Basel III, basic income, Ben Bernanke: helicopter money, Benchmark Capital, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, blue-collar work, Bob Geldof, bond market vigilante , Boris Johnson, Bretton Woods, Brexit referendum, business cycle, business process, business process outsourcing, buy and hold, call centre, capital controls, central bank independence, centre right, clean water, cognitive dissonance, contact tracing, contact tracing app, coronavirus, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, currency manipulation / currency intervention, currency peg, currency risk, decarbonisation, deindustrialization, Donald Trump, Elon Musk, energy transition, eurozone crisis, facts on the ground, failed state, fake news, Fall of the Berlin Wall, fear index, financial engineering, fixed income, floating exchange rates, friendly fire, George Floyd, gig economy, global pandemic, global supply chain, green new deal, high-speed rail, housing crisis, income inequality, inflation targeting, invisible hand, It's morning again in America, Jeremy Corbyn, junk bonds, light touch regulation, lockdown, low interest rates, margin call, Martin Wolf, mass immigration, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, oil shale / tar sands, Overton Window, Paris climate accords, Pearl River Delta, planetary scale, Potemkin village, price stability, Productivity paradox, purchasing power parity, QR code, quantitative easing, remote working, reserve currency, reshoring, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, shareholder value, Silicon Valley, six sigma, social distancing, South China Sea, special drawing rights, stock buybacks, tail risk, TikTok, too big to fail, TSMC, universal basic income, Washington Consensus, women in the workforce, yield curve

Treasury securities because the market is so big that in an emergency you can sell them without your sale affecting the price. There will always be someone who wants to buy your Treasuries. And there will always be important bills you can settle in dollars. When we say that the U.S. dollar is the reserve currency of the world, what we are talking about are not America’s nondescript green banknotes. What we are talking about is the wealth stored in interest-bearing U.S. Treasuries. A common chain of events in a recession is, therefore, for the price of equities to fall and the price of Treasuries to rise.

Among American moneymen, Dalio is known for his interest in history. After studying the rise and decline of financial empires over the last five hundred years, Dalio was convinced that a fundamental shift was under way. The United States, he warned, was “creating a lot of debt and printing a lot of money, which in history was a threat to reserve currencies.” “The fundamentals are undermining the U.S. dollar.” The conclusion could not be dodged: the future belonged to China. As Dalio remarked somewhat defensively, “People have accused me of being biased, naive, and in some cases unpatriotic. I think I’m just being objective.”45 If Bridgewater’s boss was not explicit enough, Karen Karniol-Tambour, the precocious head of investment research at the firm, fleshed out the argument in an interview she gave at the end of the year to Barron’s magazine, the weekly reading of retail investors and financial advisors across Middle America.


pages: 1,202 words: 424,886

Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi

accounting loophole / creative accounting, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, cross-border payments, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, Dutch auction, financial innovation, financial intermediation, fixed income, flag carrier, foreign exchange controls, full employment, Glass-Steagall Act, Goodhart's law, Greenspan put, guns versus butter model, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, land bank, large denomination, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market bubble, market clearing, market fundamentalism, Money creation, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Phillips curve, Ponzi scheme, price mechanism, price stability, profit motive, proprietary trading, prudent man rule, Real Time Gross Settlement, reserve currency, risk free rate, risk tolerance, risk/return, Savings and loan crisis, seigniorage, shareholder value, short selling, short squeeze, tail risk, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game

First, because they are constantly traded in the secondary market in large volume and at narrow spreads between the bid and asked prices, they are highly liquid. Second, governments are considered to be free from credit risk because it is inconceivable that the government would default on them. Third, interest income on governments is exempt from state taxation. Fourth, because the U.S. dollar remains the reserve currency in the global financial system, the Treasury market is truly a global market. Because of these advantages, bills and governments having a short current maturity normally trade at yields below those of other money market instruments. Generally, yields on governments are higher the longer their current maturity, that is, time left to maturity.

London has a long history as a world center for a host of financial activities: international lending, trade financing, commodities trading, stock trading, foreign-exchange trading, insurance, and others. In truth, that square mile of London known as the City of London, or more often as just the City, is and has been since the nineteenth century the financial capital 9 Gabriele Galati and Philip Wooldridge, “The Euro as a Reserve Currency: A Challenge to the Pre-Eminence of the U.S. Dollar?” The Bank for International Settlements, BIS Working Papers, October 2006. FIGURE 7.7 U.S. dollar international claims and liabilities of the world. London continues to be the largest depository of Eurodollars in the world, although more of the money deposited in London is being directed to nonbank borrowers than in years past, particularly to the United States.10 This is evidenced by the interbank recycling ratio, which shows the extent to which dollars deposited in the United Kingdom have been recycled into the banking system (Figure 7.8).

The Fed has also done a lot of its reverses and MSPs with foreign central banks, and, since the mid-1970s, the Fed has permitted dealers to show customer money to it when it was doing reverses and customer collateral to it when it was doing repos. Many dealers’ customers, however, are unaware of this possibility. Transactions for the Accounts of Foreign Central Banks Foreign central banks hold short-term balances of dollars for a number of reasons. One is that the dollar is a reserve currency, a currency that foreign central banks hold, instead of or in addition to gold, as part of their foreign-exchange reserves. Also, when the dollar is weak, some foreign central banks—chiefly the Bank of Japan—will buy dollars in an attempt to stabilize foreign-exchange rates. The Fed offers to invest, in either bills or repos, any dollar balances that foreign central banks hold with it.


pages: 200 words: 47,378

The Internet of Money by Andreas M. Antonopoulos

AltaVista, altcoin, bitcoin, blockchain, clean water, cognitive dissonance, cryptocurrency, disruptive innovation, Dogecoin, Ethereum, ethereum blockchain, financial exclusion, global reserve currency, information security, litecoin, London Interbank Offered Rate, Marc Andreessen, Oculus Rift, packet switching, peer-to-peer lending, Ponzi scheme, QR code, ransomware, reserve currency, Satoshi Nakamoto, self-driving car, skeuomorphism, Skype, smart contracts, the medium is the message, trade route, Tragedy of the Commons, underbanked, WikiLeaks, zero-sum game

We’re still at the laughing-at-us stage. That’s quite all right, because by the time they get to fighting us, they’ve already lost. This technology just went global with the introduction of more than $2.5 billion from Chinese investors who discovered a counterbalance to the world domination of the global reserve currency of the US dollar. 1.5.1. Altcoins: Currencies for Everyone There are almost 200 currencies of the world, but there’s only one international currency. There are almost 200 currencies controlled by central banks and governments, but there is only one mathematical currency today, and that is bitcoin.


pages: 140 words: 91,067

Money, Real Quick: The Story of M-PESA by Tonny K. Omwansa, Nicholas P. Sullivan, The Guardian

Blue Ocean Strategy, BRICs, business process, business process outsourcing, call centre, cashless society, cloud computing, creative destruction, crowdsourcing, delayed gratification, dematerialisation, democratizing finance, digital divide, disruptive innovation, end-to-end encryption, financial exclusion, financial innovation, financial intermediation, income per capita, Kibera, Kickstarter, M-Pesa, microcredit, mobile money, Network effects, new economy, reserve currency, Salesforce, Silicon Valley, software as a service, tontine, transaction costs

Total assets in the banking sector increased at roughly the same rate. Two metrics show just how positive the development of M-PESA has been for banks. Since 2007, when M-PESA was introduced, the amount of currency outside banks has been declining steadily, as a percentage of overall money supply and reserve currency. Central Bank Governor Ndung’u cites this an a signal of increased financial intermediation, implying that many who had previously been excluded from banking services were now using more appropriate financial instruments. As Ndemo, the permanent secretary of Kenya’s ICT Ministry notes: “Mobile money has brought money that used to be under the pillows into circulation.


pages: 209 words: 53,236

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, Alan Greenspan, bank run, behavioural economics, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, decentralized internet, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, guns versus butter model, Home mortgage interest deduction, impact investing, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jeff Bezos, John Bogle, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, low interest rates, Marc Andreessen, Mark Spitznagel, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, obamacare, OSI model, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reality distortion field, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, Skinner box, smart grid, Solyndra, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

But the doomsayers were honest in their belief that the dollar could not survive the Fed’s fivefold increase in its dollar holdings of “high-powered” reserves. Many imagined that China and other holders and users of massive dollar reserves would join to overthrow the American dollar’s hegemony as the world’s reserve currency. And then, against all odds, at least as understood by hard-money economists and bullion enthusiasts, what eventually cracked and crashed was not the dollar but gold. From 2012 to 2014, the precious metal lost 40 percent of its value against the dollar, which went on an awesome tear against nearly all the world’s currencies and commodities.


American Secession: The Looming Threat of a National Breakup by F. H. Buckley

Affordable Care Act / Obamacare, Andrei Shleifer, belling the cat, Bernie Sanders, British Empire, Cass Sunstein, colonial rule, crony capitalism, desegregation, diversified portfolio, Donald Trump, Francis Fukuyama: the end of history, guns versus butter model, hindsight bias, illegal immigration, immigration reform, income inequality, low interest rates, Michael Milken, military-industrial complex, old-boy network, Paris climate accords, race to the bottom, Republic of Letters, reserve currency, Ronald Coase, Stephen Fry, Suez crisis 1956, transaction costs, Washington Consensus, wealth creators

We’re responsible for 35 percent of the world’s military spending, more than China, Russia and the next five countries combined. In doing so, we have created a global commons, with all the wealth gains that come from international commerce, open sea-lanes, unhindered trade and a U.S. dollar that’s the world’s reserve currency. Because of us, world GDP has increased twentyfold since the Second World War, and so we’re now hearing American demands to make our allies pay their fair share of defense spending. President Trump’s criticism of our free-riding NATO allies, backed up by his trade threats, seems to be having an effect.


pages: 537 words: 149,628

Ghost Fleet: A Novel of the Next World War by P. W. Singer, August Cole

3D printing, Admiral Zheng, air gap, augmented reality, British Empire, digital map, energy security, Firefox, glass ceiling, global reserve currency, Google Earth, Google Glasses, IFF: identification friend or foe, Just-in-time delivery, low earth orbit, Maui Hawaii, military-industrial complex, MITM: man-in-the-middle, new economy, old-boy network, operational security, RAND corporation, reserve currency, RFID, Silicon Valley, Silicon Valley startup, South China Sea, sovereign wealth fund, space junk, stealth mode startup, three-masted sailing ship, trade route, Virgin Galactic, Wall-E, We are Anonymous. We are Legion, WikiLeaks, zero day, zero-sum game

Put it this way: enjoy yourselves and all this sunshine because your grandkids are still going to be paying the tab.” “They’ll be paying in ramen,” said Lieutenant Gupal, one of the ship’s newest officers. Ramen was slang for RMN, renminbi, the Chinese currency that, along with the euro, had joined the American dollar as the global reserve currency following the dollar’s post-Dhahran crash. “At least we can sail with our own oil now,” said Captain Riley. “When I joined back in the Stone Age, Middle East oil owned the market.” “True enough,” said Simmons. “And shale extraction is coming back at even higher levels than before the moratorium after the New York quake.

fips=wotc&trk=p3. 13 ever since Chinese special operations forces: Dean Cheng, “The Chinese People’s Liberation Army and Special Operations,” Special Warfare 25, no. 3 (July–September 2012), accessed March 18, 2014, http://www.dvidshub.net/publication/issues/10629. 14 renminbi, the Chinese currency: Xinhua, “RMB to Be Global Reserve Currency by 2030: Economist,” China Daily, April 9, 2014, accessed August 19, 2014, http://www.chinadaily.com.cn/china/2014-04/09/content_17420923.htm. 14 “sail with our own oil”: Mark Thompson, “U.S. to Become Biggest Oil Producer — IEA,” CNN, November 12, 2012, accessed November 12, 2012, http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/index.html?


pages: 537 words: 158,544

Second World: Empires and Influence in the New Global Order by Parag Khanna

Abraham Maslow, Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, continuation of politics by other means, crony capitalism, death from overwork, Deng Xiaoping, different worldview, Dissolution of the Soviet Union, Donald Trump, dual-use technology, Edward Glaeser, energy security, European colonialism, export processing zone, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, gentrification, Gini coefficient, global reserve currency, global supply chain, Great Leap Forward, guns versus butter model, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, karōshi / gwarosa / guolaosi, Khyber Pass, Kickstarter, knowledge economy, land reform, Londongrad, low cost airline, low skilled workers, mass immigration, means of production, megacity, meritocracy, military-industrial complex, Monroe Doctrine, Nelson Mandela, no-fly zone, oil shale / tar sands, oil shock, oil-for-food scandal, open borders, open economy, Parag Khanna, Pax Mongolica, Pearl River Delta, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, restrictive zoning, rising living standards, Robert Solow, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Suez crisis 1956, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce

During the Cold War, American allies tolerated the overvalued dollar, knowing it was necessary to sustain America’s military commitment to protect them, but the goodwill on which that exceptionalism rests is quickly evaporating. Not only are China and Japan the two largest holders of U.S. dollar reserves, but for the first time in history, the world’s main reserve currency belongs to a debtor nation—and one indebted to its rivals.18 America’s fiscal and trade imbalances make the dollar no longer the safest haven of investment, inspiring a gradual diversification of both currency holdings and the pricing of commodities such as oil. Though the world has several major currencies, there are three whose value all are constantly watching: the U.S. dollar, the Euro, and the Chinese renminbi.

Jeane Kirkpatrick, American ambassador to the UN during the 1980s, justified supporting autocrats because such regimes did not seek to reinvent society (as totalitarian systems do). See Kirkpatrick, “Dictatorships and Double-Standards,” Commentary, November 1979. 18. Though control over the global money supply is a key vehicle of exporting influence, the paramount status of the U.S. dollar as a global reserve currency is not coterminous with American monetary dominance when currencies are denationalized as they are today. See Benjamin J. Cohen, “The Geopolitics of Currencies and the Future of the International System,” University of California, Santa Barbara, Global and International Studies Program, Paper no. 10, 2003.


pages: 554 words: 158,687

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

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

For other member states the euro has implied loss of the weapon of currency depreciation in the face of German exporting prowess. German financial capital has, meanwhile, benefited from the homogeneity of the money market within the European Monetary Union and from the global role of the euro as reserve currency. The euro has facilitated bank borrowing in international markets, lending across the world, and engaging in financial transactions. In particular, the tendency of the euro to rise against the dollar in the 2000s has benefited the German financial sector but also German industrial capital by facilitating its relocation across Europe.48 FIG. 5 Evolution of nominal unit labour costs in the eurozone A striking feature of the development of the eurozone has been the emergence of a division between core and periphery, the latter including at least Spain, Portugal, Ireland, and Greece.49 The split between core and periphery has emanated from a ‘race to the bottom’ in eurozone labour markets.

European states intervene with limited results Intervention by the state has been fundamental to confronting the eurozone turmoil, but both outlook and methods have been quite different to those in the US. The reasons ultimately lie in the political and social relations underpinning the euro. As has been mentioned above, monetary union in Europe essentially represents a hierarchical alliance of sovereign states giving rise to a new form of world money. To support the nascent reserve currency the eurozone has had to institute a single central bank, proclaiming its liabilities to be legal tender as well as creating a homogeneous money market to provide liquidity to the banks of the monetary union. However, eurozone banks have remained largely national with regard to regulation and to solvency.


pages: 543 words: 147,357

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

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

There was already a vast pool of money available to the banks and other companies, managed by professional treasury managers – the so-called interbank money market. This had been developing since the 1960s and was given a huge boost when the era of floating exchange rates began. Companies, banks and even countries dealing in cash denominated in one of the world’s reserve currencies could lend to each other in that currency or access the interbank market in another reserve currency – principally the dollar and the yen, but also the pound, the Swiss franc and German mark – and hedge against the risk of potentially adverse, loss-making movements. They could buy derivatives – essentially promises to settle a deal in the future at a rate linked to today’s rate (arithmetically connected to relative future interest rates) – or they could swap each other’s liabilities and assets.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

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

Meanwhile, having fuelled a market boom with the biggest US tax cut in history, Trump fell out with the US Federal Reserve, which had embarked on a series of interest rate increases to curb the overheating. Trump fired Janet Yellen and appointed Kevin Warsh, an inflation hawk turned dove, to replace her. Confidence in the dollar began to plummet. Sensing an opening, China unveiled a five-year roadmap to make the renminbi the world’s co-equal premier reserve currency with the US dollar. Having exhausted the WTO option in 2017, China unveiled a series of retaliatory measures in mid-2018. ‘We cannot sit passively while America sets fire to the global trading system,’ said Xi. Though China made sure to calibrate its steps ‘in proportion to the damage’ the US had caused, there was little chance of turning back.


pages: 248 words: 57,419

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

Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Ben Bernanke: helicopter money, Bretton Woods, business cycle, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, Glass-Steagall Act, income inequality, inflation targeting, It's morning again in America, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, low interest rates, market bubble, market fundamentalism, mass immigration, megaproject, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, Nixon triggered the end of the Bretton Woods system, private sector deleveraging, quantitative easing, reserve currency, risk free rate, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

In this scenario, stock prices would move significantly higher from the time that QE3 is announced. Gold and silver would spike higher. The price of food and other commodities would also jump. Bond yields would be kept low (effectively set) by Fed purchases of government bonds. The dollar would fall relative to other currencies, as faith in the reserve currency status of the dollar continued to erode. QE3 would prevent the economy from collapsing into a severe depression by pushing up stock prices. Higher stock prices would create a positive wealth effect that would give a short-term boost to the economy. The recovery, however, would be short-lived because inflation (caused by rapidly rising commodity prices) would accelerate after a lag of six months or so.


pages: 218 words: 62,889

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

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

She believes that fintech is nothing but the Eurodollar market 2.0.5 It combines many elements, from encrypted transactions to hidden identities and e-wallets, each of which seems to be perfectly geared to allow crime and tax evasion. We happen to think that Kaminska is on the right track. Back in the late 1950s the niche for unregulated financial transactions in London enabled banks around the world to sabotage existing rules on capital flows, reserves, currency rates and many other national regulations. Over time the market would evolve to become the thriving financial centre in the City of London of today, firmly wedded to the web of former British colonies turned financial havens. While some markets centred in London have achieved great efficiencies in terms of liquidity and scale (for instance, in foreign exchange trading), the network of city-based financial institutions, as well as law and accounting firms, has been essential to making possible schemes that play a key role in regulatory arbitrage, tax avoidance and money laundering.


pages: 586 words: 160,321

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

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

Global Financial System and Imbalances The US tradition thought of the international monetary system as fundamentally a given, although Americans wanted other countries, in particular surplus countries, to take on more of the task of adjustment in the existing international monetary system. In France, by contrast, there was a long-standing suspicion of the US role as issuer of the global reserve currency (that went back to General de Gaulle’s famous criticism of the US dollar). Consequently, French leaders wished that Europe could create a currency that would be more actively managed and supplant the United States’ long-lived exorbitant privilege. The US and UK view linked the inadequate European fiscal response to a long-standing debate about global financial imbalances, in which the United States had long worried about the distortions imposed on the world economy by countries running persistent current account surpluses.

