Big bang: deregulation of the City of London

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pages: 322 words: 77,341

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

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asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, laissez-faire capitalism, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, mortgage debt, mortgage tax deduction, mutually assured destruction, new economy, Nick Leeson, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk

But the fact is that after Margaret Thatcher came to power, the financial sector underwent a three-decade-long expansion, during which it got everything it asked for from the government. The abolition of exchange controls in 1979 and the increasingly international flow of capital, combining with the abolition of restrictions on trading practices which culminated in the “Big Bang” in 1986, have all led to the City’s increasing dominance of British economic life. The Big Bang in turn caused the “Wimbledonization” of the City, making it a place where most of the major players were foreign. As for the Big Bang, it consisted of a series of rule changes which boiled down to one simple thing: the biggest act of deregulation the financial sector had ever seen. Because financial deregulation has been a primary culprit in the current crisis, there’s a temptation to act as if it is inherently a bad thing. You need a short memory to think that. I grew up abroad and can vividly remember what a pain in the backside things such as currency restrictions were.

., 77, 100, 204 regulation and, 184–86 risk and, 142–43, 164–66 conservatism, housing and, 98 correlation, correlations: CDOs and, 115–16, 158, 167 risk and, 74, 148–49, 158–59, 165, 167 credit, 8, 169–73 banks and, 24–26, 37, 41, 43, 209, 211 bubbles in, 42, 60, 109, 170, 176, 216–17, 221, 223 CDOs and, 114–15, 119–20, 172 crunch in, 37, 41, 43, 54n, 77, 84–86, 92–93, 94n, 136, 163–64, 169, 171–73, 182, 193, 201–2, 215–16, 218–19 histories and ratings on, 85, 100, 123–26, 158, 163, 165, 208–11 housing and, 84–86, 92–93, 94n, 100, 109, 112, 125, 129–30, 132, 163–64 Iceland’s economic crisis and, 10–12 interest rates and, 172–73, 175, 209 risk and, 136, 158, 165 see also banking-and-credit crisis Crédit Agricole, 36 credit cards, 27, 217 credit ratings and, 123–24 Iceland’s economic crisis and, 9, 11–12 risk and, 158–59, 163 credit default swaps (CDSs), 20, 63, 65–80, 117, 158–59, 183–86 AIG and, 75–78, 201 attractive aspects of, 72–74 examples of, 57–58 Exxon deal and, 67–70, 121 over-the-counter trading of, 184–85, 201 regulation and, 68, 70, 73, 184–86 risk and, 58, 66–70, 72–75, 78–80, 212 securitized bundles of, 69–70, 74 streamlining and industrializing of, 68–69 unfortunate side effect of, 74–75 Credit Suisse, 36, 227 Cuomo, Andrew, 99 Cutter family, 126–27 Darling, Alistair, 172, 220 debt, debts, 27–29, 34, 59–63, 118, 172n, 179, 216, 229 in balance sheets, 27–28, 30–31 benefits of, 59–61 bonds and, 59, 61–63, 208, 210 credit and, 123–26, 221 derivatives and, 52, 67, 69–72 housing and, 93, 100, 132, 176 paying the bill and, 220–22 personal, 221–22 regulation and, 181, 190 Russian default on, 55–56, 162, 164–65 see also collateralized debt obligations default, defaults, default rates, 162–65 CDOs and, 114–15 on mortgages, 159–60, 163, 165, 229 risk and, 154, 159–60, 163 of Russia, 55–56, 162, 164–65 see also credit default swaps Demchak, William, 69 democracy, democracies, 15–18, 108–9, 179, 213 free-market capitalism and, 15, 17, 23 housing and, 87, 98 DePastina, Anthony, 85 Depository Institutions Deregulation and Monetary Control Act (DIDMCA), 100 deregulation, see regulation, deregulation derivatives, 45–58, 63–80, 86, 210–12 in balance sheets, 30–31, 70 banks and, 20, 51–54, 57–58, 63–71, 74–75, 77, 79, 115–17, 120–21, 132, 183–84, 200, 205–6, 211 Black-Scholes formula and, 48, 54, 116–17, 151 bonds and, 58, 63–67, 112, 114, 118–19, 210–11 Buffett and, 56–57, 78 and City of London, 56–57, 79, 201 complexity of, 52–54, 56–57 Enron and, 56, 105–6, 185 futures and, 46–47, 49n, 51–52, 54, 184 Greenspan on, 166, 183–84 in history, 45–48, 147 mathematics and, 47–48, 52–54, 115–17, 166 offshore companies and, 70, 72 options and, 46–47, 50–52, 151, 174, 184 over-the-counter trading of, 184–85, 201, 205–6 prices and, 38, 46–52, 54, 56, 75, 158–59, 166 regulation and, 68, 70, 73, 153, 183–86, 200–201 risk and, 46–47, 49–52, 54–55, 57–58, 66–75, 78–80, 114–15, 117–22, 151, 153, 158–60, 163, 166–67, 184–85, 205, 212 size of market in, 48, 56, 80, 117, 201 see also collateralized debt obligations; credit default swaps Detroit, Mich., 81–82 Deutsche Bank, 36, 77, 83, 227 diversification, 146–48, 177 dividends, 101, 147–48 Doctorow, E.

I grew up abroad and can vividly remember what a pain in the backside things such as currency restrictions were. When Margaret Thatcher came to power, you couldn’t take more than £500 out of the country at any one time—a restriction which now seems as distant as that of whalebone corsetry. The City of London was a club, and a particularly unlovable club at that, exclusively white and male and not just conservative but actively reactionary as a social force. Big Bang changed both the clublike nature of City life and also its impact on Britain: global finance was now a radical force, remaking Britain in the image of a laissez-faire free-market economy, tearing up the consensual, all-in-it-together model of governance which both parties had been pursuing since the Second World War. To many observers Margaret Thatcher seemed as pure a nineteenth-century Manchester School liberal as had ever held office: keen on free trade, keen on the distinction between the deserving and the undeserving poor, and keen to make money take the place of class as the determining principle of British life.


pages: 223 words: 10,010

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

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banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

While many lower income families have been helped into home ownership through such mortgages, weakened regulation has also made it much easier for unscrupulous operators determined to make easy money. While the process of deregulation brought more choice—and more risk—for consumers, it also led to the slow build-up of a massive debt mountain. Given the profit to be made from the mortgage business, the banks had every incentive to try and capture a growing share of the market. A higher share meant bigger profits, share values and executive bonuses. After the freeing up of mortgage restrictions, the lending institutions became increasingly innovative—some would say reckless. In the 1960s and 1970s, the typical mortgage was limited to two and a half times earnings, and rarely more than 80 or 90 per cent of the property value. Some kind of deposit was mandatory. After big bang, these restrictions were mostly axed and mortgage deals became more and more generous.

It can lay claim unchallenged to one title: it is the magnet for the world’s billionaires.’170 Notes 136 H Roberts and D Kynaston, City State, Penguin, 2001, p 48. 137 S Lansley and H Reed, The Red Tape Delusion, TUC Touchstone Pamphlet, 2010, pp20-21. 138 Lansley, Life in the Middle, op. cit. p 28. 139 WD Rubenstein, Men of Property, Croom Helm, London, 1981, tables 3.3-3.7, p 62-66. 140 J Bakan, The Corporation, Constable, 2004, ch 4. 141 Lansley, Do the Super-Rich Matter?, op. cit. p 12-13. 142 C Toulouse, ‘Thatcherism, Class Politics and Urban Development in London’, Critical Sociology, Volume 18, 1992, p 62. 143 D Kynaston, The City of London, Volume IV, Pimlico, 2001, chapter 22. 144 Z/Yen, The Global Financial Centre Index, City of London Corporation, March 2007. 145 http://www.ifsl.org.uk/media/2333/Eco_con_of_UK_fin_ser_2007.pdf. 146 Centre for Research on Socio-Cultural Change (CRESC), An Alternative report on UK Banking Reform, University of Manchester, 2009, p 41. 147 Robin Blackburn,’ Finance and the Fourth Dimension’, New Left Review, 39, May/June, 2006. 148 Boston Consulting Group, Investment Banking and Capital Markets, Annual Reports. 149 Glyn, Capitalism Unleashed, op. cit. p 52.