It encouraged individuals and financial institutions to lend to and invest in the East Asian countries, drawn by high domestic interest rates and returns on investment, and reassured about currency risk by the belief that the IMF would bail them out if the unexpected happened and the exchange pegs broke.”7 On the IMF board, the moral hazard worry was articulated most forcefully and consistently by the German representatives. It was also Germany that successfully blocked a proposal in October 1994 at the annual IMF meeting in Madrid to undertake a general issue of the IMF’s reserve currency, the special drawing right (SDR). As the Germans argued, there was no evidence of a general liquidity shortage that was the condition in the IMF’s amended Articles of Agreement for a new issue.8 The IMF’s liquidity assistance alone is typically not enough to turn a country around by itself and make its debt level sustainable.


Trade Your Way to Financial Freedom by van K. Tharp

asset allocation, backtesting, book value, Bretton Woods, buy and hold, buy the rumour, sell the news, capital asset pricing model, commodity trading advisor, compound rate of return, computer age, distributed generation, diversification, dogs of the Dow, Elliott wave, high net worth, index fund, locking in a profit, margin call, market fundamentalism, Market Wizards by Jack D. Schwager, passive income, prediction markets, price stability, proprietary trading, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, Sharpe ratio, short selling, Tax Reform Act of 1986, transaction costs

The more you understand the concept you are trading, the less need you have to do historical testing. Second, I would strongly suggest that you imagine various scenarios that might happen in the market. For example, you might imagine the next war, a nuclear terrorist attack, the adoption of the euro as the world’s reserve currency, the adoption of a common currency in Asia, China joining Japan to become a common power, or an unemployment report that jumps 120 percent. Some of these ideas might seem wild, but if you can understand how your system concept would handle these events if they actually happened, then you understand your concept very well.

I decided to take a look at a graph of the U.S. debt of the past 100 years, and that graph is shown in Figure 6.1. It’s not a pretty picture. In 1900 our debt was about $2.1 billion. It goes from $2.6 billion to $16 billion in 1920 after the formation of the Federal Reserve. The debt begins to take off in 1950 after the expenses of World War II, supported by the U.S. dollar being adopted as the reserve currency of the world. It takes off again in 1980 after the expenses of the Vietnam War and the United States’ refusal to redeem dollars for gold. But since that time, it’s gotten totally out of control, and by 2006, which is not a full 10 years from 2000, the official debt is $8.5 trillion. We could easily see our official debt at $15 trillion by 2010.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, airline deregulation, Alan Greenspan, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, electricity market, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, Great Leap Forward, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Bogle, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, Paul Volcker talking about ATMs, payday loans, Phillips curve, price stability, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, search costs, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, Tragedy of the Commons, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

Part of the reason for the trade imbalances is the role of the United States as a reserve currency. Others want to hold dollars as backing for their country and their currency. The consequences is that we are exporting T-bills (U.S. short-term bonds), rather than automobiles. Exporting T-bills, however, doesn’t create jobs. In spite of global recognition of the anachronistic system—it makes no sense for the United States to play such a disproportionate role in the global monetary system in the multipolar world of the twenty-first century—the Obama administration has resisted change, partially out of worry that if the United States was not the reserve currency, it would be more difficult to borrow so cheaply.


The Economic Weapon by Nicholas Mulder

anti-communist, Boycotts of Israel, Bretton Woods, British Empire, capital controls, classic study, deglobalization, European colonialism, falling living standards, false flag, foreign exchange controls, global pandemic, guns versus butter model, Monroe Doctrine, power law, reserve currency, rising living standards, Suez crisis 1956, transatlantic slave trade, éminence grise

Its hegemony derived less from goods trade than from international leadership in corporate, regulatory, technological, and financial structures—an ensemble of capacities that policymakers have come to see as tools of “economic statecraft.”19 Finance is a particularly potent conduit for pressure. Just as Hawtrey, Strakosch, and Keynes saw the City of London as an essential sanctionist hub in the 1920s, so the pivotal role of Wall Street in the global financial system since the 1970s has provided significant levers for policymakers to exploit.20 Because the dollar is the premier reserve currency and most popular medium for global trade and debt issuance, a vast segment of international markets and firms falls under U.S. jurisdiction in some way or other. This “weaponized interdependence” has been deepened by the unprecedented interventions of the Federal Reserve since the 2008 global financial crisis.21 Today, global banks and corporate finance are the frontline of sanctions implementation and compliance.

It was a fact evident at the time in studies such as Paul Einzig, Behind the Scenes of International Finance (London: Macmillan, 1931), and Ragnar Nurkse, International Currency Experience: Lessons of the Interwar Period (Geneva: League of Nations, 1944), the implications of which have since been documented further by Adam Tooze, The Wages of Destruction: The Breaking and Making of the Nazi Economy (London: Viking, 2006), pp. 71–96, 214, 232–234; Barry Eichengreen and Marc Flandreau, “Rise and Fall of the Dollar, or When Did the Dollar Overtake Sterling as the Leading Reserve Currency?” European Review of Economic History 13, no. 3 (2009): 377–411; Nicholas Crafts and Peter Fearon, “Lessons from the 1930s Great Depression,” Oxford Review of Economic Policy 26, no. 3 (Autumn 2010): 285–317; and Stefan J. Link, Forging Global Fordism: Nazi Germany, Soviet Russia, and the Contest over the Industrial Order (Princeton, NJ: Princeton University Press, 2020), pp. 16, 102, 115–117, 134. 8.


Likewar: The Weaponization of Social Media by Peter Warren Singer, Emerson T. Brooking

4chan, active measures, Airbnb, augmented reality, barriers to entry, battle of ideas, Bellingcat, Bernie Sanders, Black Lives Matter, British Empire, Cambridge Analytica, Cass Sunstein, citizen journalism, Citizen Lab, Comet Ping Pong, content marketing, crony capitalism, crowdsourcing, data science, deep learning, digital rights, disinformation, disintermediation, Donald Trump, drone strike, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, fake news, false flag, Filter Bubble, global reserve currency, Google Glasses, Hacker Conference 1984, Hacker News, illegal immigration, information security, Internet Archive, Internet of things, invention of movable type, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jacob Silverman, John Gilmore, John Markoff, Kevin Roose, Kickstarter, lateral thinking, lolcat, Mark Zuckerberg, megacity, Menlo Park, meta-analysis, MITM: man-in-the-middle, Mohammed Bouazizi, Moneyball by Michael Lewis explains big data, moral panic, new economy, offshore financial centre, packet switching, Panopticon Jeremy Bentham, Parag Khanna, pattern recognition, Plato's cave, post-materialism, Potemkin village, power law, pre–internet, profit motive, RAND corporation, reserve currency, sentiment analysis, side project, Silicon Valley, Silicon Valley startup, Snapchat, social web, South China Sea, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, systems thinking, too big to fail, trade route, Twitter Arab Spring, UNCLOS, UNCLOS, Upton Sinclair, Valery Gerasimov, We are Anonymous. We are Legion, We are as Gods, Whole Earth Catalog, WikiLeaks, Y Combinator, yellow journalism, Yochai Benkler

Put it this way: enjoy yourselves and all this sunshine because your grandkids are still going to be paying the tab.” “They’ll be paying in ramen,” said Lieutenant Gupal, one of the ship’s newest officers. Ramen was slang for RMN, renminbi, the Chinese currency19 that, along with the euro, had joined the American dollar as the global reserve currency following the dollar’s post-Dhahran crash. “At least we can sail with our own oil20 now,” said Captain Riley. “When I joined back in the Stone Age, Middle East oil owned the market.” “True enough,” said Simmons. “And shale extraction is coming back at even higher levels than before the moratorium after the New York quake.

fips=wotc&trk=p3. 18 ever since Chinese special operations forces: Dean Cheng, “The Chinese People’s Liberation Army and Special Operations,” Special Warfare 25, no. 3 (July–September 2012), accessed March 18, 2014, http://www.dvidshub.net/publication/issues/10629. 19 renminbi, the Chinese currency: Xinhua, “RMB to Be Global Reserve Currency by 2030: Economist,” China Daily, April 9, 2014, accessed August 19, 2014, http://www.chinadaily.com.cn/china/2014-04/09/content_17420923.htm. 20 “sail with our own oil”: Mark Thompson, “U.S. to Become Biggest Oil Producer—IEA,” CNN, November 12, 2012, accessed November 12, 2012, http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/index.html?


pages: 235 words: 65,885

Peak Everything: Waking Up to the Century of Declines by Richard Heinberg, James Howard (frw) Kunstler

Adam Curtis, addicted to oil, An Inconvenient Truth, anti-communist, Asilomar, back-to-the-land, carbon tax, classic study, clean water, Community Supported Agriculture, deindustrialization, delayed gratification, demographic transition, ending welfare as we know it, energy transition, Fractional reserve banking, greed is good, Haber-Bosch Process, happiness index / gross national happiness, income inequality, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, land reform, Lewis Mumford, means of production, oil shale / tar sands, peak oil, planned obsolescence, plutocrats, reserve currency, ride hailing / ride sharing, Ronald Reagan, the built environment, the scientific method, Thomas Malthus, too big to fail, urban planning

Thus the payoff that came at the end of World War II carried an historic inevitability: with its resource base, factories, and highly motivated work force, the US had helped win the war without damage to its internal infrastructure. In contrast, Britain and the USSR had also emerged winners, but only after seeing their cities, railroads, and factories bombed. While the rest of the industrial world lay in ruins, America stood unscathed. Because of the American economy’s stability, the US dollar was adopted as a reserve currency by other nations. American oil wells supplied over half the total amount of petroleum being extracted globally. Sixty percent of all export goods delivered throughout the world carried a “Made in USA” tag. General Motors was the world’s biggest corporation and Hollywood films were on screens everywhere.


pages: 222 words: 50,318

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

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

The future higher price for imported oil will put an even greater strain on the U.S. economy, compounding the continued balance of trade deficits, which are running at historically high levels (more than six percent of the gross domestic product) during the 2000s.57 The value of residential and commercial real estate that can be reached only by cars will certainly be significantly devalued when peak oil is reached, whenever that may be. The dollar will probably fall in value, making imported goods much more expensive, and the dollar 82 | THE OPTION OF URBANISM may lose its status as the world’s reserve currency. Some forecasters have suggested that peak oil, if it occurs without alternative energy sources under development, could trigger a global depression similar to the 1930s. The U.S. economy will have painted itself into a corner if peak oil arrives and the only option is drivable sub-urban development.


pages: 254 words: 69,276

The Metric Society: On the Quantification of the Social by Steffen Mau

Airbnb, cognitive bias, cognitive load, collaborative consumption, connected car, crowdsourcing, digital capitalism, double entry bookkeeping, future of work, gamification, income inequality, informal economy, invisible hand, knowledge economy, labour market flexibility, lifelogging, Mark Zuckerberg, meritocracy, mittelstand, moral hazard, personalized medicine, positional goods, principal–agent problem, profit motive, QR code, reserve currency, school choice, selection bias, sharing economy, smart cities, subprime mortgage crisis, the scientific method, the strength of weak ties, Uber for X, vertical integration, web of trust, Wolfgang Streeck

To put it another way, the logic of optimization and performance enhancement which neoliberalism has imposed on every conceivable aspect of life is leading to a straightforward battle for the best figures. Moreover, the more figures are produced, and the more advanced the methods of data collection and processing become, the easier it is to embed the standards for performance and self-improvement within the social fabric. Now that data have evolved into the reserve currency of digitalized society, there are scarcely any natural boundaries left to halt this process. It is, in effect, infinite. What does quantification mean? First, let us consider the question of what quantification actually means, and what it does. In general terms, quantification entails an act of translation: it expresses phenomena, characteristics or states of affairs in a general, abstract and universally accessible language – that of mathematics.


pages: 305 words: 69,216

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

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

In fact the banks were unable to attract enough new private capital to assure their solvency. Warren Buffett's $5 billion loan to Goldman Sachs in September 2008 was an exception—Mitsubishi's $9 billion investment in Morgan Stanley the following month was not, because it was guaranteed by the federal government. At least until the U.S. dollar ceases to be the world's principal reserve currency (a currency held by foreign banks as well as by the issuing country's own banks, and used as a major medium for international transactions), the federal government has almost unlimited capital because of its taxing, borrowing, and money-creating powers, and it is not constrained by having to make a profit or even cover its costs to survive.


pages: 218 words: 68,648

Confessions of a Crypto Millionaire: My Unlikely Escape From Corporate America by Dan Conway

Affordable Care Act / Obamacare, Airbnb, bank run, basic income, Bear Stearns, Big Tech, bitcoin, blockchain, buy and hold, cloud computing, cognitive dissonance, corporate governance, crowdsourcing, cryptocurrency, disruptive innovation, distributed ledger, double entry bookkeeping, Ethereum, ethereum blockchain, fault tolerance, financial independence, gig economy, Gordon Gekko, Haight Ashbury, high net worth, holacracy, imposter syndrome, independent contractor, initial coin offering, job satisfaction, litecoin, Marc Andreessen, Mitch Kapor, obamacare, offshore financial centre, Ponzi scheme, prediction markets, rent control, reserve currency, Ronald Coase, Satoshi Nakamoto, Silicon Valley, Silicon Valley billionaire, smart contracts, Steve Jobs, supercomputer in your pocket, tech billionaire, tech bro, Tragedy of the Commons, Turing complete, Uber for X, universal basic income, upwardly mobile, Vitalik Buterin

A new meme called the Flippening took hold in the crypto community and mainstream press. It refers to the moment when Ethereum overtakes Bitcoin as the blockchain with the most value. Both coins had skyrocketed, but ETH was going up more. Were the Flippening to occur, ETH would replace bitcoin as the first crypto among peers. ETH would become the crypto reserve currency with the most fiat on-ramps. Its price would go ballistic. I always thought ETH would skyrocket when the first dApp achieved mainstream usage a year or two or three down the line. Even to a speculator like me, this felt too much, too fast. But maybe this was what the Beatles felt like when they got too big, too fast.


pages: 819 words: 181,185

Derivatives Markets by David Goldenberg

Black-Scholes formula, Brownian motion, capital asset pricing model, commodity trading advisor, compound rate of return, conceptual framework, correlation coefficient, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, en.wikipedia.org, financial engineering, financial innovation, fudge factor, implied volatility, incomplete markets, interest rate derivative, interest rate swap, law of one price, locking in a profit, London Interbank Offered Rate, Louis Bachelier, margin call, market microstructure, martingale, Myron Scholes, Norbert Wiener, Paul Samuelson, price mechanism, random walk, reserve currency, risk free rate, risk/return, riskless arbitrage, Sharpe ratio, short selling, stochastic process, stochastic volatility, time value of money, transaction costs, volatility smile, Wiener process, yield curve, zero-coupon bond, zero-sum game

224; bank borrowing in spot Eurodollar (ED) market 250; ‘buying’ and ‘selling’ Eurodollar (ED) futures 256; calculation of adjusted hedge ratios 245; solution to 269; calculation of optimal (risk-minimizing) hedge ratio 240; cash settlement and effective price on S&P 500 spot index units 234; solution to 269; exchange rate risk, currency positions and 218; solution to 268; foreign exchange (FX) risk and jet fuel market 219; solution to 268–9; underlying spot 3-month Eurodollar (ED) time deposit 261; solution to 270; contract month listings 214, 215, 228; contract offerings 227–8; contract size 214, 215, 227, 228; contracts offered 257–8; currency forward positions vs. currency futures positions 220; currency futures 213–17; contract specifications 213–15; pricing vs. currency forward pricing 225; quote mechanism, future price quotes 216–17; risk management strategies using 217–24; daily price limits 228, 229; daily settlements 216, 260; diversifiable risk 225; dividend-adjusted geometric mean (for S&P 500) 227; dollar equivalency 227, 234, 239–40; economy-wide factors, risk and 225–6; effective payoff 220, 233; EFP eligibility 214; Eurodollar (ED) deposit creation 253; Eurodollar (ED) futures 220–1, 245, 246, 249, 250, 252–64; cash settlement, forced convergence and 258–61; contract specifications 254–5; forced convergence, cash settlement and 258–61; open positions, calculation of profits and losses on 262–4; quote mechanism 256–8; exchange rate risks and currency futures positions 217–20; Lufthansa example 217–20; exchange rule 214, 228; exchange-traded funds (ETFs) 226; exercises for learning development 266–8; Fed Funds Rate (FFR) 251; Federal Funds (FF) 249–50, 251, 252; Federal Reserve system (US) 249; financial futures contracts, selection of 213; FLIBOR (Futures LIBOR) 256, 257, 262, 263, 264, 267–8; forced conversion of Eurodollar (ED) futures 260; foreign exchange (FX) reserves, currency composition of 247–8; forward price change, present value of 242; hedging 224–5; hedging a cross hedge 244; issues in 224–5; quantity uncertainty 224–5; holding period rate of return 237; idiosyncratic risk 225; index points 226; interest rate derivatives (IRDs) 254; International Monetary Fund (IMF) 246; JPY/USD futures 213–15; key concepts 265–6; last trade date/time view calendar 214, 228; lending (offering) Eurodollars (EDs) 249–50; liabilities, Eurodollars (EDs) and 246; LIBID (London Interbank Bid Rate) 249–50, 252; LIBOR (London Interbank Offered Rate) 249, 250–4, 262, 263–4; Federal Funds (FF) vs. 251–2; liquidity and 220, 222, 231, 237, 252, 258; lock-in characteristics 220, 233; market risk 225–6; minimum price increment 214, 215; naive hedge ratio (NHR) 234, 240–1, 243; open interest 258; placing Eurodollars (EDs) 248–9; position accountability 214, 215, 228, 229; raw price change, present value of 243; realized daily cash flows, creation of 243; risk management strategies using currency futures 217–24; risk management using stock index futures 231–45; cross-hedging 243–5; monetizing S&P 500 Spot Index 231–4; naive hedge ratio, adjustment for risk-minimizing hedge ratio 239–41; non S&P 500 portfolios, adjustment of hedge for 243–5; pricing and hedging preliminaries 231; profits from traditional hedge 235–6; risk, return analysis of traditional hedge 236–8; risk minimizing hedge using forward vs. futures contracts 241–3; risk-minimizing hedging 238–9; rolling hedge strategy: efficient market hypothesis (EMH) 223; interpretations of profits from rolling hedge 221–3; Metallgesellschaft example 223; numerical example of 223–4; rule book chapter 228; settlement procedure 214, 228, 229, 258–9; S&P 500 Fact Sheet 226; S&P 500 Futures 228; spot commodities, S&P 500 futures contracts as 233–4; spot Eurodollar market 245–54; Eurodollar time deposits, creation of 252–4; spot 3-month Eurodollar time deposits 246–8; spot trading terminology 248–50; Stigum’s Money Market (Stigum, M.) 252; stock index futures 225–30; commentary 230; S&P 500 futures quotes, quote mechanism for 230; S&P 500 Spot Index 225–7; S&P 500 Spot Index, effective payoff on monetization of 233; S&P 500 Spot Index, monetization of 231–4; S&P 500 Stock Index Futures Contract Specifications 227–9; tailing the hedge 241–2; taking Eurodollars (EDs) 249; ticker symbol 214, 215, 228, 229, 261; timing in Eurodollar (ED) futures 257; tick size 228, 229; trading hours 214, 228; traditional hedge, risk and return analysis on 236–8; basis risk 238; holding period rate 237; intermediate execution, basis risk and 237–8; liquidity advantage in execution 237; unallocated foreign exchange (FX) reserves 248 financial innovation using European Put-Call Parity 401–5; American Put-Call Parity (no dividends) 403–5; generalized forward contracts 401–3 financial institutions and use of swaps 299–301 finite-maturity financial instruments, options as 20, 354 fixed leg in interest-rate swaps 293 fixed payments in interest-rate swaps 278–9 fixed-rate mortgages 7 FLIBOR (Futures LIBOR): financial futures contracts 256, 257, 262, 263, 264, 267–8; interest-rate swaps 278, 287 floating leg in interest-rate swaps 293 floating payments in interest-rate swaps 279–80 floating-rate bond implicit in swap 306 floating-rate payments as expected cash flows 306 floor-brokers 140 floor-traders 140 foreign currencies: forward prices on 24–5; futures prices on 25–6; see also currency futures foreign economy (FE) 103–4 foreign exchange (FX) forward contracts: example of pricing 107–9; pricing using no-arbitrage 106–7 foreign exchange (FX) markets, price quotes in 103–5 foreign exchange (FX) rates (New York, March 11, 2014) 30–1 foreign exchange (FX) reserves, currency composition of 247–8 foreign exchange (FX) risk 3–5 forward contracts: differences between futures contracts and 122; on dividend-paying stocks, pricing with no-arbitrage 100–3; hedging with 37, 43–5; on stocks with dividend yield, pricing with net interest model 99–100; swaps as strips of 274–8; valuation of (assets without dividend yield): default on 76; interpretation via synthetic contracts 78–82; leverage and 80–2; no up-front payments on 75; payment on maturity, expectation of 81; price vs. value for 73; valuing at expiration 74–5; valuing at initiation 75–8 forward market contracting: buying forward 7–8; Clearing House intermediation 14–15; concept checks: controlling for counterparty risk 12–13; exploration of forward rates in long-term mortgage market 9–10; exploration of spot rates in long-term mortgage market 11; solution 29; intermediation by Clearing House 15–16; solution 29–30; spot markets, dealing with price quotes in 6–7; counterparty risk 11; default 11–12; exit mechanism 15–16; features of 8; fixed-rate mortgages 7; forward agreement, terms of 8; forward contracts, differences between futures contracts and 122; forward market 8; forward prices 9, 24–5; forward transactions 8; historical data, checking on 9–10; interest-rate risk management 9–10; intermediation 13–14, 14–15; liquidity, enablement of 16; locked-in prices 12; market levels 11; market organization, importance of 13, 14; obligations, transfer of 16; offsetting trades 15–16; overnight averages 11; price quotes in forward markets 9–11; problems with forward markets 11–13; ‘reversing’ of trades 15–16; short positions 7; SouthWest Airlines, case example 12–13; spot, forward, and futures contracting 7–13; standardization 14; transfer of obligations 16; see also hedging with forward contracts; valuation of forward contracts forward prices 9, 24–5; change in, present value of 242; no-arbitrage, forward pricing with 102–3 front stub period 294 fundamental theorem of asset pricing number one (FTAP1): equivalent martingale measures (EMMs) 509, 511–12, 517, 528–9, 530, 532, 533; model-based option pricing (MBOP) 450, 451, 452; option pricing in continuous time 540; risk-neutral valuation 596–7, 601–2, 605, 606, 624, 631 fundamental theorem of asset pricing number two (FTAP2): binomial option pricing model (BOPM) 490; model-based option pricing (MBOP) 452; option pricing in continuous time 540; risk-neutral valuation 596–7, 601–2, 605, 606, 624, 631; risk-neutral valuation and another version of 606 future value (FV) 69–70, 382, 386, 390, 395 Futures Commission Merchant (FCM) 122, 123, 124, 125, 137, 140 futures contracts: futures market contracting 17; market organization for: ‘buying’ and ‘selling’ of 126–7; daily value of 146; differences between forward contracts and 122; futures price and 127; market participants 122–5 futures market contracting 17–26; concept check, price quotes in futures markets 19; contract size 19; contract specifications 17, 18–19; delivery dates 19; fancy forward prices 19, 25; futures contract 17; futures market 17; futures prices 17, 25–6; futures transaction 17; key definition, futures contract 17; mapping out spot, forward, and futures prices 20–6; ‘Open Outcry Futures’ 19; price quotes in futures markets 17–19; seller’s options 17; as solution to forward market problems 13–16; volatility (uncertainty) 22; see also hedging with futures contracts; market organization for futures contracts futures trading: hedging with forward contracts 35; market organization for futures contracts: cash flow implications of 144; daily settlement, perspectives on 144; delivery obligations 142; offsetting trades 142–4; phases of 125–6 gap management problem, solutions for 300–1 Gaussian distributions 543, 546, 548, 557, 565, 577 general equilibrium (GE) 453; models of, risk-neutral valuation and 615 generalized forward price 402 geometric Brownian motion (GBM) 553–61; continuous version 559–61; discrete version 553–9 Girsanov’s theorem 605 Globex and Globex LOB 134–6 Globex trades, rule for recording of 135 Gold pricing on London Bullion Market 20–3 guaranteeing futures obligations 139–41 hedge ratio: dollar bond position and 478; model-based option pricing (MBOP) and 455 hedging: financial futures contracts 224–5; hedging a cross hedge 244; issues in 224–5; quantity uncertainty 224–5; hedged position profits, graphical method for finding 55; hedgers 37; hedging definitions 168; minimum variance hedging 185–8; estimation of risk minimization hedge ratio 187–8; OLS regression 187–8; risk minimization hedge ratio, derivation of 186–7; motivation for hedging with forward contracts 33–7; objective of 167–8; as portfolio theory 165–8; reverse hedge 618, 620, 621; riskless hedge 607, 616, 620, 628, 632; rolling hedge strategy: efficient market hypothesis (EMH) 223; interpretations of profits from rolling hedge 221–3; Metallgesellschaft example 223; numerical example of 223–4; short hedge 168; synthesis of negative correlation, hedging as 165–7 hedging a European call option in BOPM (N=2) 477–85; complete hedging program (for BOPM, N=2) 484–5; concept check, value confirmation 485; hedge ratio and dollar bond position, definition of (step 2) 478; parameterization (step 1) 477–8; replicating portfolio, construction of (step 3) 478–84; concept check: interpretation of hedge ratio 482; down state, replication in 481; hedge ratio, interpretation of 482–3; replication over period 2 (under scenario 1) 479–82; replication under scenario 2 (over period 2) 484; scenarios 478–9; solving equations for ?

224; bank borrowing in spot Eurodollar (ED) market 250; ‘buying’ and ‘selling’ Eurodollar (ED) futures 256; calculation of adjusted hedge ratios 245; solution to 269; calculation of optimal (risk-minimizing) hedge ratio 240; cash settlement and effective price on S&P 500 spot index units 234; solution to 269; exchange rate risk, currency positions and 218; solution to 268; foreign exchange (FX) risk and jet fuel market 219; solution to 268–9; underlying spot 3-month Eurodollar (ED) time deposit 261; solution to 270; contract month listings 214, 215, 228; contract offerings 227–8; contract size 214, 215, 227, 228; contracts offered 257–8; currency forward positions vs. currency futures positions 220; currency futures 213–17; contract specifications 213–15; pricing vs. currency forward pricing 225; quote mechanism, future price quotes 216–17; risk management strategies using 217–24; daily price limits 228, 229; daily settlements 216, 260; diversifiable risk 225; dividend-adjusted geometric mean (for S&P 500) 227; dollar equivalency 227, 234, 239–40; economy-wide factors, risk and 225–6; effective payoff 220, 233; EFP eligibility 214; Eurodollar (ED) deposit creation 253; Eurodollar (ED) futures 220–1, 245, 246, 249, 250, 252–64; cash settlement, forced convergence and 258–61; contract specifications 254–5; forced convergence, cash settlement and 258–61; open positions, calculation of profits and losses on 262–4; quote mechanism 256–8; exchange rate risks and currency futures positions 217–20; Lufthansa example 217–20; exchange rule 214, 228; exchange-traded funds (ETFs) 226; exercises for learning development 266–8; Fed Funds Rate (FFR) 251; Federal Funds (FF) 249–50, 251, 252; Federal Reserve system (US) 249; financial futures contracts, selection of 213; FLIBOR (Futures LIBOR) 256, 257, 262, 263, 264, 267–8; forced conversion of Eurodollar (ED) futures 260; foreign exchange (FX) reserves, currency composition of 247–8; forward price change, present value of 242; hedging 224–5; hedging a cross hedge 244; issues in 224–5; quantity uncertainty 224–5; holding period rate of return 237; idiosyncratic risk 225; index points 226; interest rate derivatives (IRDs) 254; International Monetary Fund (IMF) 246; JPY/USD futures 213–15; key concepts 265–6; last trade date/time view calendar 214, 228; lending (offering) Eurodollars (EDs) 249–50; liabilities, Eurodollars (EDs) and 246; LIBID (London Interbank Bid Rate) 249–50, 252; LIBOR (London Interbank Offered Rate) 249, 250–4, 262, 263–4; Federal Funds (FF) vs. 251–2; liquidity and 220, 222, 231, 237, 252, 258; lock-in characteristics 220, 233; market risk 225–6; minimum price increment 214, 215; naive hedge ratio (NHR) 234, 240–1, 243; open interest 258; placing Eurodollars (EDs) 248–9; position accountability 214, 215, 228, 229; raw price change, present value of 243; realized daily cash flows, creation of 243; risk management strategies using currency futures 217–24; risk management using stock index futures 231–45; cross-hedging 243–5; monetizing S&P 500 Spot Index 231–4; naive hedge ratio, adjustment for risk-minimizing hedge ratio 239–41; non S&P 500 portfolios, adjustment of hedge for 243–5; pricing and hedging preliminaries 231; profits from traditional hedge 235–6; risk, return analysis of traditional hedge 236–8; risk minimizing hedge using forward vs. futures contracts 241–3; risk-minimizing hedging 238–9; rolling hedge strategy: efficient market hypothesis (EMH) 223; interpretations of profits from rolling hedge 221–3; Metallgesellschaft example 223; numerical example of 223–4; rule book chapter 228; settlement procedure 214, 228, 229, 258–9; S&P 500 Fact Sheet 226; S&P 500 Futures 228; spot commodities, S&P 500 futures contracts as 233–4; spot Eurodollar market 245–54; Eurodollar time deposits, creation of 252–4; spot 3-month Eurodollar time deposits 246–8; spot trading terminology 248–50; Stigum’s Money Market (Stigum, M.) 252; stock index futures 225–30; commentary 230; S&P 500 futures quotes, quote mechanism for 230; S&P 500 Spot Index 225–7; S&P 500 Spot Index, effective payoff on monetization of 233; S&P 500 Spot Index, monetization of 231–4; S&P 500 Stock Index Futures Contract Specifications 227–9; tailing the hedge 241–2; taking Eurodollars (EDs) 249; ticker symbol 214, 215, 228, 229, 261; timing in Eurodollar (ED) futures 257; tick size 228, 229; trading hours 214, 228; traditional hedge, risk and return analysis on 236–8; basis risk 238; holding period rate 237; intermediate execution, basis risk and 237–8; liquidity advantage in execution 237; unallocated foreign exchange (FX) reserves 248 financial innovation using European Put-Call Parity 401–5; American Put-Call Parity (no dividends) 403–5; generalized forward contracts 401–3 financial institutions and use of swaps 299–301 finite-maturity financial instruments, options as 20, 354 fixed leg in interest-rate swaps 293 fixed payments in interest-rate swaps 278–9 fixed-rate mortgages 7 FLIBOR (Futures LIBOR): financial futures contracts 256, 257, 262, 263, 264, 267–8; interest-rate swaps 278, 287 floating leg in interest-rate swaps 293 floating payments in interest-rate swaps 279–80 floating-rate bond implicit in swap 306 floating-rate payments as expected cash flows 306 floor-brokers 140 floor-traders 140 foreign currencies: forward prices on 24–5; futures prices on 25–6; see also currency futures foreign economy (FE) 103–4 foreign exchange (FX) forward contracts: example of pricing 107–9; pricing using no-arbitrage 106–7 foreign exchange (FX) markets, price quotes in 103–5 foreign exchange (FX) rates (New York, March 11, 2014) 30–1 foreign exchange (FX) reserves, currency composition of 247–8 foreign exchange (FX) risk 3–5 forward contracts: differences between futures contracts and 122; on dividend-paying stocks, pricing with no-arbitrage 100–3; hedging with 37, 43–5; on stocks with dividend yield, pricing with net interest model 99–100; swaps as strips of 274–8; valuation of (assets without dividend yield): default on 76; interpretation via synthetic contracts 78–82; leverage and 80–2; no up-front payments on 75; payment on maturity, expectation of 81; price vs. value for 73; valuing at expiration 74–5; valuing at initiation 75–8 forward market contracting: buying forward 7–8; Clearing House intermediation 14–15; concept checks: controlling for counterparty risk 12–13; exploration of forward rates in long-term mortgage market 9–10; exploration of spot rates in long-term mortgage market 11; solution 29; intermediation by Clearing House 15–16; solution 29–30; spot markets, dealing with price quotes in 6–7; counterparty risk 11; default 11–12; exit mechanism 15–16; features of 8; fixed-rate mortgages 7; forward agreement, terms of 8; forward contracts, differences between futures contracts and 122; forward market 8; forward prices 9, 24–5; forward transactions 8; historical data, checking on 9–10; interest-rate risk management 9–10; intermediation 13–14, 14–15; liquidity, enablement of 16; locked-in prices 12; market levels 11; market organization, importance of 13, 14; obligations, transfer of 16; offsetting trades 15–16; overnight averages 11; price quotes in forward markets 9–11; problems with forward markets 11–13; ‘reversing’ of trades 15–16; short positions 7; SouthWest Airlines, case example 12–13; spot, forward, and futures contracting 7–13; standardization 14; transfer of obligations 16; see also hedging with forward contracts; valuation of forward contracts forward prices 9, 24–5; change in, present value of 242; no-arbitrage, forward pricing with 102–3 front stub period 294 fundamental theorem of asset pricing number one (FTAP1): equivalent martingale measures (EMMs) 509, 511–12, 517, 528–9, 530, 532, 533; model-based option pricing (MBOP) 450, 451, 452; option pricing in continuous time 540; risk-neutral valuation 596–7, 601–2, 605, 606, 624, 631 fundamental theorem of asset pricing number two (FTAP2): binomial option pricing model (BOPM) 490; model-based option pricing (MBOP) 452; option pricing in continuous time 540; risk-neutral valuation 596–7, 601–2, 605, 606, 624, 631; risk-neutral valuation and another version of 606 future value (FV) 69–70, 382, 386, 390, 395 Futures Commission Merchant (FCM) 122, 123, 124, 125, 137, 140 futures contracts: futures market contracting 17; market organization for: ‘buying’ and ‘selling’ of 126–7; daily value of 146; differences between forward contracts and 122; futures price and 127; market participants 122–5 futures market contracting 17–26; concept check, price quotes in futures markets 19; contract size 19; contract specifications 17, 18–19; delivery dates 19; fancy forward prices 19, 25; futures contract 17; futures market 17; futures prices 17, 25–6; futures transaction 17; key definition, futures contract 17; mapping out spot, forward, and futures prices 20–6; ‘Open Outcry Futures’ 19; price quotes in futures markets 17–19; seller’s options 17; as solution to forward market problems 13–16; volatility (uncertainty) 22; see also hedging with futures contracts; market organization for futures contracts futures trading: hedging with forward contracts 35; market organization for futures contracts: cash flow implications of 144; daily settlement, perspectives on 144; delivery obligations 142; offsetting trades 142–4; phases of 125–6 gap management problem, solutions for 300–1 Gaussian distributions 543, 546, 548, 557, 565, 577 general equilibrium (GE) 453; models of, risk-neutral valuation and 615 generalized forward price 402 geometric Brownian motion (GBM) 553–61; continuous version 559–61; discrete version 553–9 Girsanov’s theorem 605 Globex and Globex LOB 134–6 Globex trades, rule for recording of 135 Gold pricing on London Bullion Market 20–3 guaranteeing futures obligations 139–41 hedge ratio: dollar bond position and 478; model-based option pricing (MBOP) and 455 hedging: financial futures contracts 224–5; hedging a cross hedge 244; issues in 224–5; quantity uncertainty 224–5; hedged position profits, graphical method for finding 55; hedgers 37; hedging definitions 168; minimum variance hedging 185–8; estimation of risk minimization hedge ratio 187–8; OLS regression 187–8; risk minimization hedge ratio, derivation of 186–7; motivation for hedging with forward contracts 33–7; objective of 167–8; as portfolio theory 165–8; reverse hedge 618, 620, 621; riskless hedge 607, 616, 620, 628, 632; rolling hedge strategy: efficient market hypothesis (EMH) 223; interpretations of profits from rolling hedge 221–3; Metallgesellschaft example 223; numerical example of 223–4; short hedge 168; synthesis of negative correlation, hedging as 165–7 hedging a European call option in BOPM (N=2) 477–85; complete hedging program (for BOPM, N=2) 484–5; concept check, value confirmation 485; hedge ratio and dollar bond position, definition of (step 2) 478; parameterization (step 1) 477–8; replicating portfolio, construction of (step 3) 478–84; concept check: interpretation of hedge ratio 482; down state, replication in 481; hedge ratio, interpretation of 482–3; replication over period 2 (under scenario 1) 479–82; replication under scenario 2 (over period 2) 484; scenarios 478–9; solving equations for ?