See Buchanan et al, Undisclosed and Unsustainable, Centre for Research on Socio-Cultural Change, Manchester University, 2009. 130 Centre for Cities, Cities Outlook, 2009. 131 Centre for Cities, Public Sector Cities, Trouble Ahead, July 2009. 132 Buchanan et al, op. cit. p 22. 133 J Hills et all (eds), Towards a More Equal Society, Policy Press, 2009, p 2. 134 Ibid. p 28. 135 Lansley, Life in the Middle, op. cit. figure 8. 4 A FAUSTIAN PACT In early January 1998, a large group of London traders, fund managers and financiers braved the pouring winter rain to gather at the Mansion House, the grand official residence of the Mayor of the City of London. The group—gathered in the very heart of the old financial sector known as the Square Mile—had been invited to debate the motion ‘This house believes that City salaries are totally fair and justified’. Most of the 200 at the debate would have been amongst the highest paid in the land. Supporting the motion was George Cox, a director of LIFFE, the London International Financial Futures Exchange, established in 1982 to trade in ‘futures’, essentially bets about the future course of share prices, currencies and commodities.


pages: 543 words: 147,357

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

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, 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, George Akerlof, Gini coefficient, 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, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, means of production, Mikhail Gorbachev, millennium bug, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, 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, too big to fail, unpaid internship, value at risk, Washington Consensus, working poor, éminence grise