pages: 593 words: 189,857

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

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

Brady began with a barrage of talking points about how America was bleeding jobs since the passage of the stimulus, when in fact the stimulus had slowed the bleeding; how our out-of-control spending had blown up the deficit, when in fact we had inherited a record deficit; how the world was preparing to abandon the dollar as its reserve currency, which was simply false; and how business investment was down because of fear about health care reform and tax increases, rather than the epic financial crisis we had just endured. “The buck, in effect, stops with you,” said Brady, a former U.S. Chamber of Commerce executive. “Conservatives agree that as point person you failed.

For months, I had been urging the markets to ignore the political theater, assuring the world it was inconceivable the United States would decide not to pay its bills. But it was starting to look conceivable. Our deadline to raise the debt limit was August 2, and the “fear index” measuring market volatility shot up 40 percent the week before. Analysts questioned the dollar’s status as the world’s reserve currency. Some commentators wanted us to sell gold from Fort Knox to pay our bills, or unilaterally invoke the Fourteenth Amendment’s assurance that U.S. debt “shall not be questioned,” or use a loophole in a law authorizing commemorative coins to mint a trillion-dollar platinum coin to circumvent the debt ceiling.


pages: 1,477 words: 311,310

The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000 by Paul Kennedy

agricultural Revolution, airline deregulation, anti-communist, banking crisis, Berlin Wall, book value, Bretton Woods, British Empire, cuban missile crisis, deindustrialization, Deng Xiaoping, disinformation, European colonialism, floating exchange rates, full employment, German hyperinflation, Great Leap Forward, guns versus butter model, Herman Kahn, imperial preference, industrial robot, joint-stock company, laissez-faire capitalism, long peace, means of production, military-industrial complex, Monroe Doctrine, mutually assured destruction, night-watchman state, North Sea oil, nuclear winter, oil shock, open economy, Peace of Westphalia, Potemkin village, price mechanism, price stability, RAND corporation, reserve currency, Ronald Reagan, Silicon Valley, South China Sea, South Sea Bubble, spice trade, spinning jenny, stakhanovite, Strategic Defense Initiative, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, trade route, University of East Anglia, upwardly mobile, zero-sum game

Its per capita disposable income, a modest $1,186 in 1960 (when the United States’ was $2,491), was an imposing $10,837 in 1979— ahead of the American average of $9,595.233 Year after year, export surpluses were built up, with the deutsche mark needing frequent upward adjustment, and indeed becoming a sort of reserve currency. Although naturally worried at the competition posed by the even more efficient Japanese, the West Germans were undoubtedly the second most successful among the larger “trading states.” This was the more impressive since the country had been separated from 40 percent of its territory and over 35 percent of its population; ironically, the German Democratic Republic was soon to show that it was the most productive and industrialized per capita of all of the eastern European states (including the USSR) despite the loss of millions of its talented labor force to the West.

Over time, however, these capital flows eventually became so strong that they began to outweigh the surpluses which Americans earned on exports of manufactures, foodstuffs, and “invisible” services. Although this increasing payments deficit did see some gold draining out of the United States by the late 1950s, most foreign governments were content to hold more dollars (that being the leading reserve currency) rather than demand payment in gold. As the 1960s unfolded, however, this cozy situation evaporated. Both Kennedy and (even more) Johnson were willing to increase American military expenditures overseas, and not just in Vietnam, although that conflict turned the flow of dollars exported into a flood.

Year after year, the German economy has notched up a surplus in its trade balances second only to Japan’s. Its international reserves are larger than those of any other country in the world (except, presumably, those of Japan after the latter’s recent surge), and the deutsche mark is often used by other nations as a reserve currency. As against all this, one can point to those factors which give the Germans cause for Angst90 The EEC’s agricultural price-support system, long a drain for the German taxpayer, redistributes resources from the most competitive to the least competitive sectors of the economy—and not just in the Federal Republic itself (where there are a surprisingly large number of small farms), but to the peasantry of southern Europe.


Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics by Francis Fukuyama

Asian financial crisis, banking crisis, Berlin Wall, Bletchley Park, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, cognitive bias, contact tracing, cuban missile crisis, currency risk, energy security, Fairchild Semiconductor, flex fuel, global pandemic, Herman Kahn, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John von Neumann, low interest rates, mass immigration, Menlo Park, Mikhail Gorbachev, moral hazard, Norbert Wiener, oil rush, oil shale / tar sands, oil shock, packet switching, RAND corporation, Ray Kurzweil, reserve currency, Ronald Reagan, The Wisdom of Crowds, trade route, Vannevar Bush, Vernor Vinge, Yom Kippur War

It has a large current account deficit because of a government budget deficit and a lack of private savings. East Asia had large current account deficits because of a high level of private investment. The U.S. dollar is less vulnerable to a crisis than East Asian currencies were in the mid-1990s because of the dollar’s global role as a reserve currency and the large size of America’s asset markets. The current account deficit is large in relation to GDP (7 percent), but it is not large in relation to America’s asset markets. The household sector has assets of $64 trillion, and the nonfinancial business sector has assets of $32 trillion. If debt is subtracted, the net value of private assets is about $70 trillion.


pages: 300 words: 76,638

The War on Normal People: The Truth About America's Disappearing Jobs and Why Universal Basic Income Is Our Future by Andrew Yang

3D printing, Airbnb, assortative mating, augmented reality, autonomous vehicles, basic income, Bear Stearns, behavioural economics, Ben Horowitz, Bernie Sanders, call centre, corporate governance, cryptocurrency, data science, David Brooks, DeepMind, Donald Trump, Elon Musk, falling living standards, financial deregulation, financial engineering, full employment, future of work, global reserve currency, income inequality, Internet of things, invisible hand, Jeff Bezos, job automation, John Maynard Keynes: technological unemployment, Khan Academy, labor-force participation, longitudinal study, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, megacity, meritocracy, Narrative Science, new economy, passive income, performance metric, post-work, quantitative easing, reserve currency, Richard Florida, ride hailing / ride sharing, risk tolerance, robo advisor, Ronald Reagan, Rutger Bregman, Sam Altman, San Francisco homelessness, self-driving car, shareholder value, Silicon Valley, Simon Kuznets, single-payer health, Stephen Hawking, Steve Ballmer, supercomputer in your pocket, tech worker, technoutopianism, telemarketer, The future is already here, The Wealth of Nations by Adam Smith, traumatic brain injury, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, unemployed young men, universal basic income, urban renewal, warehouse robotics, white flight, winner-take-all economy, Y Combinator

No one regards that as a waste of money, because the shareholders theoretically are the owners of the company. Are we not, as the citizens of the United States, the owners of this country? As a country, we are easily wealthy enough to manage even a full UBI. Our economy has grown by more than $4 trillion in the past 10 years alone. The U.S. dollar remains the global reserve currency. We are the most technologically advanced society in human history, and increased automation will allow our economy to continue to grow well past its current level. Not only that, but we will get a lot of the money back through new businesses and economic activity, better educational outcomes, improved health and preventative care, better mental health, reduced crime and incarceration, reduced services for homelessness, and many other social benefits.


pages: 322 words: 77,341

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

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

When the dot-com crash came, the fear was that the stock market bust would spread into the rest of the economy and bring it grinding to a halt; so Greenspan responded by cutting interest rates. Non-American readers may wonder what this has to do with them. The answer is twofold. One, the U.S. economy is the biggest in the world, and to a large extent it drives world output and the world economy. Two, the U.S. dollar is what is known as the world’s reserve currency: it is the currency in which a majority of other countries save money and also the currency in which a number of global commodities such as oil and coffee (the world’s number one and number two most traded commodities) are priced. The dollar interest rate is not the planetary interest rate, but in many respects it comes close.


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bond market vigilante , bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, foreign exchange controls, Glass-Steagall Act, guns versus butter model, Hyman Minsky, index fund, intangible asset, interest rate swap, inverted yield curve, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", joint-stock company, junk bonds, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, low interest rates, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, proprietary trading, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

It is also very unlikely that a UK company would accept payment in, say, Venezuelan bolivars because of the difficulty of converting the currency when delivered. For these reasons the majority of international trade is denominated in dollars. Not only is the US unit freely convertible but it is also used by many governments as a reserve currency. Since such a large proportion of their business is done in dollars, companies can match up their payments and receipts to reduce their foreign-exchange risk, using the dollars received from sales to pay for supplies. If a company cannot arrange to pay or be paid either in dollars or in its native currency, its best option is to ask to be paid in some other strong currency.


pages: 241 words: 75,417

The Last President of Europe: Emmanuel Macron's Race to Revive France and Save the World by William Drozdiak

Berlin Wall, bilateral investment treaty, Boeing 737 MAX, Boris Johnson, carbon tax, centre right, cloud computing, disinformation, Donald Trump, dual-use technology, failed state, fake news, Fall of the Berlin Wall, green new deal, Greta Thunberg, high-speed rail, hiring and firing, illegal immigration, immigration reform, income inequality, New Urbanism, offshore financial centre, reserve currency, Silicon Valley, Socratic dialogue, South China Sea, Steve Bannon, UNCLOS, working poor

“It’s a question of justice.”26 The European legislation in the digital sector reflects a new determination to use the continent’s commercial clout to compete with other big powers in defending its values and interests. Macron was particularly vocal in accusing the United States of seeking to weaponize the dollar’s unique status as the world’s reserve currency in which most global commerce is transacted. American efforts to extend the territorial reach of its sanctions against Iran by threatening to punish European companies that do business with Tehran triggered an angry backlash in Europe. Many European companies, faced with the loss of their access to US capital markets, felt that they had no other choice but to withdraw from any transaction with Iran because they could not afford the costs of being excluded from American markets.


China's Superbank by Henry Sanderson, Michael Forsythe

"World Economic Forum" Davos, addicted to oil, Asian financial crisis, Bretton Woods, BRICs, Carmen Reinhart, Credit Default Swap, deindustrialization, Deng Xiaoping, Dutch auction, failed state, financial innovation, financial repression, fixed income, Great Leap Forward, high-speed rail, if you build it, they will come, income inequality, invisible hand, joint-stock company, junk bonds, Kenneth Rogoff, land bank, London Interbank Offered Rate, low interest rates, megacity, new economy, New Urbanism, price mechanism, race to the bottom, reserve currency, Ronald Reagan, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Solyndra, South Sea Bubble, sovereign wealth fund, special drawing rights, special economic zone, too big to fail, urban renewal, urban sprawl, work culture

China’s international assets had increased from 15 percent of its GDP in 2004 to 26 percent in 2009, but its currency was hardly used in international trade settlements. In March 2009, Zhou Xiaochuan, the head of the central bank, called for special drawing rights (SDRs), units of value used by the IMF that are based on a basket of currencies, to replace the US dollar’s role as China’s reserve currency. CDB was the first bank to sell so-called dim sum bonds in Hong Kong in 2007; it was the first time a bond had been sold in China’s currency outside its borders. CDB was the perfect vehicle for the experiment: It got the sovereign credit rating by foreigners, yet it could take all the risk, and foreigners’ liabilities could be isolated in one vehicle.


pages: 274 words: 85,557

DarkMarket: Cyberthieves, Cybercops and You by Misha Glenny

Berlin Wall, Bretton Woods, Brian Krebs, BRICs, call centre, Chelsea Manning, Fall of the Berlin Wall, illegal immigration, James Watt: steam engine, Julian Assange, military-industrial complex, MITM: man-in-the-middle, pirate software, Potemkin village, power law, reserve currency, Seymour Hersh, Silicon Valley, Skype, SQL injection, Stuxnet, urban sprawl, white flight, WikiLeaks, zero day

The original and abiding purpose of the agency was to detect, investigate and then seek the prosecution of anybody found manufacturing or dealing in counterfeit currency. Soon after it was established, Congress also charged the agency with investigating financial fraud. In the wake of the Second World War, the Bretton Woods agreements established the United States as the undisputed leader of Western economies and the dollar as the chosen reserve currency in the capitalist world. Although the Soviet Union and China rejected the dollar’s supremacy, both communist superpowers were nonetheless eager to accumulate as many greenbacks as possible. In a world where most governments kept a tight rein on foreign-exchange flows across their borders, the ubiquity of the dollar as a form of payment greatly increased the attraction of issuing counterfeit US currency.


pages: 280 words: 83,299

Empty Planet: The Shock of Global Population Decline by Darrell Bricker, John Ibbitson