., 17, 36, 135, 177 Cabinet Office, 218–19, 336, 337 Cable, Vincent, 220 Cambridge University, 9, 363 Cameron, David, 20, 179, 233–4, 235, 318, 338, 342; ‘Big Society’ policy, 19–20, 234, 271, 280 Campbell, Alastair, 141, 142, 224, 312 Canada, 121, 354, 358–9, 383 capital controls, abolition of, 32, 161 capitalism: see also entrepreneurs; innovation; amorality of, 16–19; ‘arms race’ effects, 105; boom and bust cycle, 181–7, 392; deregulation (from 1970s), 159–63, 388; fairness and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; as immutable force of nature, ix, 23, 40–2; incumbent firms, 29–30, 31, 105, 106, 110, 111–12, 253–5, 257, 297; interconnectedness of markets, 200–2, 204; knowledge-entrepreneurship dynamic, 27–8, 31, 103, 110–11, 112–13; liquidity as totemic, 199, 200, 202, 240, 243; need for ‘circuit breakers’, 197, 199, 202, 203; network theory and, 199–204, 206; required reforms of, 205–9, 215–16; stakeholder, x, 148–9; undue influence of, 32–3 Carlaw, Kenneth, 108, 263 Carnegie, Andrew, 195, 303 cars, motor, 91, 108, 109, 134, 269 Castells, Manuel, 317 Cayne, Jimmy, 173–4 CCTV cameras, 10 celebrity culture, 282, 314 central banks, 154, 157, 158, 160, 182, 185, 187, 208; see also Bank of England; Federal Reserve, 169–70, 176, 177, 183 Cerberus Capital Management, 177 Cervantes, Miguel de, 274 Channel 4, 330, 350 Charles I, King of England, 124–5 Charter One Financial, 150 chavs, mockery of, 25, 83, 272, 286–8 child poverty, 12, 21, 74–5, 83, 278, 279, 288–90, 291 China, x, 101, 112, 140, 144, 160, 226, 230, 354–5, 385; consumption levels, 375–6, 379, 380, 381; economic conflict with USA, 376–7, 378–80, 381, 382, 383; export led growth, 36, 169, 208, 226, 355–6, 375–7, 379–81, 382–3; rigged exchange rates, 36, 169, 355, 377, 378–9; surpluses of capital and, 149, 154, 169, 171, 208, 226, 375; unfairness of world system and, 383, 385 Christianity, 53, 54, 352, 353 Church of England, 128 Churchill, Winston, 138, 273, 313 Churchill Insurance, 150 Cisco, 253 Citigroup, 152, 158, 172, 177, 184, 202, 203, 242, 247 city academies, 278, 307 City of London, 34, 137, 138, 178–9, 252, 359; as incumbent elite, 14, 26, 31, 32–3, 210, 249, 355; in late nineteenth-century, 128–30; light-touch regulation of, 5, 32, 138, 145, 146–7, 151, 162, 187, 198–9; New Labour and, x–xi, 5, 19, 22, 142, 144–5, 355; remuneration levels see pay of executives and bankers civic engagement, 86, 313 civil service, 13, 221, 273, 312, 343 Clasper, Mike, 178 Clayton Act (USA, 1914), 133 Clegg, Nick, 22, 218, 318, 327–8, 342, 391 Clifton, Pete, 321 Clinton, Bill, 140, 177, 183 coalition government (from May 2010), 14, 20, 22, 37, 307, 311, 343, 346, 390–2; abolition of child trust fund, 302; capital spending cuts, 370–1; deficit reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2; emergency budget (June 2010), 369–70; market fundamentalism and, 370; political reform commitment, 35, 341, 343–4, 346, 350, 390, 391; proposed financial reforms, 208, 209, 245, 252, 371; repudiation of Keynesian economics, xi, 390–1 Cohan, William, 158–9 Cohen, Ronald, 12, 245 collapse/crash of financial system, x, xi, 4, 9, 41, 144, 146, 152–4, 158–9, 168; costs of, 7, 19, 138, 152–3, 172, 214–15; errors responsible for, 136, 187–96, 197–204; global interconnectedness, 375, 382–3; lessening of internationalism following, 376–83; need to learn from/understand, 36–7; predictions/warnings of, 148, 153, 180, 182–5; recommended policy responses, 215–16; results of previous credit crunches, 358, 359–60, 361–2 collateralised debt obligations (CDOs), 155, 167–8, 174 colonialism, 109, 124 Commodity Future Trading Commission, 182–3 communism, collapse of in Eastern Europe, 16, 19, 135, 140, 163 competition, 29, 30, 33, 51, 156, 185, 186, 207–8, 251; see also ‘open-access societies’; City of London and, 160, 178, 179, 198–9; deregulated banking and, 160, 161, 163, 164, 178, 179, 181; European Union and, 251, 258, 259; fairness and, 89–90, 99, 272; incumbent elites/oligarchs and, 104, 114, 129–30, 131–4, 257; innovation and, 40, 114, 257–60; national authorities/regimes, 201–2, 257–60, 316, 318; state facilitation of, 31 Competition Commission, 257–8 computer games, 233 Confederation of British Industry (CBI), 4, 6–7 Conservative Party, xi, 5, 11, 14, 97–8, 220, 343, 378; broken Britain claims, 16, 227, 271; budget deficit and, 19, 224, 357, 360–1, 368, 379; City/private sector funding of, 179, 257, 344; decline of class-based politics, 341; deregulation and, 32, 160, 161; fairness and, 83, 302, 374, 390; general election (1992) and, 140–1; general election (2010) and, 20, 97, 227, 234, 271, 357, 374, 379, 390; Conservative Party – continued government policies (1979-97), 32, 81, 275–6, 290; inheritance/wealth taxes and, 74, 302–3; market fundamentalism and, 5, 17, 138, 147, 160, 161; poverty and, 21, 279; reduced/small state policy, 20, 22, 233–4, 235 construction industry, 5, 33, 268 consumer goods, types of, 266–7 Continental Illinois collapse, 152, 162 Convention on Modern Liberty, 340 Cook, Robin, 142 Cootner, Paul, 194–5 Copenhagen climate change talks (2009), 226, 231, 385 Corporate Leadership Council, US, 93 Corzine, Jon, 177 county markets, pre-twentieth-century, 90 Coutts, Ken, 363 Cowell, Simon, 314, 315 ‘creative destruction’ process, 111, 112, 134 creative industries, 11, 71, 355 credit cards, 64, 354 credit crunch: see collapse/crash of financial system credit default swaps, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207 Crédit Lyonnais collapse, 152 credit-rating agencies, 151, 165, 175, 196, 197, 248, 269, 362, 388; funding of, 151, 196, 207 criminal activity/allegations, 7, 101, 103, 104–5, 138, 167–8 Crosby, James, 178 Cuba, 61 culture, British, 12, 187, 282, 314 Dacre, Paul, 324, 326, 329 Daily Mail, 218, 286, 288, 315, 324, 325–7, 339, 342 Daily Telegraph, 288, 317, 319, 327 Darling, Alistair, 149, 204, 252 Darwin, Charles, 31 Data Monitor, 186 Davies, Howard, 198 Davies, Nick, Flat Earth News, 319, 321, 323–4, 326, 331–2 de Gaulle, Charles, 65 debt, 33, 155, 209, 351–63; corporate/commercial, 8, 29, 181, 245, 248, 352, 354, 359, 363, 374; moral attitudes towards, 351–4, 357, 360–1; necessity of, 155, 351, 353, 354; private, 5, 186, 187, 210, 226, 279–80, 354–7, 359, 363, 373; public, 9, 34, 164, 166, 167, 182, 203, 214, 224–6, 356–7, 362–3, 375, 388, 393; sustainable level of, 356–7, 368–9 Defence Advanced Research Projects Agency (DARPA), 265 defence and armed forces, 34, 372 deficit, public, 4, 34, 213, 224–6, 335, 364–74; coalition’s reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2, 393; need for fiscal policy, 224–5, 226, 357–8, 364, 365–9, 370, 374; speed of reduction of, 213, 224–5, 360–1, 368, 371 Delingpole, James, 287 Delong, Brad, 27, 106 democracy, 13–15, 235, 310–16, 333–48; centralisation of power and, 14–15, 35, 217, 313, 334, 337, 342; fair process and, 86, 89, 96–9; incumbent elites and, 35, 99; industrial revolution and, 128; media undermining of, 315–16, 317–18, 321–9, 333, 350; ‘open-access societies’ and, 136, 314 Democratic Party, US, 18, 140, 183, 379 Demos, 289 Deng Xiao Ping, 140 Denham, John, 21 deprivation and disadvantage, 10, 34, 288–93, 307–8, 393; low-earning households, 11–12, 13, 291, 361; weight of babies and, 13; young children and, 74–5, 83, 288–90 derivatives, 140, 145, 150–1, 164–8, 171, 175, 188, 207, 209; City of London and, 32, 137, 150–1, 157, 199; mathematical models (‘quants’) and, 188, 191; regulation and, 183, 197–8, 199 desert, due, concept of, 4, 24, 38–43, 45–7, 50–63, 64–8, 73–7, 80–2, 223, 395; see also effort, discretionary; proportionality; big finance and, 40–2, 82, 167, 174, 176, 210; debt and, 351–2; diplomacy/international relations and, 385–6; Enlightenment notions of, 53–6, 58–9, 112; luck and, 70, 73–7, 273; poverty relief systems and, 80–2, 277–8; productive entrepreneurship and, 102–3, 105–6, 112, 222, 392–3; taxation and, 40, 220, 266 Deutsche Bank, 170 developing countries, 71–2, 160, 354–5, 375, 376, 385 Diamond, Bob, 24 Dickens, Charles, 353 digitalisation, 34, 231, 320, 349, 350 Doepke, Matthias, 115–16 dot.com bubble, 9, 193 Drugs Advisory Panel, 11 Duffy, Gillian, 394 Durham University, 263 Dworkin, Ronald, 70 Dyson, James, 28, 33 East India Company, 130 Easyjet, 28, 233 eBay, 136 economic theory, 43–4, 188–9, 366; see also Keynesian economics; market fundamentalism economies of scale, 130–1, 254–5, 258 The Economist, 326, 330, 349 economy, British: see also capitalism; financial system, British; annual consumption levels, 375; balance of payments, 363–4; as ‘big firm’ economy, 254; change in landscape of trading partners, 230–1; coalition capital spending cuts, 370–1; collapse of tax base, 224, 368; cumulative loss of output caused by crash, 138, 153, 172, 214–15; desired level of state involvement, 234–5; domination of market fundamentalism, 16–17; economic boom, 3–4, 5–6, 12, 143, 173, 181–7, 244–5; fall in volatility, 365; fiscal deficit, 368; fiscal policy, 208, 224–5, 226, 357–8, 364–9, 370, 374; growth and, 9–10, 214–15, 218–19, 224, 359, 363; inefficient public spending, 335; investment in ‘intangibles’, 232–3; in late nineteenth-century, 128–30; ‘leading-edge’ sectors, 218–19; need for engaged long term ownership, 240–4, 249–51; as non-saver, 36, 354; potential new markets/opportunities, 231–3; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; required reforms of, 20, 239–44, 249–52, 264–6, 371–4 see also national ecosystem of innovation; ‘specialising sectors’, 219; urgent need for reform, 36–7; volatility of, 297–8; vulnerability of after credit crunch, 358–64 economy, world: acute shortfall of demand, 375–6; Asian and/or OPEC capital surpluses and, 149, 153–4, 169, 171, 208, 226, 354, 375; conflicts of interest and, 137, 138; deregulation (from 1970s), 159–63; emerging powers’ attitudes to, 226; entrenched elites and, 137–8, 210; fall in volatility, 365; international institutions as unfair, 383, 385; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; need for international cooperation, 357–8, 379–80, 381–3, 384, 385–6; post-crunch deleverage pressures, 359–60, 374–5; protectionism dangers, 36, 358, 376–7, 378, 379, 382, 386; savers/non-savers imbalance, 36, 169, 208, 222, 355, 356, 375–6, 378–83; shift of wealth from West to East, 36, 383–4; sovereign debt crises, 167, 203, 214; unheeded warnings, 182–5; wrecking of European ERM, 140, 144 Edinburgh University, 145 education, 10, 20–1, 128, 131, 272–4, 276, 278, 292–5, 304–8, 343; Building Schools for the Future programme, 371; cognitive and mental skills, 288–90, 304–6; private, 13, 114, 264–5, 272–3, 276, 283–4, 293–5, 304, 306 effort, discretionary, 50, 53, 54–5, 58–60, 80, 90–1, 114, 134; see also desert, due, concept of; fair process and, 91–4; indispensability and, 65–7; innovation and invention, 62, 65, 102–3, 105–6, 112, 117, 131, 223, 262–3, 392–3; luck and, 26–7, 65, 67, 70, 71, 73–4, 75–7; productive/unproductive, 43, 46–7, 51–2, 62, 64–5, 102–3, 392–3; proportionate reward for, 26, 39–40, 44, 47, 61, 74, 76–7, 84, 122, 272, 273, 2 84 egalitarianism, 27, 53–4, 55–6, 61, 75, 78–80, 144, 341, 343; Enlightenment equal worth concept, 53, 55, 59–60 Ehrenfeld, Rachel, 333 Eisman, Steve, 207 electoral politics: see also general election (6 May 2010); general elections, 97, 138, 277, 315; fair process and, 96–9; franchise, 128; general election (1992), x, 138, 140–1, 144, 148, 277; general election (1997), x, 138, 141 electricity, 134, 228, 256 electronic trading, 105 elites, incumbent, 23, 31–3, 99, 131; City of London, 14, 26, 31, 32–3, 210, 249, 355; competition and, 104, 113, 114, 129–30, 131–4, 257; democracy and, 35, 99; Enlightenment and, 122; history of (from 1880s), 131–4; history of in Britain (to 1900), 124–30; innovation and, 29–30, 110, 111–12, 113, 114, 115, 116; modern big finance and, 135, 137–8, 180, 210, 387–9; in ‘natural states’, 111, 113, 114–15, 116, 123–4, 127; New Labour’s failure to challenge, x–xi, 14, 22, 388, 389–90; world economy and, 137–8, 210 EMI, 28, 247, 248 employment and unemployment, 6, 75, 291–3, 295, 300, 373, 393; employment insurance concept, 298–9, 301, 374; lifelong learning schemes, 300, 301; lifelong savings plans, 300; unemployment benefit, 81, 281 Engels, Friedrich, 121–2 English language as lingua franca, 124 Enlightenment, European, 22, 30–1, 146, 261, 314–15; economics and, 104, 108–9, 116–17, 121–3; notions of fairness/desert, 53–6, 58–9, 112, 122–3, 394; science and technology and, 31, 108–9, 112–13, 116–17, 121, 126–7 Enron affair, 147 entrepreneurs: see also innovation; productive entrepreneurship; capitalist knowledge dynamic, 27–8, 31, 110–11, 112–13; challenges of the status quo, 29–30; Conservative reforms (1979-97) and, 275; private capital and, 241; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; rent-seeking and, 61–2, 63, 78, 84, 101, 105, 112, 113–14, 116, 129, 135, 180; unproductive, 28–9, 33, 61–2, 63, 78, 84, 101–2, 103–5, 180 environmental issues, 35–6, 71–2, 102, 226, 228, 231, 236, 385, 390, 394; due desert and, 68; German Greens and, 269 Erie Railroad Company, 133 Essex County Council, 325, 332 European Commission, 298 European Exchange Rate Mechanism (ERM), 140, 144, 166 European Union (EU), 11, 82, 179, 379–80, 383–4, 385; British media and, 15, 328, 378; Competition Commissioner, 251, 258, 259; scepticism towards, 15, 36, 328, 377, 378, 386 eurozone, 377 Fabian Society, 302–3 factory system, 126 fairness: see also desert, due, concept of; proportionality; abuse/playing of system and, 24–5, 27; asset fairness proposals, 301–3, 304; behavioural psychology and, 44, 47–50, 59–61; Blair’s conservative view of, 143; Britishness and, 15–16, 392–3, 395; capitalism and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; challenges to political left, 78–83; coalition government (from May 2010) and, 22, 37; commonly held attitudes, 44, 45–7; deficit reduction and, 226, 227, 374; economic and social determinism and, 56–8; Enlightenment notions of, 53–6, 58–9, 112, 122–3, 394; fair process, 84–94, 96, 98–9, 272; as foundation of morality, 24, 26, 45, 50; individual responsibility and, 39, 78–9; inequality in Britain, 78, 80, 275–6, 277–8, 342; international relations and, 226, 385–6; ‘Just World Delusion’, 83; luck and, 72–7; management-employee relationships, 90–2; models/frameworks of, 43–58; need for shared understanding of, 25, 37, 43; partisanship about, 42–3; politicians/political parties and, 22, 83, 271–2, 302–3, 374, 391–2; popular support for NHS and, 75, 77, 283; pre-Enlightenment notions, 52–3; shared capitalism and, 66, 92–3; state facilitation of, ix–x, 391–2, 394–5; welfare benefits to migrants and, 81–2, 282, 283, 284 Farnborough Sixth Form College, 294 Federal Reserve, 169–70, 176, 177, 183 Fees Act (1891), 128 Fertile Crescent, 106 feudalism, European, 53–4, 74, 104, 105 financial instruments, 103, 148, 157, 167–8 Financial Services and Markets Act (2001), 198 Financial Services Authority (FSA), 24, 147, 162, 178, 198–9, 208 financial system, British: see also capitalism; economy, British; Asian and/or OPEC capital surpluses and, 149, 154, 354; big finance as entrenched elite, 136, 137–8, 176, 178–80, 210, 387–9; declining support for entrepreneurship, 241; deregulation (1971), 161; fees and commissions, 33; importance of liquidity, 240, 243; lack of data on, 241; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; massive growth of, 137, 138, 209, 219; need for tax reform, 209–10; regulation and see regulation; required reforms to companies, 249–50; savings institutions’ share holdings, 240–1; short termism of markets, 241, 242–3; unfairness of, 138, 210 Financial Times, 12, 149, 294, 330, 349, 361 Fink, Stanley, 179 fiscal policy, 208, 224–5, 226, 357–8, 364–9, 374; coalition rejection of, 370 fish stocks, conservation of, 394 Fitch (credit-rating agencies), 248 flexicurity social system, 299–301, 304, 374 Forbes’ annual list, 30 Ford, Henry, 195, 302 foreign exchange markets, 32, 161, 164, 165, 168, 363, 367; China’s rigged exchange rate, 36, 169, 355, 377, 378–9; currency options, 166, 191; eurozone, 377 foreign takeovers of British firms, 8, 388 Fortune magazine, 94 Foster, Sir Christopher, 313 foundation schools, 307 France, 51–2, 123–4, 163, 372, 375, 377 free trade, 163, 334, 379 Frey, Bruno, 60, 86 Friedman, Benjamin, 282–3 Fukuyama, Francis, 140 Fuld, Dick, 192 Future Jobs Fund, 373 G20 countries, 209, 358, 368, 374 Galliano, John, 143 Gardner, Howard, 274, 305–6 gated communities, 13 Gates, Bill, 71 Gates, Bill (Senior), 222 Gaussian distribution, 190–1, 194 ‘gearing’, 6 general election (6 May 2010), 97, 142, 179, 214, 217, 227, 234, 271, 314, 318, 327–8, 334, 378; Gillian Duffy incident, 394; result of, xi, 20, 345–6, 390 ‘generalised autoregressive conditional heteroskedasicity’ (GARCH), 194 genetically modified crops, 232 Germany, 36, 63, 244, 262, 269, 375–6, 379, 380; export led growth, 355–6, 375, 381–2; Fraunhofer Institutes, 252, 264; Greek bail-out and, 377; pre-1945 period, 128, 129, 134, 382, 383 Gieve, Sir John, 339–40 Gilligan, Andrew, 329 Gladwell, Malcolm, 76–7 Glasgow University, 323 Glass-Steagall Act, 162, 170, 202–3 Glastonbury festival, 143 globalisation, 32, 98, 140, 143, 144, 153–4, 163, 182, 297, 363, 366, 380 Goldman Sachs, 42, 63, 103, 150, 167–8, 174, 176, 177, 205 Goodwin, Sir Fred, 7, 150, 176, 340 Google, 131, 136, 253, 255, 258, 262 Goolsbee, Austin, 52 Gorbachev, Mikhail, 140 Gough, Ian, 79 Gould, Jay, 133 Gould, Philip, 142 government: see also democracy; political system, British; cabinet government, 312, 334, 337; centralisation of power, 14–15, 35, 217, 313, 334, 337, 341, 342; control of news agenda, 14, 224, 313; disregard of House of Commons, 14–15, 223, 339, 345; Number 10 Downing Street as new royal court, 14, 337, 338, 346, 347; press officers/secretaries, 14, 180, 224, 312; Prime Ministerial power, 337, 344, 345, 346 GPS navigation systems, 233, 265 Gray, Elisha, 221 Great Depression, 159, 162, 205, 362 Greece: classical, 25, 26, 38, 39, 44–5, 52–3, 59, 96, 107, 108; crisis and bail-out (2010), 167, 371, 377, 378 Green, Sir Philip, 12, 29, 33 Green Investment Bank, proposed, 252, 371 Greenhead College, Huddersfield, 294 Greenspan, Alan, 145–6, 165, 177, 183, 184, 197–8 Gregory, James, 277 growth, economic: Britain and, 9–10, 214–15, 219, 221, 359, 364; education and, 305–6; export led growth, 36, 169, 208, 226, 355–6, 375–7, 378–83; social investment and, 280–1 GSK, 219, 254 the Guardian, 319, 330, 349 Gupta, Sanjeev, 367 Gutenberg, Johannes, 110–11 Habsburg Empire, 127 Haines, Joe, 312 Haji-Ioannous, Stelios, 28 Haldane, Andrew, 8, 151, 153, 193, 214, 215 the Halifax, 186, 251 Hamilton, Lewis, 64, 65 Hammersmith and Fulham, Borough of, 167 Hampton, Sir Philip, 173 Hands, Guy, 28, 178, 246–8 Hanley, Lynsey, 291, 293, 302 Hanushek, Eric, 305–6 Hart, Betty, 289 Harvard University, 47, 62, 198 Hashimoto administration in Japan, 362 Hastings, Max, 217–18 Hauser, Marc, 47–50 Hawley, Michael, 65–6 Hayward, Tony, 216–17 HBOS, 157, 158, 178, 251 health and well-being, 9, 75, 77, 106, 232, 233, 290–1; see also National Health Service (NHS) Heckman, James, 290 hedge funds, 6, 21, 103, 157–8, 167–8, 172, 203, 205, 206, 240; collapses of, 152, 173–4, 187, 202; as destabilisers, 166–7, 168; destruction of ERM, 140, 144, 166; near collapse of LTCM, 169–70, 183, 193, 200–1 hedging, 164, 165–6 Heinz, Henry John, 302 Hermes fund management company, 242 Herrman, Edwina, 179 Herstatt Bank collapse, 152 Hetherington, Mark, 84 Hewitt, Patricia, 180 Hewlett-Packard, 30 Hills Report on social housing, 290 Hilton, Paris, 304 Himmelfarb, Gertrude, 146 Hirst, Damien, 12 history, economic, 121–36, 166, 285–6, 353–4 Hobhouse, Leonard, 220, 222, 234, 235, 261, 266 Hobsbawm, Eric, 100 Hoffman, Elizabeth, 60 Holland, 113, 124, 230 Honda, 91, 269 Hong Kong, 168 Hopkins, Harry, 300 Horton, Tim, 277 House of Commons, 14–15, 223, 312–13, 337–9, 345 House of Lords, 15, 128, 129, 312, 334, 344, 346–7 housing, social, 10, 289, 290–1, 292, 308–9 housing cost credits, 308–9 HSBC, 181, 251 Huhne, Chris, 346 Hunt family, sale of cattle herds, 201 Hurka, Thomas, 45–6 Hutton, Will, works of, x; The State We’re In, x, 148–9 IBM, 29, 164, 254 Iceland, 7, 138 ICT industry, 9, 29–30, 109, 134, 135–6, 182, 229 immigration, 11, 143, 326, 328, 342, 343, 386, 394; from Eastern Europe, 82, 281–2, 283; welfare state and, 81–2, 281–2, 283, 284 incapacity benefit, 27 the Independent, 93, 330 Independent Safeguarding Authority, 339 India, 144, 226, 230, 254, 354–5 individual responsibility, 17, 38, 39, 78–9 individualism, 54, 57, 66, 111, 221, 281, 341, 366; capitalism/free market theories and, ix, 17, 19, 27, 40, 145, 221, 234–5 Indonesia, 168 Industrial and Commercial Finance Corporation (now 3i), 250 industrial revolution, 28, 112, 115, 121–3, 124, 126–8, 130, 315 inflation, 6, 32, 355, 364, 365; targets, 163, 165, 208, 359 Ingham, Bernard, 312 innovation: see also entrepreneurs; national ecosystem of innovation; as collective and social, 40, 131, 219–22, 261, 265–6, 388; comparisons between countries, 67; competition and, 40, 114, 257–60; development times, 240, 243; discretionary effort and, 62, 65, 102–3, 105–6, 131, 222, 392–3; dissemination of knowledge and, 110–11, 112–13, 219–22, 265–6; due desert and, 40, 62, 67, 112, 117; ‘financial innovation’, 63–4, 138, 147, 149, 153–4, 182; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; high taxation as deterrent, 104, 105; history of, 107–17, 121–7, 131–4, 221; increased pace of advance, 228–9, 230, 266–7; incremental, 108, 254, 256; incumbent elites and, 29–30, 104, 106, 109, 111–12, 113, 114, 115, 116, 257; large firms and, 251–2, 254–5; as natural to humans, 106–7, 274; need for network of specialist banks, 251–2, 265, 371; in ‘open-access societies’, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; patents and copyright, 102, 103, 105, 110, 260–1, 263; private enterprise and, 100–1; regulation and, 268–70; risk-taking and, 6, 103, 111, 189; short term investment culture and, 33, 242–3, 244; small firms and, 252, 253–4, 255–6; universities and, 261–5 Innovation Fund, 21, 251, 252 Institute of Fiscal Studies, 275–6, 363, 368–9, 372 Institute of Government, 334, 335, 337, 343 insurance, 165–6, 187, 240, 242 Intel, 255, 256 intellectual property, 260–1 interest rates, 164, 191, 352–3, 354, 357, 359, 360, 361, 362, 367, 380 internal combustion engine, 28, 109, 134 International Monetary Fund (IMF), 9, 152–3, 177–8, 187, 207, 226, 383, 384; Asian currency crisis (1997) and, 168–9; proposed bank levy and financial activities tax, 209; support for fiscal policy, 367 internet, 11, 28, 52, 109, 134, 227, 256, 265; news and politics on, 316–17, 321, 349; pay-walls, 316, 349; as threat to print media, 324, 331, 349 iPods, 105, 143 Iraq War, 14–15, 18, 36, 144, 329 Ireland, 138 iron steamships, 126 Islam, 352, 353 Islamic fundamentalism, 283, 384 Israel, 251, 322–3 Italy, 101, 103, 317, 328 ITN, 330, 331 James, Howell, 180 Japan, 36, 67, 140, 163, 168, 244, 369, 375, 376, 385, 386; credit crunch (1989-92), 359–60, 361–2, 382; debt levels, 356, 362, 363; incumbent elites in early twentieth-century, 134; Tokyo Bay, 254; Top Runner programme, 269 Jenkins, Roger, 296 Jobcentre Plus, 300 Jobs, Steve, 29–30, 65–6, 71 John Lewis Group, 66, 67, 93, 246 Johnson, Boris, 179 Johnson, Simon, 177 Jones, Tom, 242 Joseph Rowntree Foundation, 21, 278–9 journalism, 318–21, 323–4, 326–7 Jovanovic, Boyan, 256 JP Morgan, 169, 191–2, 195–6 judges, 15 justice systems, 30–1, 44–5, 49; symbolised by pair of scales, 4, 40 Kahneman, Daniel, 94–5 Kant, Immanuel, 73, 112, 274 Kay, John, 175 Kennedy, Helena, 340 Keynesian economics, x, xi, 184, 190, 196–7, 354, 362, 390–1 Kindleberger, Charles, 184 King, Mervyn, 213 Kinnock, Neil, 142 kitemarking, need for, 267 Klenow, Peter, 52 Knetsch, Jack, 94–5 Knight, Frank, Risk, Uncertainty and Profit (1921), 189, 191, 196–7 knowledge: capitalist advance of, 27–8, 31, 110–11, 112–13; public investment in learning, 28, 31, 40, 131, 220, 235, 261, 265 knowledge economy, 8, 11–12, 34, 135–6, 229–33, 258, 273–4, 341, 366; credit growth and, 355; graduate entry to, 295; large firms and, 251–2, 254–5; small firms and, 252, 253–4, 255–6, 261; state facilitation of, 219–22, 229–30 Koizumi administration in Japan, 362 Koo, Richard, 360, 361–2 Kuper, Simon, 352 Kwak, James, 64, 177 labour market, 52, 62, 83, 95; flexibility, 5, 275, 276, 299, 364–5, 387 laissez-faire ideology, 153, 198–9, 259 Laker, Freddie, 30 Lambert, Richard, 6–7 language acquisition and cognitive development, 288, 289 Large Hadron Collider, 263 Latin American debt crisis, 164 Lavoisier, Antoine, 31 Lazarus, Edmund, 179 Leahy, Sir Terry, 295 Learning and Skills Council, 282, 300 left wing politics, modern, 17, 38, 78–83 Lehman Brothers, 150, 152, 165, 170, 181, 192, 204 lender-of-last-resort function, 155, 158, 160, 187 Lerner, Melvin, 83 leverage, 6, 29, 154–6, 157, 158, 172, 179, 180, 198, 204, 209–10, 254, 363; disguised on balance sheet, 181, 195; effect on of credit crunches, 358, 359, 360, 361, 374–5; excess/massive levels, 7, 147–8, 149, 150–1, 158, 168, 170, 187, 192, 197, 203; need for reform of, 206, 207, 208; private equity and, 245–6, 247 Lewis, Jemima, 282, 287 Lewis, Joe, 12 libel laws, 332–3, 348–9 Liberal Democrats, xi, 11, 98, 141, 343, 360–1, 368; general election (2010) and, 97, 142, 179, 271, 390 libertarianism, 234 Likierman, Sir Andrew, 180 limited liability (introduced 1855), 353–4, 363 Lind, Allan, 85 Lindert, Peter, 280–1 Lipsey, Richard, 108, 263 Lisbon earthquake (1755), 54 Lisbon Treaty Constitution, 328 literacy and numeracy, 20–1 livestock fairs, pre-twentieth-century, 90 Lloyds Bank, 176, 178, 186, 202, 204, 251, 259 Lo, Andrew, 195 loan sharks, illegal, 291 local government, 307, 347–8 Locke, John, 54–5, 59 London School of Economics (LSE), 246 London Stock Exchange, 90, 162 London Underground, financing of, 336, 389 lone parent families, 292 Long Term Capital Management (LTCM), 169–70, 183, 193, 194, 200–1 long-term incentive plans (LTIPs), 6 Loomes, Graham, 59 luck, 23, 26–7, 38, 39, 40, 41, 67, 68, 69–77, 222, 273, 393–4; diplomacy/international relations and, 385–6; disadvantaged children and, 74–5, 83, 288–90; executive pay and, 138; taxation and, 73–4, 75, 78, 303 Luxembourg, 138 MacDonald, Ramsey, 315 Machiavelli, Niccolo, 62 Machin, Steve, 283–4 Macmillan Committee into City (1931), 179 Madoff, Bernie, 7 mafia, Italian, 