"World Economic Forum" Davos, affirmative action, agricultural Revolution, Berlin Wall, Black Lives Matter, Brexit referendum, BRICs, British Empire, Columbian Exchange, commoditize, demographic dividend, demographic transition, Deng Xiaoping, Donald Trump, en.wikipedia.org, full employment, gender pay gap, gentrification, ghettoisation, glass ceiling, global reserve currency, Great Leap Forward, Gunnar Myrdal, Hans Rosling, Hernando de Soto, illegal immigration, income inequality, James Watt: steam engine, Jeff Bezos, John Snow's cholera map, Kibera, knowledge worker, labor-force participation, Mark Zuckerberg, megacity, New Urbanism, nuclear winter, off grid, offshore financial centre, out of africa, Potemkin village, purchasing power parity, reserve currency, Ronald Reagan, Silicon Valley, South China Sea, statistical model, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, transcontinental railway, upwardly mobile, urban planning, working-age population, young professional, zero-sum game

No wonder the National Intelligence Council concluded recently that the “unipolar moment is over and Pax Americana—the era of American ascendancy in international politics that began in 1945—is fast winding down.”319 Perhaps. But there is a whole lot of “on the other hand.” However large the Chinese economy, the average American makes eight times their Chinese counterpart; the American dollar remains the unchallenged global reserve currency; despite massive new investments in China’s military, the U.S. outspends its rival in defense three to one, with a global-power-defining eight hundred military bases in fifty countries around the world; ten of the world’s twenty highest-ranked universities are located in the United States;320 eight of the world’s nine largest high-tech companies are U.S.


pages: 262 words: 83,548

The End of Growth by Jeff Rubin

Alan Greenspan, Anthropocene, Ayatollah Khomeini, Bakken shale, banking crisis, Bear Stearns, Berlin Wall, British Empire, business cycle, call centre, carbon credits, carbon footprint, carbon tax, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, decarbonisation, deglobalization, Easter island, energy security, eurozone crisis, Exxon Valdez, Eyjafjallajökull, Fall of the Berlin Wall, fiat currency, flex fuel, Ford Model T, full employment, ghettoisation, Glass-Steagall Act, 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, Jevons paradox, Kickstarter, low interest rates, McMansion, megaproject, Monroe Doctrine, moral hazard, new economy, Occupy movement, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, proprietary trading, quantitative easing, race to the bottom, reserve currency, rolling blackouts, Ronald Reagan, South China Sea, sovereign wealth fund, subprime mortgage crisis, The Chicago School, The Death and Life of Great American Cities, Thomas Malthus, Thorstein Veblen, too big to fail, traumatic brain injury, uranium enrichment, urban planning, urban sprawl, women in the workforce, working poor, Yom Kippur War, zero-sum game

I bet the Greek government wishes it could do that right about now. But unfortunately, Greece doesn’t have a currency of its own. (And even if the drachma were around, who would want to hold a Greek bond?) But the United States isn’t Greece. Not only does America have its own currency, but the US dollar is also the world’s reserve currency. That means the United States can borrow money from all over the world and then repay foreign lenders with US dollars. Nothing too tricky about that. But consider what happens to the value of that debt if the United States decides to devalue its currency by printing money to buy its own bonds.


pages: 300 words: 87,374

The Light That Failed: A Reckoning by Ivan Krastev, Stephen Holmes

active measures, Affordable Care Act / Obamacare, Andrei Shleifer, anti-communist, anti-globalists, bank run, Berlin Wall, Black Lives Matter, borderless world, Brexit referendum, corporate governance, David Brooks, deglobalization, deindustrialization, Deng Xiaoping, disinformation, Dissolution of the Soviet Union, Donald Trump, failed state, fake news, Fall of the Berlin Wall, Francis Fukuyama: the end of history, illegal immigration, Kickstarter, knowledge economy, kremlinology, liberal world order, mass immigration, Mikhail Gorbachev, Neil Armstrong, nuclear winter, obamacare, offshore financial centre, open borders, post-truth, postnationalism / post nation state, reserve currency, Ronald Reagan, shared worldview, South China Sea, Steve Bannon, the market place, Thorstein Veblen, too big to fail, Twitter Arab Spring, WikiLeaks

A decade or two ago, non-Americans assumed that the spread of English meant that American values and ideas were conquering the world.42 In his theory of linguistic justice, the philosopher Philippe Van Parijs suggested that a special language tax should be imposed on members of Anglophone communities to subsidize the costs of English learning by members of non-Anglophone communities.43 The justification offered for such a transfer programme was that English speakers reap massive unearned benefits from having been raised with English as their mother tongue. In a way it is true that American English serves as the world’s ‘reserve language’ just as the American dollar serves as the world’s reserve currency, giving Americans an unfair leg-up in all kinds of international transactions. But after the transformation of Washington into the centre of worldwide instability, the idea that the spread of English provides an indisputable advantage for native speakers seems less intuitively plausible. To be sure, Americans remain proud that people everywhere learn English and want to study at American universities.


Understanding Power by Noam Chomsky

anti-communist, Ayatollah Khomeini, Berlin Wall, Bretton Woods, British Empire, Burning Man, business climate, business cycle, cognitive dissonance, continuous integration, Corn Laws, cuban missile crisis, dark matter, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, disinformation, European colonialism, Fall of the Berlin Wall, feminist movement, gentrification, global reserve currency, guns versus butter model, Howard Zinn, junk bonds, Korean Air Lines Flight 007, liberation theology, Mahatma Gandhi, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Paul Samuelson, Ralph Nader, reserve currency, Ronald Reagan, Rosa Parks, school choice, Strategic Defense Initiative, strikebreaker, structural adjustment programs, systems thinking, the scientific method, The Wealth of Nations by Adam Smith, union organizing, wage slave, women in the workforce

See, by 1971 the Vietnam War had already badly weakened the United States economically relative to its industrial rivals, and one of the ways the Nixon administration reacted to that was by simply tearing apart the Bretton Woods system, which had been set up to organize the world economy after World War II. The Bretton Woods system had made the United States the world’s banker, basically—it had established the U.S. dollar as a global reserve currency fixed to gold, and it imposed conditions about no import quotas, and so on. And Nixon just tore the whole thing to shreds: he went off the gold standard, he stopped the convertibility of the dollar, he raised import duties. No other country would have had the power to do that, but Nixon did it, and that made him a lot of powerful enemies—because multinational corporations and international banks relied on that system, and they did not like it being broken down.

The first had to do with the breakdown of the post-war world economic system, which occurred in the early 1970s. See, during the Second World War, the United States basically reorganized the world economic system and made itself into sort of the “global banker” [at the Bretton Woods United Nations Monetary and Financial Conference of 1944]—so, the U.S. dollar became the global reserve currency, it was fixed to gold, and other countries’ currencies were fixed relative to the dollar. And that system was pretty much what lay behind the very substantial economic growth rate that followed in the 1950s and Sixties. But by the 1970s, the “Bretton Woods” system had become unsustainable: the U.S. no longer was strong enough economically to remain the world’s banker, primarily because of the huge costs of financing the Vietnam War.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, benefit corporation, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, data science, deep learning, disintermediation, diversified portfolio, Dutch auction, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gamification, Garrett Hardin, gentrification, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, independent contractor, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, Large Hadron Collider, loss aversion, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, power law, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Russell Brand, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, stock buybacks, TaskRabbit, the Cathedral and the Bazaar, The Future of Employment, the long tail, trade route, Tragedy of the Commons, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Vitalik Buterin, warehouse robotics, Wayback Machine, Y Combinator, young professional, zero-sum game, Zipcar

Bernard Lietaer, one of the economists who helped design the euro, has been proposing since 1991 that fiat currencies—money declared legal by the government but not backed by a physical commodity—be replaced or at least augmented with currencies that represent a “basket” of commodities.24 His current suggestion is to create a currency that is backed by one third gold, one third forests, and one third highways. The gold is the fixed-commodity component, as there is only so much of it. Forests are the growth component; trees grow. And highways, thanks to tolls, are the income component. As an investor’s response to deflation, or even as a new reserve currency, it makes sense. But if we’re trying to compensate for the way central currency tends to work its way out of circulation and into the bank accounts of the already wealthy, we should be looking instead for ways to help money move around better. This has less to do with making sure money has some intrinsic value for long-term storage and accumulation into the future, and a lot more to do with making sure it can serve as a medium for exchange right now.


pages: 329 words: 95,309

Digital Bank: Strategies for Launching or Becoming a Digital Bank by Chris Skinner

algorithmic trading, AltaVista, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, augmented reality, bank run, Basel III, bitcoin, Bitcoin Ponzi scheme, business cycle, business intelligence, business process, business process outsourcing, buy and hold, call centre, cashless society, clean water, cloud computing, corporate social responsibility, credit crunch, cross-border payments, crowdsourcing, cryptocurrency, demand response, disintermediation, don't be evil, en.wikipedia.org, fault tolerance, fiat currency, financial innovation, gamification, Google Glasses, high net worth, informal economy, information security, Infrastructure as a Service, Internet of things, Jeff Bezos, Kevin Kelly, Kickstarter, M-Pesa, margin call, mass affluent, MITM: man-in-the-middle, mobile money, Mohammed Bouazizi, new economy, Northern Rock, Occupy movement, Pingit, platform as a service, Ponzi scheme, prediction markets, pre–internet, QR code, quantitative easing, ransomware, reserve currency, RFID, Salesforce, Satoshi Nakamoto, Silicon Valley, smart cities, social intelligence, software as a service, Steve Jobs, strong AI, Stuxnet, the long tail, trade route, unbanked and underbanked, underbanked, upwardly mobile, vertical integration, We are the 99%, web application, WikiLeaks, Y2K

For example, the total Bitcoin economy peaked at $2 billion invested in April 2013 and, due to this limited amount of real money in the system, it is subject to wild swings. The question is: what would happen if there were $1 trillion in the Bitcoin system? Then it would be a mainstream currency, and could even start to become a serious contender as a real reserve currency alongside the dollar and euro. This is the concern of governments, as Bitcoin cannot be regulated like the dollar and euro, as no government of central bank is involved. Another key attribute is that there is a limit of 21 million Bitcoins that will ever be issued. This cap was introduced in order to act as a currency control mechanism and ensure the stored value exchange would not break.


pages: 334 words: 91,722

Brexit Unfolded: How No One Got What They Want (And Why They Were Never Going To) by Chris Grey

"World Economic Forum" Davos, anti-communist, Berlin Wall, Boris Johnson, Brexit referendum, coronavirus, COVID-19, deindustrialization, Dominic Cummings, Donald Trump, failed state, Fall of the Berlin Wall, first-past-the-post, game design, global pandemic, imperial preference, Jeremy Corbyn, John Bercow, lockdown, non-tariff barriers, open borders, post-truth, reserve currency, Robert Mercer

This in turn suggested numerous other questions. What would the effect on employment be? How would the tax take be affected? What would the impact be on what had been the totemic issue of politics in recent years, the fiscal deficit? What about the balance of payments? Would the UK’s credit rating be affected? Would sterling’s status as a reserve currency be affected? And what about the value of sterling, anyway? Brexit had seen a huge currency depreciation which at any other time would have been a major election issue. Yet there was barely any mention of any these things. Beyond the economics, there was also little or no discussion of what foreign policy would look like not just post-Brexit but, now, in the context of Trump’s America.


pages: 312 words: 93,836

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

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

Eurodollar futures were being bought in the anticipation that LIBOR would collapse the next day. Soon, traders came to the realisation that this strategy was rather risky. If people were hoarding bottles of water or cans of food in New York or London, they would also hoard cash. And the cash everybody wanted during times of crisis was the world reserve currency: the US dollar. It was safer to bet on the fear in the market than on banks lending to each other at lower interest rates once the Federal Reserve had managed to cut the official central bank rate. That fear tended to result in a rush towards assets that were considered safe: US dollar cash.


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

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

Treasury obligations by other countries' monetary authorities, first Japan and then China, to suppress their exchange rates have elevated the dollar's foreign-exchange value and thereby played a role in the huge increase in U.S. imports (from 13 percent of U.S. GDP in early 2002 to almost 18 percent in late 2006). There is doubtless some truth in that, but the impact of official efforts to manipulate exchange rates, in my experience, is often exaggerated.* Vastly more significant is the U.S. dollar's status as the world's foremost reserve currency, which has so far fostered the financing of our external deficit. Many observers, however, consider this a vulnerability as well—foreign *I have little doubt t h a t China's monetary authorities' purchase of h u n d r e d s of billions of dollars to suppress its exchange rate has been successful.

., 247-62 causes of, 3 4 8 - 5 2 defined, 347 financing of, 348 post-Civil War, 355n current account surpluses, 348, 350, 351, 355 Czechoslovakia, 133-34, 137 Clinton policies and, 148, 149 deregulation and, 82 Nixon and, 58, 59, 245 Reagan and, 87, 94, 109 taxes and, 1 1 3 , 2 2 1 , 2 2 2 , 223 Deng Xiaoping, 295, 300, 302, 304, 309, 502 deposit insurance, 115, 257, 373-74 depression, 28, 86-87 see also Great Depression deregulation, 7 1 - 7 3 , 81-82, 114, 183, 2 4 1 , 255, 279, 366, 502 de Soto, Hernando, 253-54, 296 developing countries, 12-15, 237, 251-55, 385-89, 504 current account surpluses of, 348 dollar ties of, 188-89 Dutch disease and, 257-59 economic growth in, 13, 311 GDP shift toward, 13,459 globalization and, 364 savings in, 13, 385-88, 483 technology in, 388, 389, 459, 473 Diaz, Francisco Gil, 341 Dillon, Doug, 145 DiMaggio, Joe, 22 discomfort index (misery index), 61 discount rate, 103, 111-12 disinflation, 378-84, 389-90, 476n, 478, 482, 491 labor shifts and, 477, 479 in 2000s, 228, 341, 379-84, 388 dividends, 238-39, 353, 398 Doha round of trade negotiations, 315, 365, 398-99 Dole, Bob, 95, 158 dollar, U.S., 82, 102, 104, 110, 159, 161, 188-92, 314, 353n Argentine peso and, 342—43 China's purchase of, 306n current account deficit and, 347, 353n exchange rates of, 188, 259, 347, 349, 3 5 2 - 5 3 , 360-62 as reserve currency, 349 Russian purchase of, 329, 330 Domenici, Pete, 217, 220, 221, 236 Dornbusch, Rudiger, 340 Dorrance, John, 78 dot-com boom, 162, 164, 224, 434 dot-com crash, 5, 7, 228, 230, 485 Douglas, Donald, 44 Douglas, Roger, 292 Douglas, Stephen, 208 Dow Jones Industrial Average, 109, 110 D'Amato,Alfonse, 150 Dana, Richard Henry, Jr., 44 Daniels, Mitch, 239 Darman, Richard, 113, 118-19, 120, 122 Darwin, Charles, 262, 279 Daschle, Tom, 7, 218, 223, 234 David, Paul, 474-75, 476n debt: highly liquid markets for, 151 Mexican crisis and, 156-61, 250, 380 ratio of income to, 232, 3 4 6 ^ 7 , 359 servicing requirements for, 353 short-term consumer, 346—47 see also loans; mortgages; national debt debt leverage, 359-60 DeConcini, Dennis, 479 Defense Department, U.S.


pages: 329 words: 102,469

Free World: America, Europe, and the Surprising Future of the West by Timothy Garton Ash

"World Economic Forum" Davos, Albert Einstein, battle of ideas, Berlin Wall, BRICs, British Empire, call centre, centre right, clean water, Columbine, continuation of politics by other means, cuban missile crisis, demographic transition, Deng Xiaoping, Doha Development Round, Eratosthenes, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), James Watt: steam engine, Kickstarter, Mikhail Gorbachev, Nelson Mandela, Peace of Westphalia, postnationalism / post nation state, Project for a New American Century, purchasing power parity, reserve currency, Ronald Reagan, shareholder value, Silicon Valley, Suez crisis 1956, Thomas Malthus, trade liberalization, Washington Consensus, working poor, working-age population, World Values Survey

In case we get numbed by shorthand billions and trillions, it’s worth spelling out the zeros in full: in 2000 American firms had some $3,000,000,000,000 worth of assets in Europe, and European firms had some $3,300,000,000,000 worth of assets in America.94 There is more European investment in Texas than there is American investment in all of Japan. The U.S. also partly depends on Europeans (although even more on Asians) continuing to buy American bonds, to sustain its huge deficits. In trade negotiations, the E.U. talks to the U.S. as giant to giant. The euro has the potential to became a rival reserve currency to the dollar, especially if oil sales begin to be denominated in euros. American notions of unbridled sovereignty will be qualified by these economic realities. Yet the fact that America has to take Europe seriously economically does not mean it will do so politically. As in pre-1914 Europe, there is no automatic “read-across” from economics to politics.


pages: 391 words: 97,018

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

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, Bear Stearns, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, carbon tax, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, congestion pricing, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, financial engineering, Frederick Winslow Taylor, high net worth, high-speed rail, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, index fund, intangible asset, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low interest rates, low skilled workers, man camp, Mark Zuckerberg, Martin Wolf, Mary Meeker, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, scientific management, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, zero-sum game, Zipcar

On August 5, 2011, Standard & Poor’s, the firm that rated Lehman Brothers an investment-grade A credit on the eve of its implosion, that rented out its ancient and venerable name to any investment bank that wanted to shovel junky assets into a credulous market, stripped the United States of its AAA credit rating. In a terse statement, S&P downgraded the credit of the world’s largest economy, the unchallenged military leader, the proprietor of the world’s reserve currency and guardian of the globe’s stability, to AA–. The United States, which first received an AAA score from the credit ratings agency Moody’s in 1917, was suddenly judged to be as likely to make good on its debt as … New Zealand? The downgrade was just the latest humiliation to befall the U.S. economy in a three-year run of epically bad news.


pages: 367 words: 97,136

Beyond Diversification: What Every Investor Needs to Know About Asset Allocation by Sebastien Page

Andrei Shleifer, asset allocation, backtesting, Bernie Madoff, bitcoin, Black Swan, Bob Litterman, book value, business cycle, buy and hold, Cal Newport, capital asset pricing model, commodity super cycle, coronavirus, corporate governance, COVID-19, cryptocurrency, currency risk, discounted cash flows, diversification, diversified portfolio, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, fixed income, future of work, Future Shock, G4S, global macro, implied volatility, index fund, information asymmetry, iterative process, loss aversion, low interest rates, market friction, mental accounting, merger arbitrage, oil shock, passive investing, prediction markets, publication bias, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Feynman, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, robo advisor, seminal paper, shareholder value, Sharpe ratio, sovereign wealth fund, stochastic process, stochastic volatility, stocks for the long run, systematic bias, systematic trading, tail risk, transaction costs, TSMC, value at risk, yield curve, zero-coupon bond, zero-sum game

An unexpected shift in growth differentials, as earlier-cycle economies pick up relative to the US. 3. Earnings disappointments (in the face of high expectations) in the US despite global risk-on sentiment, which could lead to a narrowing of the valuation gap. 4. US debt and deficits lead to a loss of market confidence in the USD as reserve currency. Verdict: Several committee members have a bullish view on the USD, but we decided not to add to richly valued US stocks. EBIDTA margins for EAFE value are near an all-time low relative to EAFE growth (12th percentile over 10 years)—a bullish signal for EAFE value. Historically, relative margins revert to a mean—like trees, they don’t grow to the sky.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

Alan Greenspan, algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Greenspan put, hiring and firing, housing crisis, inflation targeting, junk bonds, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Rubik’s Cube, Savings and loan crisis, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

France left the pool in mid-1967, having earlier converted much of its reserves into gold because it felt US policymakers were abusing the “exorbitant privilege” (in the words of French Finance Minister Valéry Giscard d’Estaing) of being able to issue dollar assets at low cost because of the additional demand for US assets coming from its status as a reserve currency. Soon after, the devaluation of the pound sterling intensified doubts about the dollar peg against gold and the pool was forced to sell $800 billion worth of gold in a month, a very large sum by the standards of the day. By the next spring the pool had disbanded, and soon after the United States allowed the price of gold for private transactions to float away from $35 an ounce, although the old parity continued to be respected for transactions between central banks.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

air traffic controllers' union, Alan Greenspan, Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Bletchley Park, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, business process, butterfly effect, call centre, capital controls, carbon tax, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, commons-based peer production, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, disinformation, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, false flag, financial engineering, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, fulfillment center, full employment, future of work, game design, Glass-Steagall Act, green new deal, guns versus butter model, Herbert Marcuse, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Perry Barlow, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, late capitalism, low interest rates, low skilled workers, market clearing, means of production, Metcalfe's law, microservices, middle-income trap, Money creation, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, power law, precariat, precautionary principle, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, scientific management, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, technological determinism, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, Twitter Arab Spring, union organizing, universal basic income, urban decay, urban planning, vertical integration, Vilfredo Pareto, wages for housework, WikiLeaks, women in the workforce, Yochai Benkler

All other markets – for credit, for shares, for derivatives – would then correct, to reflect the increased risk of financial capitalism. Capital would be reallocated to productive investment and away from speculative finance. Ultimately, the world would have to return to exchange rates pegged against a new global currency managed by the IMF, with the Chinese RMB becoming a fully tradable reserve currency like the dollar. That would address the systemic threat posed by fiat money – the lack of credibility arising from the danger that globalization will break up. But the price would be a permanent end to the global imbalances: the currencies of surplus countries would rise, and China, India and the rest would have to give up their cheap labour advantage.


Lonely Planet Ireland's Best Trips by Lonely Planet

Kickstarter, mass immigration, reserve currency, urban renewal

A SIM-only packages are also available, but make sure your phone is compatible with the local provider. TOURIST INFORMATION In both the Republic and the North there’s a tourist office or information point in almost every big town; most can offer a variety of services, including accommodation and attraction reservations, currency-changing services, map and guidebook sales, and free publications. In the Republic, the tourism purview falls to Fáilte Ireland (Republic 1850 230 330, UK 0800 039 7000; www.discoverireland.ie); in Northern Ireland, it’s the Northern Irish Tourist Board (NITB; head office 028-9023 1221; www.discovernorthernireland.com).


pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, buy and hold, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, currency risk, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, equity risk premium, Exxon Valdez, foreign exchange controls, forensic accounting, Glass-Steagall Act, global reserve currency, high net worth, index fund, inflation targeting, information security, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, proprietary trading, purchasing power parity, Real Time Gross Settlement, reserve currency, Right to Buy, risk free rate, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

Foreign exchange, like derivatives, is used for hedging. There are 170 currencies in use worldwide, but most are not very liquid. The US dollar is by far the most widely traded currency, not least because the United States has the biggest and most liquid bond markets, and commodities are priced in dollars. The US dollar is the global reserve currency and an invoice currency in many contracts. However, many believe that, in 10 years’ time, the dollar will no longer have this status. The euro, introduced at the start of 1999, initially in non-physical form, has enabled eurozone member countries to trade with each other directly without the need to exchange their currencies.


pages: 460 words: 107,454

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab, Peter Vanham

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

In a significant development, the United States joined the 100 percent club in the early 2010s, with its debt rapidly rising further in recent years, to over 130 percent in 2020.27 The US situation raises a peculiar uncertainty because US government bonds are among the most traded in the world, and the US dollar is the de facto world reserve currency. A US government default is unlikely, given that its Federal Reserve has its hands on the printing press, but if it does happen, the global economic system as we know it might collapse. It is in the combination of high debt and low growth that things really get problematic, from a financial point of view.


pages: 460 words: 107,454

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

In a significant development, the United States joined the 100 percent club in the early 2010s, with its debt rapidly rising further in recent years, to over 130 percent in 2020.27 The US situation raises a peculiar uncertainty because US government bonds are among the most traded in the world, and the US dollar is the de facto world reserve currency. A US government default is unlikely, given that its Federal Reserve has its hands on the printing press, but if it does happen, the global economic system as we know it might collapse. It is in the combination of high debt and low growth that things really get problematic, from a financial point of view.


pages: 453 words: 117,893

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

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

The Bank of England has warned about the consequences if foreigners stop investing in the UK after it leaves the EU, which would make the current account deficit harder to finance. The United States also has a large trade deficit, but it enjoys the privilege of the US dollar being the world’s reserve currency. That means foreigners more readily lend money to America to finance its deficit. But, the dollar’s position has been questioned by the rise of currencies such as the Chinese renminbi (RMB). The heart of the issue is this: does it matter if the US or Britain has a large trade deficit? It’s been the case for decades.


pages: 374 words: 113,126

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

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

The Bank of England has warned about the consequences if foreigners stop investing in the UK after it leaves the EU, which would make the current account deficit harder to finance. The United States also has a large trade deficit, but it enjoys the privilege of the US dollar being the world’s reserve currency. That means foreigners more readily lend money to America to finance its deficit. But, the dollar’s position has been questioned by the rise of currencies such as the Chinese renminbi (RMB). The heart of the issue is this: does it matter if the US or Britain has a large trade deficit? It’s been the case for decades.


pages: 358 words: 119,272

Anatomy of the Bear: Lessons From Wall Street's Four Great Bottoms by Russell Napier

Alan Greenspan, Albert Einstein, asset allocation, banking crisis, Bear Stearns, behavioural economics, book value, Bretton Woods, business cycle, buy and hold, collective bargaining, Columbine, cuban missile crisis, desegregation, diversified portfolio, fake news, financial engineering, floating exchange rates, Fractional reserve banking, full employment, Glass-Steagall Act, global macro, hindsight bias, Kickstarter, Long Term Capital Management, low interest rates, market bubble, Michael Milken, military-industrial complex, Money creation, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, price stability, reserve currency, risk free rate, Robert Gordon, Robert Shiller, Ronald Reagan, short selling, stocks for the long run, yield curve, Yogi Berra

As early as 1960, Yale Professor Robert Triffin had warned, in his book Gold and the Dollar Crisis, that the US would be forced to run regular current account deficits to provide the rest of the world with the necessary liquidity to grow. [69] He pointed out that the long-term result of these deficits would be to undermine faith in the dollar as the world reserve currency and thus the stability of the Bretton Woods system itself. Eleven years later, Triffin’s prediction came to pass when, on 15 August 1971, President Nixon declared the US was suspending the redemption of dollars for gold. The US dollar devalued in December 1971, from $35 to $38 an ounce of gold, and early in 1973 it was devalued to $42.


pages: 424 words: 119,679

It's Better Than It Looks: Reasons for Optimism in an Age of Fear by Gregg Easterbrook

affirmative action, Affordable Care Act / Obamacare, air freight, Alan Greenspan, Apollo 11, autonomous vehicles, basic income, Bernie Madoff, Bernie Sanders, Black Lives Matter, Boeing 747, Branko Milanovic, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, clean tech, clean water, coronavirus, Crossrail, David Brooks, David Ricardo: comparative advantage, deindustrialization, Dissolution of the Soviet Union, Donald Trump, driverless car, Elon Musk, Exxon Valdez, factory automation, failed state, fake news, full employment, Gini coefficient, Google Earth, Home mortgage interest deduction, hydraulic fracturing, Hyperloop, illegal immigration, impulse control, income inequality, independent contractor, Indoor air pollution, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, labor-force participation, liberal capitalism, longitudinal study, Lyft, mandatory minimum, manufacturing employment, Mikhail Gorbachev, minimum wage unemployment, Modern Monetary Theory, obamacare, oil shale / tar sands, Paul Samuelson, peak oil, plant based meat, plutocrats, Ponzi scheme, post scarcity, purchasing power parity, quantitative easing, reserve currency, rising living standards, Robert Gordon, Ronald Reagan, self-driving car, short selling, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, Steve Wozniak, Steven Pinker, supervolcano, The Chicago School, The Rise and Fall of American Growth, the scientific method, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, transaction costs, Tyler Cowen, uber lyft, universal basic income, War on Poverty, Washington Consensus, We are all Keynesians now, WikiLeaks, working poor, Works Progress Administration

Crime, especially homicide, was in long-term decline. All forms of pollution except greenhouse gases were in long-term decline; all forms of discrimination were in long-term decline; most disease rates were in long-term decline. Education levels and longevity were the highest ever. Two-thirds of the globe’s reserve currency was held in the USD, which meant the rest of the world judged America’s prospects to be excellent. The United States military not only was the strongest—it was stronger than all other militaries of the world combined. Objectively, America was in the best condition it had ever been in. Yet Trump convinced voters that “our country is going to hell.”


pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "World Economic Forum" Davos, accelerated depreciation, addicted to oil, airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, book value, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, disinformation, Doha Development Round, energy security, European colonialism, export processing zone, financial deregulation, financial independence, full employment, global village, high net worth, land bank, land reform, large denomination, liberal capitalism, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, military-industrial complex, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, Seymour Hersh, statistical model, structural adjustment programs, Suez crisis 1956, Tax Reform Act of 1986, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

Dependent on aid, loan reschedulings, and debt rollovers to survive—never mind actually develop—they have been forced to restructure their economies and rewrite their laws to meet conditions laid down in IMF structural adjustment programs and World Bank conditionalities. Unlike the U.S., they do not control the world’s reserve currency, and so cannot live beyond their means for long without financial crisis. As Doug Henwood, author of After the New Economy, points out: The United States would right now be a prime candidate for structural adjustment if this were an ordinary country. We are living way beyond our means, we have massive and constantly growing foreign debts, a gigantic currency account deficit, and a government that shows no interest in doing anything about it….


pages: 316 words: 117,228

The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor

Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Big Tech, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, digital rights, Donald Trump, double helix, driverless car, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Gregor Mendel, Hernando de Soto, income inequality, initial coin offering, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, power law, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Robert Solow, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, seminal paper, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, Tragedy of the Commons, transaction costs, Wolfgang Streeck

Becker, “Crime and Punishment: An Economic Approach,” Journal of Political Economy 76, no. 2 (1968):169–217. 63. Hayek, Law, Legislation, and Liberty as well as Hadfield and Weingast, “What Is Law?” 240 n ote s to c h a P te r 2 64. This phrase has been coined by French president Giscard D’Estaing in reference to the status of the US dollar as the global reserve currency and has since been used as the title of a book by Barry Eichengreen, but seems apt in this context. 65. This is the assumption of the efficient capital market hypothesis. See Eugene Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,” Journal of Finance 25, no. 2 (1970):383–417. 66.


pages: 494 words: 121,217

Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency by Andy Greenberg

2021 United States Capitol attack, Airbnb, augmented reality, bitcoin, Bitcoin Ponzi scheme, Black Lives Matter, blockchain, Brian Krebs, Cody Wilson, commoditize, computerized markets, COVID-19, crowdsourcing, cryptocurrency, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, forensic accounting, Global Witness, Google Glasses, Higgs boson, hive mind, impulse control, index card, Internet Archive, Jeff Bezos, Julian Assange, Large Hadron Collider, machine readable, market design, operational security, opioid epidemic / opioid crisis, pirate software, Ponzi scheme, ransomware, reserve currency, ride hailing / ride sharing, rolodex, Ross Ulbricht, Satoshi Nakamoto, Skype, slashdot, Social Justice Warrior, the market place, web application, WikiLeaks

The sum total of all bitcoins at the time was worth about $3 million. About $30,000 worth of bitcoins were changing hands every day, used to buy everything from alpaca socks to sex toys to dog sweaters. “I don’t know where it’s going to go, but there’s a small possibility that in fifty years it just might replace the dollar as the world’s reserve currency,” Andresen said, speaking in the sort of light tone that might have led the audience to believe he was joking. But he was not. “It might happen!” he added, as if to dispel any doubt about his seriousness. Exactly one person in the crowd responded with an enthusiastic whoop. As radical as Andresen’s dreams for Bitcoin’s future value might have been, it was something else he said that got my attention: his brief description, almost in passing, of Bitcoin’s pseudonymous creator, Satoshi Nakamoto, as “this mysterious guy who was definitely inspired by the cypherpunks.”


pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

Airbnb, Alan Greenspan, altcoin, Apple Newton, bank run, banking crisis, bitcoin, Bitcoin Ponzi scheme, blockchain, Bretton Woods, buy and hold, California gold rush, capital controls, carbon footprint, clean water, Cody Wilson, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, decentralized internet, disinformation, disintermediation, Dogecoin, driverless car, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, Firefox, Flash crash, Ford Model T, Fractional reserve banking, Glass-Steagall Act, hacker house, Hacker News, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Joi Ito, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Nelson Mandela, Network effects, new economy, new new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, off-the-grid, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, printed gun, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Ross Ulbricht, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, underbanked, Vitalik Buterin, WikiLeaks, Y Combinator, Y2K, zero-sum game, Zimmermann PGP

Those who’ve dreamed of the IMF’s playing an intermediary role in international commerce, who’ve wanted to free the world of its unhealthy dependence on the dollar and to reduce the excessive influence of the Fed and U.S. Treasury, might suddenly feel empowered. The Chinese and the French, who’ve pushed to have the IMF’s Special Drawing Rights elevated from their current role as mere units of accounting to becoming an international reserve currency for storing central bank deposits, might have themselves a new cause. We doubt officials in Paris or Beijing are conceiving of such things right now, but if cryptocurrency technology lives up to its potential, they may have to think about it. Under this imagined Bretton Woods II, perhaps the IMF would create its own cryptocurrency, with nodes for managing the blockchain situated in proportionate numbers within all the member countries, where none could ever have veto power, to avoid a state-run 51 percent attack.