101, 104–5 Major, John, 138, 180, 279, 334 Malaysia, 168 malls, out-of-town, 143 Mandelbrot, Benoit, 194, 195 Mandelson, Peter, 21, 24, 142, 148, 220 manufacturing sector, decline of, 5, 8, 219, 272, 292, 341, 363 Manza, Jeff, 281, 282 Marconi, 142–3 market fundamentalism, 9–19, 32–3, 40–2, 366; belief in efficiency of markets, 188–9, 190, 193, 194, 235–9, 366; coalition government (from May 2010) and, 370; collapse of, 3–4, 7–9, 19, 20, 219–20, 235, 392; Conservative Party and, 5, 17, 138, 147, 160, 161; domination of, 5–6, 14, 16–17, 163, 364–5, 387–90; likely resurgence of, 5, 8; New Labour and, x–xi, 5, 19, 144–9, 388, 389–90; post-communist fiasco in Russia, 135; rejection of fiscal policy, 224–5, 364–5, 367 mark-to-market accounting convention, 175 Marland, Lord Jonathan, 179 Marquand, David, 328 Marsh, Jodie, 64, 65 Marx, Karl, 56–8, 121–2 Maslow’s hierarchy of needs, 232, 274–5 mass production, 109, 134, 182 Masters, Blythe, 196 mathematical models (‘quants’), 105, 149, 151, 152, 165, 169, 188, 190–6, 203; extensions and elaborations, 194; Gaussian distribution, 190–1, 194; JP Morgan and, 195–6 Matthewson, Sir George (former chair of RBS), 25 Maude, Francis, 180 Mayhew, Henry, 285–6 McCartney, Paul, 247 McGoldrick, Mark, 174 McKinsey Global Institute, 253, 358–9, 360, 363 McQueen, Alexander, 143 media, mainstream, 6, 35, 312, 315–20, 321–32, 348–50; commoditisation of information, 318–20, 321; communications technology and, 316, 320, 349; domination of state by, 14, 16, 223–4, 338, 339, 343; fanatical anti-Europeanism, 15, 328, 378; foreign/tax exile ownership of, 218; hysterical tabloid campaigns, 10–11, 298, 319–20; ‘info-capitalism’, 317–18, 327, 328, 342; lauding of celebrity, 281, 314; modern 24/7 news agenda, 13, 224, 321, 343; regional newspapers, 331; as setter of agenda/narrative, 327–31, 342; television news, 330–1; undermining of democracy, 315–16, 317–18, 321–9, 333, 350; urgent need for reform, 35, 218, 344, 348–50, 391; view of poverty as deserved, 25, 53, 83, 281, 286; weakness of foreign coverage, 322, 323, 330 Mencken, H.L., 311 mergers and takeovers, 8, 21, 33, 92, 245, 251, 258, 259, 388 Merkel, Angela, 381–2 Merrill Lynch, 150, 170, 175, 192 Merton, Robert, 169, 191 Meucci, Antonnio, 221 Mexico, 30, 385 Meyer, Christopher, 332 Michalek, Richard, 175 Microsoft, 71, 114, 136, 253, 254, 258–9 Milburn, Alan, 273 Miles, David, 186–7 Milgram, Stanley, 200 millennium bug, 319 Miller, David, 70, 76, 77 minimum wage, 142, 278 Minsky, Hyman, 183, 185 Mirror newspapers, 319, 329 Mlodinow, Leonard, 72–3 MMR vaccine, 327 mobile phones, 30, 134, 143, 229, 349 modernity, 54–5, 104 Mokyr, Joel, 112 monarchy, 15, 312, 336 Mondragon, 94 monetary policy, 154, 182, 184, 185, 208, 362, 367 monopolies, 74, 102, 103, 160, 314; history of, 104, 113, 124, 125–6, 130–4; in the media, 30, 317, 318, 331, 350; modern new wave of, 35, 135–6, 137–8, 201–2, 258–9; ‘oligarchs’, 30, 65, 104 Monopolies and Mergers Commission, 258, 318 Moody’s (credit-ratings agency), 151, 175 morality, 16–27, 37, 44–54, 70, 73; see also desert, due, concept of; fairness; proportionality; debt and, 351–4, 357, 360–1 Morgan, JP, 67 Morgan, Piers, 329 Morgan Stanley, 150 Mulas-Granados, Carlos, 367 Murdoch, James, 389 Murdoch, Rupert, 317–18, 320, 327 Murphy, Kevin, 62, 63 Murray, Jim ‘Mad Dog’, 321 Myners, Paul, 340 Nash bargaining solution, 60 National Audit Office, 340 National Child Development Study, 289–90 national ecosystem of innovation, 33–4, 65, 103, 206, 218, 221, 239–44, 255–9, 374; state facilitation of, 102, 219–22, 229–30, 233, 251–2, 258–66, 269–70, 392 National Health Service (NHS), 21, 27, 34, 92, 265, 277, 336, 371–2; popular support for, 75, 77, 283 national insurance system, 81, 277, 302 national strategy for neighbourhood renewal, 278 Navigation Acts, abolition of, 126 Neiman, Susan, 18–19 neo-conservatism, 17–18, 144–9, 387–90 network theory, 199–201, 202–4, 206; Pareto curve and, 201–2 New Economics Foundation, 62 New Industry New Jobs strategy, 21 New Labour: budget deficit and, 224, 335, 360, 368, 369; business friendly/promarket policies, x–xi, 139–40, 142, 145, 146–7, 162, 198–9, 382; City of London and, x–xi, 5, 19, 22, 142–3, 144–5, 355; decline of class-based politics, 341; failure to challenge elites, x–xi, 14, 22, 388, 389–90; general election (1992) and, 138, 140–1, 144, 148, 277; general election (2005) and, 97; general election (2010) and, 20, 271, 334, 374, 378; light-touch regulation and, 138, 145, 146–7, 162, 198–9; New Industry New Jobs strategy, 21; one-off tax on bank bonuses, 26, 179, 249; record in government, 10–11, 19, 20–2, 220, 276–80, 302, 306, 334–6, 366–7, 389–90; reforms to by ‘modernisers’, 141; responses to newspaper campaigns, 11 New York markets, 140, 152, 162; Asian and/or OPEC capital surpluses and, 169, 171, 354; London/New York axis, 149, 150–1, 157–8, 160, 188, 202 Newsweek, 174 Newton, Isaac, 31, 127, 190 NHS Direct, 372 Nicoli, Eric, 13 non-executive directors (NEDs), 249–50 Nordhaus, William, 260 Nordic countries, 262; Iceland, 7, 138; Norway, 281; Sweden, 264, 281 North, Douglas, 113, 116, 129–30 Northern Rock, 9, 156, 157, 158, 186, 187–8, 202, 204, 251, 340–1 Norton Publishing, 93 Nozick, Robert, 234, 235 nuclear non-proliferation, 226, 384, 394 Nussbaum, Martha, 79 Obama, Barack, 18, 183, 380, 382–3, 394–5 the Observer, 141, 294, 327 Office for Budget Responsibility, 360 Office of Fair Trading (OFT), 257, 258 OFSTED, 276 oil production, 322; BP Gulf of Mexico disaster (2010), 216–17, 392; finite stocks and, 230, 384; OPEC, 149, 161, 171; price increase (early 1970s), 161; in USA, 130, 131, 132 Olsen, Ken, 29 Olympics (2012), 114 open markets, 29, 30, 31, 40, 89, 92, 100–1, 366, 377, 379, 382, 384; see also ‘open-access societies’; as determinants of value, 51–2, 62; fairness and, 60–1, 89–91, 94–6; ‘reference prices’ and, 94–6 ‘open-access societies’, 134, 135, 258, 272, 273, 275, 276, 280–1, 394; Britain as ‘open-access society’ (to 1850), 124, 126–7; democracy and, 136, 314; Enlightenment and, 30–1, 314–15, 394; innovation and invention in, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; partial political opening in, 129–30; US New Freedom programme, 132–3 opium production, 102 options, 166, 188, 191 Orange County derivatives losses, 167 Organisation for Economic Co-operation and Development (OECD), 180, 337, 373 Orwell, George, 37 Osborne, George, 147, 208, 224, 245, 302, 338 Overend, Gurney and Co., 156–7 Oxbridge/top university entry, 293–4, 306 Oxford University, 261 Page, Scott, 204 Paine, Tom, 347 Pareto, Vilfredo, 201–2 Paribas, 152, 187 Parkinson, Lance-Bombardier Ben, 13 participation, political, 35, 86, 96, 99 Paulson, Henry, 177 Paulson, John, 103, 167–8 pay of executives and bankers, 3–4, 5, 6–7, 22, 66–7, 138, 387; bonuses, 6, 25–6, 41, 174–5, 176, 179, 208, 242, 249, 388; high levels/rises of, 6–7, 13, 25, 82–3, 94, 172–6, 216, 296, 387, 393; Peter Mandelson on, 24; post-crash/bail-outs, 176, 216; in private equity houses, 248; remuneration committees, 6, 82, 83, 176; shared capitalism and, 66, 93; spurious justifications for, 42, 78, 82–3, 94, 176, 216 pension, state, 81, 372, 373 pension funds, 240, 242 Pettis, Michael, 379–80 pharmaceutical industry, 219, 255, 263, 265, 267–8 Phelps, Edmund, 275 philanthropy and charitable giving, 13, 25, 280 Philippines, 168 Philippon, Thomas, 172–3 Philips Electronics, Royal, 256 Pimco, 177 piracy, 101–2 Plato, 39, 44 Player, Gary, 76 pluralist state/society, x, 35, 99, 113, 233, 331, 350, 394 Poland, 67, 254 political parties, 13–14, 340, 341, 345, 390; see also under entries for individual parties political system, British: see also democracy; centralised constitution, 14–15, 35, 217, 334; coalitions as a good thing, 345–6; decline of class-based politics, 341; devolving of power to Cardiff and Edinburgh, 15, 334; expenses scandal, 3, 14, 217, 313, 341; history of (to late nineteenth-century), 124–30; lack of departmental coordination, 335, 336, 337; long-term policy making and, 217; monarchy and, 15, 312, 336; politicians’ lack of experience outside politics, 338; required reforms of, 344–8; select committee system, 339–40; settlement (of 1689), 125; sovereignty and, 223, 346, 347, 378; urgent need for reform, 35, 36–7, 218, 344; voter-politician disengagement, 217–18, 310, 311, 313–14, 340 Pommerehne, Werner, 60 population levels, world, 36 Portsmouth Football Club, 352 Portugal, 108, 109, 121, 377 poverty, 278–9; child development and, 288–90; circumstantial causes of, 26, 283–4; Conservative Party and, 279; ‘deserving’/’undeserving’ poor, 276, 277–8, 280, 284, 297, 301; Enlightenment views on, 53, 55–6; need for asset ownership, 301–3, 304; political left and, 78–83; the poor viewed as a race apart, 285–7; as relative not absolute, 55, 84; Adam Smith on, 55, 84; structure of market economy and, 78–9, 83; view that the poor deserve to be poor, 25, 52–3, 80, 83, 281, 285–8, 297, 301, 387; worldwide, 383, 384 Power2010 website, 340–1 PR companies and media, 322, 323 Press Complaints Commission (PCC), 325, 327, 331–2, 348 preventative medicine, 371 Price, Lance, 328, 340 Price, Mark, 93 Prince, Chuck, 184 printing press, 109, 110–11 prisoners, early release of, 11 private-equity firms, 6, 28–9, 158, 172, 177, 179, 205, 244–9, 374 Procter & Gamble, 167, 255 productive entrepreneurship, 6, 22–3, 28, 29–30, 33, 61–2, 63, 78, 84, 136, 298; in British history (to 1850), 28, 124, 126–7, 129; due desert/fairness and, 102–3, 105–6, 112, 223, 272, 393; general-purpose technologies (GPTs) and, 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384 property market: baby boomer generation and, 372–3; Barker Review, 185; boom in, 5, 143, 161, 183–4, 185–7, 221; bust (1989-91), 161, 163; buy-to-let market, 186; commercial property, 7, 356, 359, 363; demutualisation of building societies, 156, 186; deregulation (1971) and, 161; Japanese crunch (1989-92) and, 361–2; need for tax on profits from home ownership, 308–9, 373–4; property as national obsession, 187; residential mortgages, 7, 183–4, 186, 356, 359, 363; securitised loans based mortgages, 171, 186, 188; shadow banking system and, 171, 172; ‘subprime’ mortgages, 64, 152, 161, 186, 203 proportionality, 4, 24, 26, 35, 38, 39–40, 44–6, 51, 84, 218; see also desert, due, concept of; contributory/discretionary benefits and, 63; diplomacy/ international relations and, 385–6; job seeker’s allowance as transgression of, 81; left wing politics and, 80; luck and, 73–7, 273; policy responses to crash and, 215–16; poverty relief systems and, 80–1; profit and, 40, 388; types of entrepreneurship and, 61–2, 63 protectionism, 36, 358, 376–7, 378, 379, 382, 386 Prussia, 128 Public Accounts Committee, 340 Purnell, James, 338 quantitative easing, 176 Quayle, Dan, 177 race, disadvantage and, 290 railways, 9, 28, 105, 109–10, 126 Rand, Ayn, 145, 234 Rawls, John, 57, 58, 63, 73, 78 Reagan, Ronald, 135, 163 recession, xi, 3, 8, 9, 138, 153, 210, 223, 335; of 1979-81 period, 161; efficacy of fiscal policy, 367–8; VAT decrease (2009) and, 366–7 reciprocity, 43, 45, 82, 86, 90, 143, 271, 304, 382; see also desert, due, concept of; proportionality Reckitt Benckiser, 82–3 Regional Development Agencies, 21 regulation: see also Bank of England; Financial Services Authority (FSA); Bank of International Settlements (BIS), 169, 182; Basel system, 158, 160, 163, 169, 170–1, 196, 385; big as beautiful in global banking, 201–2; Big Bang (1986), 90, 162; by-passing of, 137, 187; capital requirements/ratios, 162–3, 170–1, 208; dismantling of post-war system, 149, 158, 159–63; economists’ doubts over deregulation, 163; example of China, 160; failure to prevent crash, 154, 197, 198–9; Glass-Steagall abolition (1999), 170, 202–3; light-touch, 5, 32, 138, 151, 162, 198–9; New Deal rules (1930s), 159, 162; in pharmaceutical industry, 267–8; as pro-business tool, 268–70; proposed Financial Policy Committee, 208; required reforms of, 267, 269–70, 376, 377, 384, 392; reserve requirements scrapped (1979), 208; task of banking authorities, 157; Top Runner programme in Japan, 269 Reinhart, Carmen, 214, 356 Repo 105 technique, 181 Reshef, Ariell, 172–3 Reuters, 322, 331 riches and wealth, 11–13, 272–3, 283–4, 387–8; see also pay of executives and bankers; the rich as deserving of their wealth, 25–6, 52, 278, 296–7 Rickards, James, 194 risk, 149, 158, 165, 298–302, 352–3; credit default swaps and, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207; derivatives and see derivatives; distinction between uncertainty and, 189–90, 191, 192–3, 196–7; employment insurance concept, 298–9, 301, 374; management, 165, 170, 171, 189, 191–2, 193–4, 195–6, 202, 203, 210, 354; securitisation and, 32, 147, 165, 169, 171, 186, 188, 196; structured investment vehicles and, 151, 165, 169, 171, 188; value at risk (VaR), 171, 192, 195, 196 Risley, Todd, 289 Ritchie, Andrew, 103 Ritter, Scott, 329 Robinson, Sir Gerry, 295 Rogoff, Ken, 214, 356 rogue states, 36 Rolling Stones, 247 Rolls-Royce, 219, 231 Rome, classical, 45, 74, 108, 116 Roosevelt, Franklin D., 133, 300 Rothermere, Viscount, 327 Rousseau, Jean-Jacques, 56, 58, 112 Rousseau, Peter, 256 Rowling, J.K., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.