Norco '80: The True Story of the Most Spectacular Bank Robbery in American History by Peter Houlahan

blue-collar work, cognitive dissonance, cuban missile crisis, friendly fire, index card, Peoples Temple, reserve currency

“Don’t look at me,” he said. Dessormeau shifted her eyes to the floor as Schlax opened the teller nests, hoping Harven might not notice that the larger reserve area of the vault was completely bare. Ron Richter scooped bills from the teller nests into a drawstring bag held by Schlax. “We have no reserve currency,” she whispered to him. “I know,” he said. “Stop wasting time,” Chris growled, poking Richter in the ribs with the gun. George called out from the lobby area. “Thirty seconds left!” At the west entrance to the bank, Russell Harven had another problem on his hands. Hiding behind the plastic tree again, Russell did not notice Miriam Tufts approaching the door to the bank until the woman had pulled it wide open.


pages: 524 words: 130,909

The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power by Max Chafkin

3D printing, affirmative action, Airbnb, anti-communist, bank run, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, Blitzscaling, Boeing 747, borderless world, Cambridge Analytica, charter city, cloud computing, cognitive dissonance, Cornelius Vanderbilt, coronavirus, COVID-19, Credit Default Swap, cryptocurrency, David Brooks, David Graeber, DeepMind, digital capitalism, disinformation, don't be evil, Donald Trump, driverless car, Electric Kool-Aid Acid Test, Elon Musk, Ethereum, Extropian, facts on the ground, Fairchild Semiconductor, fake news, Ferguson, Missouri, Frank Gehry, Gavin Belson, global macro, Gordon Gekko, Greyball, growth hacking, guest worker program, Hacker News, Haight Ashbury, helicopter parent, hockey-stick growth, illegal immigration, immigration reform, Internet Archive, Jeff Bezos, John Markoff, Kevin Roose, Kickstarter, Larry Ellison, life extension, lockdown, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, Max Levchin, Menlo Park, military-industrial complex, moral panic, move fast and break things, Neal Stephenson, Nelson Mandela, Network effects, off grid, offshore financial centre, oil shale / tar sands, open borders, operational security, PalmPilot, Paris climate accords, Patri Friedman, paypal mafia, Peter Gregory, Peter Thiel, pets.com, plutocrats, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, public intellectual, QAnon, quantitative hedge fund, quantitative trading / quantitative finance, randomized controlled trial, regulatory arbitrage, Renaissance Technologies, reserve currency, ride hailing / ride sharing, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Sam Altman, Sand Hill Road, self-driving car, sharing economy, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Silicon Valley startup, skunkworks, social distancing, software is eating the world, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, surveillance capitalism, TaskRabbit, tech billionaire, tech worker, TechCrunch disrupt, techlash, technology bubble, technoutopianism, Ted Kaczynski, TED Talk, the new new thing, the scientific method, Tim Cook: Apple, transaction costs, Travis Kalanick, Tyler Cowen, Uber and Lyft, uber lyft, Upton Sinclair, Vitalik Buterin, We wanted flying cars, instead we got 140 characters, Whole Earth Catalog, WikiLeaks, William Shockley: the traitorous eight, Y Combinator, Y2K, yellow journalism, Zenefits

Despite the reclusiveness, Thiel still had juice, and in October 2019 he flew to Washington to meet with Zuckerberg and Trump. The Facebook CEO was in town to testify about his plan to create a new digital currency, Libra, which critics warned could one day displace the dollar as the world’s reserve currency. Since the end of World War II, foreign governments have bought and held large quantities of dollars, which means that the United States can effectively borrow nearly unlimited amounts of money and can cut rogue nations out of the global financial system. If people began holding their money in digital currency like Libra, borrowing could become more expensive for the United States and the global financial system would be outside of American control.


pages: 519 words: 148,131

An Empire of Wealth: Rise of American Economy Power 1607-2000 by John Steele Gordon

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bretton Woods, British Empire, business cycle, buttonwood tree, California gold rush, Charles Babbage, clean water, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, cotton gin, cuban missile crisis, disintermediation, double entry bookkeeping, failed state, Fairchild Semiconductor, financial independence, flying shuttle, Ford Model T, Frederick Winslow Taylor, full employment, Glass-Steagall Act, global village, Ida Tarbell, imperial preference, industrial research laboratory, informal economy, interchangeable parts, invisible hand, Isaac Newton, it's over 9,000, Jacquard loom, James Hargreaves, James Watt: steam engine, joint-stock company, joint-stock limited liability company, junk bonds, lone genius, Louis Pasteur, low interest rates, margin call, Marshall McLuhan, means of production, megaproject, Menlo Park, Mikhail Gorbachev, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, New Urbanism, postindustrial economy, price mechanism, Ralph Waldo Emerson, RAND corporation, rent control, rent-seeking, reserve currency, rolodex, Ronald Reagan, Savings and loan crisis, spinning jenny, Suez canal 1869, The Wealth of Nations by Adam Smith, three-masted sailing ship, trade route, transaction costs, transcontinental railway, undersea cable, vertical integration, Yom Kippur War

Its economy, by far the largest on earth before the war, now produced fully 50 percent of the world’s gross product. Eighty percent of the world’s monetary gold belonged to the United States; most of the rest was stored in the vaults beneath the New York Federal Reserve bank. Under the Bretton Woods Agreement of 1944, the dollar, convertible into gold by central banks, would be the world’s primary reserve currency and the basis of world trade in the future. The American army was the best equipped in the world and second in size only to that of the Soviet Union; the navy and air force were larger than the navies and air forces of the rest of the world combined. It had a monopoly on the most fearsome weapon of war ever conceived, the atomic bomb.


pages: 582 words: 160,693

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, William Rees-Mogg

affirmative action, agricultural Revolution, Alan Greenspan, Alvin Toffler, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, classic study, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, independent contractor, informal economy, information retrieval, Isaac Newton, John Perry Barlow, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, Norman Macrae, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, Sam Peltzman, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto

Earlier, we cited the dreary record of the world's nationstates in maintaining the value of their currencies over the past half century. No currency has suffered a smaller loss from inflation since World War II than the German mark. Yet even so, 71 percent of its value vanished between January 1, 1949, and the end of June 1995. The world reserve currency during this period, the U.S. dollar, lost 84 percent of its value.'8 This is a measure of the wealth that governments expropriated by exploiting their territorial monopolies on legal tender. Note that there is no intrinsic necessity that currency depreciate or that the nominal cost of living rise every year.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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

Collectively, the world’s three largest economic areas and trading powers—Europe, China, and America—represent the vast majority of world GDP, investment, and trade, especially with each other. Conflict, cooperation, and competition thus overlap in a complex interplay where relations become a subtle mix of cooperation on some issues (containing North Korea’s nuclear program, confronting climate change, expanding bilateral trade) and competition on others (reserve currency, regional influence, cyber regulation)—rather than an all-or-nothing proposition. When Presidents Obama and Xi held a 2014 summit at Sunnylands in California and spoke of aspiring toward “a new kind of great power relationship,” that was a reflection of the current reality—not a future scenario.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, business cycle, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, Easter island, European colonialism, Fall of the Berlin Wall, financial engineering, Francisco Pizarro, full employment, Great Leap Forward, Gregor Mendel, guns versus butter model, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, Kickstarter, Kitchen Debate, land reform, land tenure, liberal capitalism, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, mass immigration, means of production, megacity, Mikhail Gorbachev, new economy, Pearl River Delta, Pierre-Simon Laplace, power law, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, retail therapy, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, undersea cable, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, work culture , World Values Survey

However, nearly all the Japanese debt is in the hands of Japanese investors and institutions, whereas half the US federal debt in public hands is in the hands of foreign creditors, of which just over a fifth is held by the monetary authorities of the People’s Republic of China. Only the American ‘exorbitant privilege’ of being able to print the world’s premier reserve currency gives the US breathing space.30 Yet this very privilege is under mounting attack from the Chinese government. ‘Because the United States’ issuance of dollars is out of control and international commodity prices are continuing to rise,’ declared the Chinese Commerce Minister Chen Deming in October 2010, ‘China is being attacked by imported inflation.’31 The United States is engaged in ‘uncontrolled’ and ‘irresponsible’ money printing, according to Xia Bin, an economic adviser to the People’s Bank of China: ‘As long as the world exercises no restraint in issuing global currencies such as the dollar … then the occurrence of another crisis is inevitable.’32 Quantitative easing (purchases of Treasury securities by the Federal Reserve) was a form of ‘financial protectionism’, declared Su Jingxiang, a researcher with the China Institute of Contemporary International Relations.33 In November 2010 the Dagong credit rating agency downgraded the US to A+ from AA, with a negative outlook.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

For all Keynes’s adumbrations against the “barbarous relic,” the problem was not the gold standard in the abstract but the decision by almost all the developed world to fix their postwar currencies against the dollar at the prewar noncompetitive exchange rates, despite significant costs of storage and loss of interest. The fetters that doomed the international economy were not Keynes’s fetters of gold but the fetters of pride. The world’s major central banks to this day value gold as a reserve currency and, where appropriate, as a medium of exchange. At the end of 2017, the United States held 262 million ounces of gold and the central banks of the world’s major countries (including the International Monetary Fund and the Bank for International Settlements) held 815 million ounces. Even Russia, which as part of the USSR eschewed the capitalist totem and refused to hold gold, has, since the USSR was disbanded in 1991, accumulated 59 million ounces of gold.


pages: 475 words: 149,310

Multitude: War and Democracy in the Age of Empire by Michael Hardt, Antonio Negri

"World Economic Forum" Davos, affirmative action, air traffic controllers' union, Berlin Wall, Bretton Woods, British Empire, business cycle, classic study, conceptual framework, continuation of politics by other means, David Graeber, Defenestration of Prague, deskilling, disinformation, emotional labour, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, friendly fire, global village, Great Leap Forward, Howard Rheingold, Howard Zinn, illegal immigration, Joseph Schumpeter, land reform, land tenure, late capitalism, liberation theology, means of production, military-industrial complex, Naomi Klein, new economy, Paul Samuelson, Pier Paolo Pasolini, post-Fordism, post-work, private military company, race to the bottom, RAND corporation, reserve currency, Richard Stallman, Slavoj Žižek, the Cathedral and the Bazaar, The Chicago School, The Structural Transformation of the Public Sphere, Thomas Malthus, Thorstein Veblen, Tobin tax, transaction costs, union organizing, War on Poverty, Washington Consensus

In the period from the attacks of September 11, 2001, to the Iraq War in 2003, the dissolution of previously solid ties of loyalty and common political and economic interest among the world aristocracies has been dramatic. One manifestation of the aristocratic crisis that has a strong effect on geopolitics is the competition among currencies. The passage of the euro from a weak to a strong position, for example, and the first threat that the euro poses to the dollar as the reserve currency of international business represents a minefield and a problem that must be resolved before long within the imperial order. The third element of unilateralist strategy has to do with the maintenance of order itself, the form of global governance, and the search for security. The United States’s unilateralist version of Empire has been imposed by military might, but the U.S. military campaigns in Afghanistan and Iraq are proving incapable of meeting the minimum objectives of security and stability.


pages: 553 words: 168,111

The Asylum: The Renegades Who Hijacked the World's Oil Market by Leah McGrath Goodman

Alan Greenspan, anti-communist, Asian financial crisis, automated trading system, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, Carl Icahn, computerized trading, corporate governance, corporate raider, credit crunch, Credit Default Swap, East Village, energy security, Etonian, family office, Flash crash, global reserve currency, greed is good, High speed trading, light touch regulation, market fundamentalism, Oscar Wyatt, peak oil, Peter Thiel, pre–internet, price mechanism, profit motive, proprietary trading, regulatory arbitrage, reserve currency, rolodex, Ronald Reagan, side project, Silicon Valley, upwardly mobile, zero-sum game

Believing that this might be evidence of a possible oil drought in the future, many nations had begun to aggressively stockpile petroleum supplies, which just pushed prices up further. With the war in Iraq plodding on interminably, the credit crisis still smoldering, and an astronomical national deficit putting a drag on the U.S. dollar, oil itself was threatening to replace the greenback as the new global reserve currency—which, again, only increased energy prices. The dollar was hardly worth the paper it was printed on, some Wall Street traders were saying, but crude oil was something of intrinsic value. The world’s oil dependence had brought incalculable pain to the average consumer barely able to keep up with spiraling prices.


pages: 566 words: 163,322

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

"World Economic Forum" Davos, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, 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, driverless car, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, financial engineering, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, global macro, Goodhart's law, guns versus butter model, hiring and firing, hype cycle, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Japanese asset price bubble, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, Larry Ellison, lateral thinking, liberal capitalism, low interest rates, Malacca Straits, Mark Zuckerberg, market bubble, Mary Meeker, mass immigration, megacity, megaproject, Mexican peso crisis / tequila crisis, middle-income trap, military-industrial complex, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, open immigration, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, 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, tacit knowledge, tech billionaire, 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, work culture , working-age population

That share may sound impossibly high, but it is accurate, because most global commercial deals are conducted in dollars, even if the deal does not involve an American party. A South Korean company that sells smartphones to Brazil will likely request payment in dollars, because most people still prefer to hold the world’s leading reserve currency. The subjective feel of a currency opens up the whole question of how competitive (read: cheap) the currency is to manipulation by politicians. In the early 2010s, for example, officials in Ankara were trying to make the case that the Turkish lira was very competitive by comparing the inflation-adjusted price of the currency to its price in the 1970s.


Alpha Trader by Brent Donnelly

Abraham Wald, algorithmic trading, Asian financial crisis, Atul Gawande, autonomous vehicles, backtesting, barriers to entry, beat the dealer, behavioural economics, bitcoin, Boeing 747, buy low sell high, Checklist Manifesto, commodity trading advisor, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, currency risk, deep learning, diversification, Edward Thorp, Elliott wave, Elon Musk, endowment effect, eurozone crisis, fail fast, financial engineering, fixed income, Flash crash, full employment, global macro, global pandemic, Gordon Gekko, hedonic treadmill, helicopter parent, high net worth, hindsight bias, implied volatility, impulse control, Inbox Zero, index fund, inflation targeting, information asymmetry, invisible hand, iterative process, junk bonds, Kaizen: continuous improvement, law of one price, loss aversion, low interest rates, margin call, market bubble, market microstructure, Market Wizards by Jack D. Schwager, McMansion, Monty Hall problem, Network effects, nowcasting, PalmPilot, paper trading, pattern recognition, Peter Thiel, prediction markets, price anchoring, price discovery process, price stability, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Robert Shiller, secular stagnation, Sharpe ratio, short selling, side project, Stanford marshmallow experiment, Stanford prison experiment, survivorship bias, tail risk, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, time dilation, too big to fail, transaction costs, value at risk, very high income, yield curve, you are the product, zero-sum game

By the end of summer, the market was all-in on this bullish EURUSD narrative: Emmanuel Macron and Angela Merkel agree to a framework to bring Europe closer to fiscal union. After approval at an EU Summit in July, this removes eurozone break-up risk and makes the EUR a more attractive alternative to the USD as a reserve currency. ECB is quiet, saying fiscal policy (not monetary policy) needs to do the heavy lifting on COVID-19 relief. No further easing from ECB is bullish EURUSD. The Fed has been mega-dovish in response to COVID-19 and is ready to get even more dovish on the back of a new Average Inflation Targeting (AIT) framework.


pages: 1,239 words: 163,625

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated by Gautam Baid

Abraham Maslow, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, Albert Einstein, Alvin Toffler, Andrei Shleifer, asset allocation, Atul Gawande, availability heuristic, backtesting, barriers to entry, beat the dealer, Benoit Mandelbrot, Bernie Madoff, bitcoin, Black Swan, book value, business process, buy and hold, Cal Newport, Cass Sunstein, Checklist Manifesto, Clayton Christensen, cognitive dissonance, collapse of Lehman Brothers, commoditize, corporate governance, correlation does not imply causation, creative destruction, cryptocurrency, Daniel Kahneman / Amos Tversky, deep learning, delayed gratification, deliberate practice, discounted cash flows, disintermediation, disruptive innovation, Dissolution of the Soviet Union, diversification, diversified portfolio, dividend-yielding stocks, do what you love, Dunning–Kruger effect, Edward Thorp, Elon Musk, equity risk premium, Everything should be made as simple as possible, fear index, financial independence, financial innovation, fixed income, follow your passion, framing effect, George Santayana, Hans Rosling, hedonic treadmill, Henry Singleton, hindsight bias, Hyman Minsky, index fund, intangible asset, invention of the wheel, invisible hand, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jeff Bezos, John Bogle, Joseph Schumpeter, junk bonds, Kaizen: continuous improvement, Kickstarter, knowledge economy, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, low interest rates, Mahatma Gandhi, mandelbrot fractal, margin call, Mark Zuckerberg, Market Wizards by Jack D. Schwager, Masayoshi Son, mental accounting, Milgram experiment, moral hazard, Nate Silver, Network effects, Nicholas Carr, offshore financial centre, oil shock, passive income, passive investing, pattern recognition, Peter Thiel, Ponzi scheme, power law, price anchoring, quantitative trading / quantitative finance, Ralph Waldo Emerson, Ray Kurzweil, Reminiscences of a Stock Operator, reserve currency, Richard Feynman, Richard Thaler, risk free rate, risk-adjusted returns, Robert Shiller, Savings and loan crisis, search costs, shareholder value, six sigma, software as a service, software is eating the world, South Sea Bubble, special economic zone, Stanford marshmallow experiment, Steve Jobs, Steven Levy, Steven Pinker, stocks for the long run, subscription business, sunk-cost fallacy, systems thinking, tail risk, Teledyne, the market place, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, time value of money, transaction costs, tulip mania, Upton Sinclair, Walter Mischel, wealth creators, Yogi Berra, zero-sum game

The even bigger picture tells us that, for more than two centuries, in spite of all of the major and minor calamities and all of the hundreds and thousands of reasons continuously given for why the world might be coming to an end, equities have rewarded their owners with real gains of more than 6.5 percent a year, on average—far higher than Treasury bills, bonds, gold, and the world’s reserve currency. History clearly shows that equities deliver the highest long-term real returns. Their predominance over the other classes of assets is completely overwhelming. Acting on this bit of information will be far more lucrative in the long run than reacting to the opinions and suggestions of commentators and advisory services that keep predicting the coming depression.


Unfinished Empire: The Global Expansion of Britain by John Darwin

Alfred Russel Wallace, British Empire, classic study, colonial rule, Corn Laws, David Ricardo: comparative advantage, European colonialism, financial independence, friendly fire, full employment, imperial preference, Khartoum Gordon, Khyber Pass, Kowloon Walled City, land tenure, mass immigration, Nelson Mandela, open economy, plutocrats, principal–agent problem, quantitative easing, reserve currency, Right to Buy, Scientific racism, South China Sea, special economic zone, spice trade, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, too big to fail, trade route, transcontinental railway, union organizing

But since the Viceroy (who had his own foreign office) managed British interests in the Persian Gulf, southern Iran, Afghanistan and Tibet, and administered both Aden and Burma, much of the eastern empire was also part of its remit. Other departments had fingers in the imperial pie. External defence was the sphere of the Admiralty and its reluctant collaborator the War Office, where the exiguous stock of British infantry battalions – the vital reserve currency of imperial power – was watched over jealously. All fell under the baleful gaze of the ogre of Whitehall. By the mid nineteenth century, the relentless struggle to reduce public debt had brought the Victorian Treasury to its pinnacle. The ‘Treasury knights’ regarded overseas spending as the next thing to vice.


pages: 650 words: 203,191

After Tamerlane: The Global History of Empire Since 1405 by John Darwin

agricultural Revolution, Atahualpa, Berlin Wall, Bretton Woods, British Empire, Cape to Cairo, classic study, colonial rule, Columbian Exchange, cuban missile crisis, deglobalization, deindustrialization, European colonialism, failed state, Francisco Pizarro, Great Leap Forward, invisible hand, Isaac Newton, joint-stock company, Khartoum Gordon, laissez-faire capitalism, land reform, Mahatma Gandhi, Malacca Straits, military-industrial complex, mutually assured destruction, new economy, New Urbanism, oil shock, open economy, price mechanism, reserve currency, Ronald Reagan, Scramble for Africa, South China Sea, South Sea Bubble, spice trade, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, trade route, transaction costs, transatlantic slave trade

The International Monetary Fund (to promote exchange-rate stability) and the General Agreement on Tariffs and Trade (to liberalize trade) would have come to nothing without its support. Above all, perhaps, it was the American dollar, convertible into gold, which supplied the universally accepted reserve currency on which trade expansion depended. America, of course, was perfectly placed to reap the rewards of the new commercial economy. Between 1939 and 1950 the value of American investment abroad had more than doubled. American industry reached its competitive peak in the 1950s. In dynamic sectors like air transport and mass entertainment, American products were almost unbeatable.


pages: 650 words: 204,878

Reminiscences of a Stock Operator by Edwin Lefèvre, William J. O'Neil

activist fund / activist shareholder / activist investor, bank run, behavioural economics, Black Monday: stock market crash in 1987, book value, British Empire, business process, buttonwood tree, buy and hold, buy the rumour, sell the news, clean water, Cornelius Vanderbilt, cotton gin, Credit Default Swap, Donald Trump, fiat currency, Ford Model T, gentleman farmer, Glass-Steagall Act, Hernando de Soto, margin call, Monroe Doctrine, new economy, pattern recognition, Ponzi scheme, price stability, refrigerator car, Reminiscences of a Stock Operator, reserve currency, short selling, short squeeze, technology bubble, tontine, trade route, transcontinental railway, traveling salesman, Upton Sinclair, yellow journalism

Thus, credit conditions for the NYSE were largely determined by the level of gold reserves within the New York area. The statement Livermore is referring to was issued by the NYCH once a week, on Saturday at noon. If Saturday was a holiday, it was issued at 3 P.M. on Friday. The statement gave the conditions of all member banks; provided the weekly average amounts of loans, gold reserves, currency notes, and deposits; and listed gains and losses in each item compared to the previous week. Similar bank statements were made in other large cities, but the New York statement was taken as a proxy for the credit conditions of the country due to the city’s importance as a financial center. The Bank of England issued a similar statement on Thursdays, which was also closely watched.


pages: 812 words: 205,147

The Anarchy: The Relentless Rise of the East India Company by William Dalrymple

British Empire, colonial rule, company town, crony capitalism, Dava Sobel, deindustrialization, European colonialism, fake news, Fellow of the Royal Society, global reserve currency, John Harrison: Longitude, joint-stock company, land reform, lone genius, megacity, offshore financial centre, reserve currency, spice trade, surveillance capitalism, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile

Its annual spending within Britain alone – around £8.5 millionj – equalled about a quarter of total British government annual expenditure.171 No wonder the Company now referred to itself as ‘the grandest society of merchants in the Universe’. Its armies were larger than those of almost all nation states and its power now encircled the globe; indeed, its shares were by now a kind of global reserve currency. As Burke wrote: ‘The Constitution of the Company began in commerce and ended in Empire;’ or rather, as one of its directors admitted, ‘an empire within an empire’.172 Nevertheless, for all its vast resources, to finance his six years of incessant warfare Wellesley had come close to bankrupting the Company, hugely increasing its annual deficits to around £2 millionk a year.


pages: 920 words: 233,102

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State by Paul Tucker

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, Andrei Shleifer, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, Brexit referendum, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, conceptual framework, corporate governance, diversified portfolio, electricity market, Fall of the Berlin Wall, financial innovation, financial intermediation, financial repression, first-past-the-post, floating exchange rates, forensic accounting, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, Greenspan put, incomplete markets, inflation targeting, information asymmetry, invisible hand, iterative process, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, liberal capitalism, light touch regulation, Long Term Capital Management, low interest rates, means of production, Money creation, money market fund, Mont Pelerin Society, moral hazard, Northern Rock, operational security, Pareto efficiency, Paul Samuelson, price mechanism, price stability, principal–agent problem, profit maximization, public intellectual, quantitative easing, regulatory arbitrage, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, road to serfdom, Robert Bork, Ronald Coase, seigniorage, short selling, Social Responsibility of Business Is to Increase Its Profits, stochastic process, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the payments system, too big to fail, transaction costs, Vilfredo Pareto, Washington Consensus, yield curve, zero-coupon bond, zero-sum game

Most notably, underpinned by the famous “stability culture,” which comprised part of Germany’s reinvention of itself after World War II, the Bundesbank was widely recognized to have done better than any other major Western monetary authority at containing inflation in the face of the 1970s/1980s oil-price shocks, without the German economy suffering more than elsewhere. On the other side of the Atlantic, in the face of concerted efforts by the Reagan administration to pack the Federal Reserve Board against him, Paul Volcker had enjoyed sufficient public support (just) to take the decisive steps in conquering inflation in the world’s reserve currency, a job consolidated during Alan Greenspan’s early years at the helm, and which seemed to have laid the foundations for an exceptional period of growth.6 By the early 1990s, economists were compiling evidence that central bank independence could improve inflation performance without exacerbating volatility in output and jobs: an apparent free lunch.7 Something seemed to be going very well if only the right policy regime existed.


pages: 1,057 words: 239,915

The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931 by Adam Tooze

anti-communist, bank run, banking crisis, British Empire, centre right, collective bargaining, Corn Laws, credit crunch, failed state, fear of failure, first-past-the-post, floating exchange rates, Ford Model T, German hyperinflation, imperial preference, labour mobility, liberal world order, low interest rates, mass immigration, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, negative equity, price stability, reserve currency, Right to Buy, Suez canal 1869, Suez crisis 1956, the payments system, trade route, transatlantic slave trade, union organizing, zero-sum game

But once the decision to engage the US was adopted, once it was made into both a cornerstone of military strategy and of Entente propaganda, it created an immense dependence, and the Wilson administration both before and after American entry into the war was conscious of this. In the spring of 1917 Wilson’s Treasury Secretary (and son-in-law) William McAdoo made quite clear that he aimed to replace sterling with the dollar as the key reserve currency.35 As a first move, McAdoo proposed that no funds from congressionally approved Liberty Loans should be used to support either sterling or the franc. Nor should London be permitted to use such funds to repay overdrafts that it had contracted with J. P. Morgan during Wilson’s credit freeze over the winter of 1916–17.


pages: 736 words: 233,366

Roller-Coaster: Europe, 1950-2017 by Ian Kershaw

airport security, anti-communist, Apollo 11, Ayatollah Khomeini, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, business cycle, centre right, colonial rule, cuban missile crisis, deindustrialization, Deng Xiaoping, Donald Trump, European colonialism, eurozone crisis, Exxon Valdez, failed state, Fall of the Berlin Wall, falling living standards, feminist movement, first-past-the-post, fixed income, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, Herbert Marcuse, illegal immigration, income inequality, Jeremy Corbyn, Johann Wolfgang von Goethe, labour market flexibility, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liberation theology, low interest rates, low skilled workers, mass immigration, means of production, Mikhail Gorbachev, mutually assured destruction, Neil Armstrong, Nelson Mandela, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open borders, post-war consensus, precariat, price stability, public intellectual, quantitative easing, race to the bottom, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Sinatra Doctrine, Suez crisis 1956, The Chicago School, trade liberalization, union organizing, upwardly mobile, washing machines reduced drudgery, Washington Consensus, Winter of Discontent, young professional

The complexities of putting such a system into practice meant that the Bretton Woods system was fully implemented only from December 1958 onwards. And within a decade it was encountering difficulties. Bretton Woods had essentially been a deal worked out by the United States and the United Kingdom. It reflected the post-war dominance of the dollar as the international reserve currency in place of the earlier pre-eminence of sterling. Since then Western economies had both become far more interwoven and varied widely in strength. It had become increasingly difficult to reconcile the fluctuating economies with fixed exchange rates. Currency speculation – and the financial uncertainty that this caused – was inevitable.


pages: 1,088 words: 228,743

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

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

Yet, many of these statistical relations are weak and are hardly stable over time or across countries. I will not discuss either theories or empirical evidence on exchange rate determination further in this book, nor will I cover the role of global and local risk factors in largely integrated world markets, prospects for dollar, or alternatives to the dollar as global reserve currencies. “Timing” the carry strategy with ex ante opportunity size, seasonals, and various conditioners Ex ante opportunity If carry were the only source of expected return, the evolution of ex ante carry opportunity (signal strength) could be measured by the dispersion of deposit rates or of carry-to-volatility ratios across G10 markets.


America in the World by Robert B. Zoellick

Albert Einstein, anti-communist, banking crisis, battle of ideas, Berlin Wall, Bretton Woods, British Empire, classic study, Corn Laws, coronavirus, cuban missile crisis, defense in depth, Deng Xiaoping, Donald Trump, Douglas Engelbart, Douglas Engelbart, energy security, European colonialism, facts on the ground, Fall of the Berlin Wall, foreign exchange controls, Great Leap Forward, guns versus butter model, hypertext link, Ida Tarbell, illegal immigration, immigration reform, imperial preference, Isaac Newton, Joseph Schumpeter, land reform, linear model of innovation, Mikhail Gorbachev, MITM: man-in-the-middle, Monroe Doctrine, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, Norbert Wiener, Paul Samuelson, public intellectual, RAND corporation, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, Scramble for Africa, Silicon Valley, Strategic Defense Initiative, The Wealth of Nations by Adam Smith, trade liberalization, transcontinental railway, undersea cable, Vannevar Bush, War on Poverty

America’s scientific culture and transnational system proved far superior to the Soviet Union’s closed model of national planning. At various junctures, often amidst shocks, the United States forced adaptations of the system of international trade, finance, and technology. After World War II, the U.S. dollar served as the principal reserve currency. In the 1970s, the United States abandoned the Bretton Woods system of fixed exchange rates, launching in its stead a floating (and sometimes pegged) exchange rate system. The rise of OPEC in the 1970s compelled the United States to experiment with approaches to energy security. More recently, technological, market, and environmental innovations have again transformed energy and environmental politics.


pages: 870 words: 259,362

Austerity Britain: 1945-51 by David Kynaston

Alistair Cooke, anti-communist, Arthur Marwick, British Empire, Chelsea Manning, collective bargaining, continuous integration, deindustrialization, deskilling, Etonian, full employment, garden city movement, hiring and firing, industrial cluster, invisible hand, job satisfaction, labour mobility, Lewis Mumford, light touch regulation, mass immigration, moral panic, Neil Kinnock, occupational segregation, price mechanism, public intellectual, rent control, reserve currency, road to serfdom, Ronald Reagan, shared worldview, stakhanovite, strikebreaker, the market place, upwardly mobile, urban planning, urban renewal, very high income, wage slave, washing machines reduced drudgery, wealth creators, women in the workforce, young professional

It would not have been easy for Britain to shed at all quickly a major portion of her accumulated global commitments, but there was a dismal absence of grown-up public debate about the question. It was much the same in the financial domain, where the continuing existence of the sterling area, accompanied by sterling’s position as one of the world’s leading reserve currencies, likewise resulted in overstretch. The sterling area, operating in those parts of the world where the writ (whether formal or informal) of the British Empire still ran, had been a creation of the Bank of England during the 1930s, and although Keynes had bitterly observed in 1944 that ‘all our reflex actions are those of a rich man’, the conventional wisdom remained that it was desirable for sterling after the war to play a leading world role.


pages: 872 words: 259,208

A History of Modern Britain by Andrew Marr

air freight, Albert Einstein, anti-communist, battle of ideas, Beeching cuts, Big bang: deregulation of the City of London, Bletchley Park, Bob Geldof, Bretton Woods, British Empire, Brixton riot, clean water, collective bargaining, computer age, congestion charging, cuban missile crisis, deindustrialization, Etonian, falling living standards, fear of failure, Fellow of the Royal Society, financial independence, floating exchange rates, full employment, gentleman farmer, Herbert Marcuse, housing crisis, illegal immigration, Kickstarter, liberal capitalism, Live Aid, loadsamoney, market design, mass immigration, means of production, Mikhail Gorbachev, millennium bug, Neil Kinnock, Nelson Mandela, new economy, North Sea oil, Northern Rock, offshore financial centre, open borders, out of africa, Parkinson's law, Piper Alpha, post-war consensus, Red Clydeside, reserve currency, Right to Buy, road to serfdom, Ronald Reagan, Silicon Valley, strikebreaker, upwardly mobile, Winter of Discontent, working poor, Yom Kippur War

Callaghan’s Treasury officials presented him with 500 typed pages, arranged into forty-nine sections. They showed that the deficit the Tories had left him was far worse than previously thought, some £800m and that he would have to begin with a programme of savage spending cuts and tax rises. Even then the pound, still a world ‘reserve’ currency, would be under constant pressure. This was bad enough. Labour had been elected promising a more generous welfare system, better pensions, spending on schools and much more. That was immediately in jeopardy. Prized national projects including the supersonic airliner project jointly developed with the French, Concorde, were under threat of being axed.


Lonely Planet Ireland by Lonely Planet

bank run, banking crisis, Berlin Wall, Bernie Sanders, bike sharing, Bob Geldof, British Empire, carbon footprint, Celtic Tiger, classic study, country house hotel, credit crunch, Easter island, G4S, glass ceiling, global village, haute cuisine, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), Jacquard loom, Kickstarter, land reform, reserve currency, sustainable-tourism, three-masted sailing ship, young professional

In summer the clock shifts to GMT plus one hour, so when it's noon in Dublin and London, it's 4am in Los Angeles and Vancouver, 7am in New York and Toronto, 1pm in Paris, 7pm in Singapore and 9pm in Sydney. Tourist Information In both the Republic and the North there's a tourist office or information point in almost every big town; most can offer a variety of services, including accommodation and attraction reservations, currency-changing services, map and guidebook sales, and free publications. In the Republic, the tourism purview falls to Fáilte Ireland (%Republic 1850 230 330, the UK 0800 039 7000; www.discoverireland.ie); in Northern Ireland, it's Discover Northern Ireland (%head office 028-9023 1221; www.discovernorthernireland.com).


Ireland (Lonely Planet, 9th Edition) by Fionn Davenport

air freight, Berlin Wall, Bob Geldof, British Empire, carbon credits, carbon footprint, Celtic Tiger, centre right, classic study, country house hotel, credit crunch, Easter island, glass ceiling, global village, haute cuisine, Intergovernmental Panel on Climate Change (IPCC), Jacquard loom, Kickstarter, McMansion, new economy, period drama, reserve currency, risk/return, sustainable-tourism, three-masted sailing ship, urban planning, urban renewal, urban sprawl, young professional

Fáilte Ireland has an office in Belfast ( 9032 7888) and NITB has an office in Dublin ( within the Republic 01-679 1977, 1850 230 230). In both the Republic and the North there’s a tourist office in almost every big town; most can offer a variety of services including accommodation and attraction reservations, currency changing services, map and guidebook sales and free publications. Fáilte Ireland also has six regional offices, which can give more in-depth information on specific areas. Main Regional Tourist Offices in the Republic Cork & Kerry ( 021-425 5100; www.discoverireland.ie/southwest; Cork Kerry Tourism, Áras Discover, Grand Pde, Cork) Dublin ( 01-605 7700; www.visitdublin.com; Dublin Tourism Centre, St Andrew’s Church, 2 Suffolk St, Dublin) East Coast & Midlands ( 044-934 8761; www.discoverireland.ie/eastcoast; East Coast & Midlands Tourism, Dublin Rd, Mullingar) For Kildare, Laois, Longford, Louth, Meath, North Offaly, Westmeath and Wicklow.