But once again, when the economists offered their explanations for the catastrophe, they reached the wrong conclusion: rather than realising that deregulation had been a disaster, the consensus was that it had not gone far enough. Twenty years later, light, non-directive regulation based on principles rather than rules would be similarly celebrated by the British FSA … and would end in a similar fiasco.25 Back in the eighties, though, the logic of deregulation forced yet more deregulation. The cartel of stockbrokers and jobbers running the London Stock Exchange with fixed commissions and de facto bans on new entrants was indefensible as the controls came tumbling down, but the scrapping of the old system in the famous Big Bang of 1986 had huge side-effects. American banks were suddenly allowed to do in London what they had been prohibited from doing in New York under the provisions of the Glass–Steagall Act – an integral part of New Deal banking control.

., 156–7 Oxbridge/top university entry, 293–4, 306 Oxford University, 261 Page, Scott, 204 Paine, Tom, 347 Pareto, Vilfredo, 201–2 Paribas, 152, 187 Parkinson, Lance-Bombardier Ben, 13 participation, political, 35, 86, 96, 99 Paulson, Henry, 177 Paulson, John, 103, 167–8 pay of executives and bankers, 3–4, 5, 6–7, 22, 66–7, 138, 387; bonuses, 6, 25–6, 41, 174–5, 176, 179, 208, 242, 249, 388; high levels/rises of, 6–7, 13, 25, 82–3, 94, 172–6, 216, 296, 387, 393; Peter Mandelson on, 24; post-crash/bail-outs, 176, 216; in private equity houses, 248; remuneration committees, 6, 82, 83, 176; shared capitalism and, 66, 93; spurious justifications for, 42, 78, 82–3, 94, 176, 216 pension, state, 81, 372, 373 pension funds, 240, 242 Pettis, Michael, 379–80 pharmaceutical industry, 219, 255, 263, 265, 267–8 Phelps, Edmund, 275 philanthropy and charitable giving, 13, 25, 280 Philippines, 168 Philippon, Thomas, 172–3 Philips Electronics, Royal, 256 Pimco, 177 piracy, 101–2 Plato, 39, 44 Player, Gary, 76 pluralist state/society, x, 35, 99, 113, 233, 331, 350, 394 Poland, 67, 254 political parties, 13–14, 340, 341, 345, 390; see also under entries for individual parties political system, British: see also democracy; centralised constitution, 14–15, 35, 217, 334; coalitions as a good thing, 345–6; decline of class-based politics, 341; devolving of power to Cardiff and Edinburgh, 15, 334; expenses scandal, 3, 14, 217, 313, 341; history of (to late nineteenth-century), 124–30; lack of departmental coordination, 335, 336, 337; long-term policy making and, 217; monarchy and, 15, 312, 336; politicians’ lack of experience outside politics, 338; required reforms of, 344–8; select committee system, 339–40; settlement (of 1689), 125; sovereignty and, 223, 346, 347, 378; urgent need for reform, 35, 36–7, 218, 344; voter-politician disengagement, 217–18, 310, 311, 313–14, 340 Pommerehne, Werner, 60 population levels, world, 36 Portsmouth Football Club, 352 Portugal, 108, 109, 121, 377 poverty, 278–9; child development and, 288–90; circumstantial causes of, 26, 283–4; Conservative Party and, 279; ‘deserving’/’undeserving’ poor, 276, 277–8, 280, 284, 297, 301; Enlightenment views on, 53, 55–6; need for asset ownership, 301–3, 304; political left and, 78–83; the poor viewed as a race apart, 285–7; as relative not absolute, 55, 84; Adam Smith on, 55, 84; structure of market economy and, 78–9, 83; view that the poor deserve to be poor, 25, 52–3, 80, 83, 281, 285–8, 297, 301, 387; worldwide, 383, 384 Power2010 website, 340–1 PR companies and media, 322, 323 Press Complaints Commission (PCC), 325, 327, 331–2, 348 preventative medicine, 371 Price, Lance, 328, 340 Price, Mark, 93 Prince, Chuck, 184 printing press, 109, 110–11 prisoners, early release of, 11 private-equity firms, 6, 28–9, 158, 172, 177, 179, 205, 244–9, 374 Procter & Gamble, 167, 255 productive entrepreneurship, 6, 22–3, 28, 29–30, 33, 61–2, 63, 78, 84, 136, 298; in British history (to 1850), 28, 124, 126–7, 129; due desert/fairness and, 102–3, 105–6, 112, 223, 272, 393; general-purpose technologies (GPTs) and, 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384 property market: baby boomer generation and, 372–3; Barker Review, 185; boom in, 5, 143, 161, 183–4, 185–7, 221; bust (1989-91), 161, 163; buy-to-let market, 186; commercial property, 7, 356, 359, 363; demutualisation of building societies, 156, 186; deregulation (1971) and, 161; Japanese crunch (1989-92) and, 361–2; need for tax on profits from home ownership, 308–9, 373–4; property as national obsession, 187; residential mortgages, 7, 183–4, 186, 356, 359, 363; securitised loans based mortgages, 171, 186, 188; shadow banking system and, 171, 172; ‘subprime’ mortgages, 64, 152, 161, 186, 203 proportionality, 4, 24, 26, 35, 38, 39–40, 44–6, 51, 84, 218; see also desert, due, concept of; contributory/discretionary benefits and, 63; diplomacy/ international relations and, 385–6; job seeker’s allowance as transgression of, 81; left wing politics and, 80; luck and, 73–7, 273; policy responses to crash and, 215–16; poverty relief systems and, 80–1; profit and, 40, 388; types of entrepreneurship and, 61–2, 63 protectionism, 36, 358, 376–7, 378, 379, 382, 386 Prussia, 128 Public Accounts Committee, 340 Purnell, James, 338 quantitative easing, 176 Quayle, Dan, 177 race, disadvantage and, 290 railways, 9, 28, 105, 109–10, 126 Rand, Ayn, 145, 234 Rawls, John, 57, 58, 63, 73, 78 Reagan, Ronald, 135, 163 recession, xi, 3, 8, 9, 138, 153, 210, 223, 335; of 1979-81 period, 161; efficacy of fiscal policy, 367–8; VAT decrease (2009) and, 366–7 reciprocity, 43, 45, 82, 86, 90, 143, 271, 304, 382; see also desert, due, concept of; proportionality Reckitt Benckiser, 82–3 Regional Development Agencies, 21 regulation: see also Bank of England; Financial Services Authority (FSA); Bank of International Settlements (BIS), 169, 182; Basel system, 158, 160, 163, 169, 170–1, 196, 385; big as beautiful in global banking, 201–2; Big Bang (1986), 90, 162; by-passing of, 137, 187; capital requirements/ratios, 162–3, 170–1, 208; dismantling of post-war system, 149, 158, 159–63; economists’ doubts over deregulation, 163; example of China, 160; failure to prevent crash, 154, 197, 198–9; Glass-Steagall abolition (1999), 170, 202–3; light-touch, 5, 32, 138, 151, 162, 198–9; New Deal rules (1930s), 159, 162; in pharmaceutical industry, 267–8; as pro-business tool, 268–70; proposed Financial Policy Committee, 208; required reforms of, 267, 269–70, 376, 377, 384, 392; reserve requirements scrapped (1979), 208; task of banking authorities, 157; Top Runner programme in Japan, 269 Reinhart, Carmen, 214, 356 Repo 105 technique, 181 Reshef, Ariell, 172–3 Reuters, 322, 331 riches and wealth, 11–13, 272–3, 283–4, 387–8; see also pay of executives and bankers; the rich as deserving of their wealth, 25–6, 52, 278, 296–7 Rickards, James, 194 risk, 149, 158, 165, 298–302, 352–3; credit default swaps and, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207; derivatives and see derivatives; distinction between uncertainty and, 189–90, 191, 192–3, 196–7; employment insurance concept, 298–9, 301, 374; management, 165, 170, 171, 189, 191–2, 193–4, 195–6, 202, 203, 210, 354; securitisation and, 32, 147, 165, 169, 171, 186, 188, 196; structured investment vehicles and, 151, 165, 169, 171, 188; value at risk (VaR), 171, 192, 195, 196 Risley, Todd, 289 Ritchie, Andrew, 103 Ritter, Scott, 329 Robinson, Sir Gerry, 295 Rogoff, Ken, 214, 356 rogue states, 36 Rolling Stones, 247 Rolls-Royce, 219, 231 Rome, classical, 45, 74, 108, 116 Roosevelt, Franklin D., 133, 300 Rothermere, Viscount, 327 Rousseau, Jean-Jacques, 56, 58, 112 Rousseau, Peter, 256 Rowling, J.K., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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

While the currency crisis destabilized the EMS and forced the adoption of a much looser Exchange Rate Mechanism, the embrace of these measures by Europe’s states meant that the march towards the single currency could be resumed with the assurance that “discipline” would prevail. Especially significant in this respect, and indeed for the overall shift in the balance of class forces in Europe, was the transformation of European financial markets along US lines.18 The City of London, which had since the 1960s served US banks “as a laboratory for financial innovation” at the center of the Euromarkets, was the leading site of this Americanization.19 The removal of UK capital controls in 1979, the City of London’s own “big bang” in 1987, and the new stock exchange system modeled on the automated NASDAQ in the US, were all about trying to compete with New York on a level playing field, reinforced by direct pressures from the Wall Street investment banks operating in London. It was, ironically, US regulatory changes in the 1970s requiring prudent investment on the part of US pension funds that led to the diversification of these funds into equity and bond investments abroad, and US banks in London were especially well positioned to attract such funds to the London equity market.20 The 1987 Financial Services Act, the most “crucial piece of regulatory reform introduced in Britain,” was only adopted after the US model had been closely examined by “a stream of British visitors”;21 and the first chairman of the new Securities and Investment Board explicitly acknowledged: “[W]e shall, to all intents and purposes, be exercising the power of an SEC in this country.”22 As one experienced City insider put it: The triumph of American values and American ways provided an ideal background for the Wall Street investment banks.

The 1971 Report of the Hunt Commission, appointed by Nixon to study how to “improve the functioning of the private financial system,” had already been oriented to move “as far as possible towards freedom of financial markets and equip all institutions with the power necessary to compete in such markets.”67 And in August 1973 Nixon, arguing that “the public is better served by the free play of competitive forces than by the imposition of rigid and unnecessary regulation,” proposed to Congress the gradual elimination of interest-rate ceilings.68 This would in fact be delayed until 1980, but with the famous “big bang” it delivered to Wall Street in 1975, the SEC dramatically shifted away from its long-maintained support for the cartel-like structures of brokers, investment banks, and corporate managers that had dominated the capital markets since the 1930s. Congressional investigations attracting considerable media attention had provided the pension and mutual funds and insurance companies, supported by retail-oriented investment banks like Merrill Lynch, with a forum to make their case for the abolition of fixed rates on brokerage commissions on Wall Street. What was notable, however, about the amendments to the Securities Acts that ushered in this foundational instance of “deregulation” was that this did not amount to reducing the power of the state.

(The Soviet Union was of course an entirely different matter, and insofar as it also played an imperial role in the postwar era, it did so in a very different way, precisely because it was not a capitalist state.) Economic Crisis and the Illusion of Hegemonic Decline By the 1960s, alongside the activities of MNCs abroad, the international operations of US management, legal, accounting, and consultancy firms also facilitated the making of global capitalism under the aegis of the American empire. This was further enhanced when the City of London switched its international allegiance from sterling to the dollar, and became by the 1960s the Eurodollar satellite of Wall Street. But, together with the appearance of US balance of payments deficits due to the flow of imports from Europe, as well as increased US foreign direct investment (FDI from here on) in Europe, this raised severe problems for the dollar’s fixed exchange rate, even though the US Treasury bond market still served as the foundation for all calculations of value in the global capitalist economy.


pages: 391 words: 102,301

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

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

As the historian Harold James notes, this liberalization of capital flows meant that “economic issues became globalised—in other words, it was ever harder for national authorities to control them.”9 By 1981, three of Thatcher’s signature policies were in place: the abolition of exchange controls, cuts in direct taxation, and moves to curb the power of trade unions. Britain was in the midst of a deep recession and manufacturing industries were suffering badly. But the foundations for a boom in the City of London had been laid. In 1982, the evocatively named LIFFE futures trading exchange opened in the City. In 1986, the Thatcher government pushed through the “Big Bang” of financial deregulation in the City, which Andrew Marr suggests “has a claim to be the single most significant change of the whole Thatcher era.”10 The brash city trader, along with the striking miner, became one of the emblematic figures of the Thatcher era. Thatcher herself seemed ambivalent about the surge in conspicuous consumption in the City.

In his State of the Union address in 1996, Bill Clinton proclaimed that “the era of big government is over” and then launched into an ambitious reform that cut back welfare benefits in order to improve incentives to work, an idea that would have appealed only to hard-line conservatives just a decade before.19 In 1994, three years before they took power in Britain, Gordon Brown and Tony Blair, the duo who defined New Labour, visited Alan Greenspan in his office in the Fed in Washington. As Greenspan noted, “Brown in particular espoused globalization and free markets.”20 The Fed chairman was impressed. In the spring of 1997, shortly before his election as the first Labour prime minister in eighteen years, Tony Blair gave a speech at the Corn Exchange in the heart of the City of London in which he announced, “We accept, and indeed embrace, the role of free enterprise in the economy. There will be no retreat from any of that.”21 In particular, Labour announced that there would be no retreat from the 40 percent top tax rate introduced under Margaret Thatcher—a point of crucial importance to the City audience. Blair also took it upon himself to become an evangelist for free markets to the more skeptical left-wing parties of France and Germany.

. … Reform was mentioned only once.” 18. James Kynge, China Shakes the World (London: Weidenfeld & Nicolson, 2006), 14. 19. Ibid., 16. 20. Quoted in “Second Long March.” 21. Quoted in Francis Fukuyama, The End of History and the Last Man (London: Penguin, 1992), 98. 2. BRITAIN, 1979: THATCHERISM 1. Quoted in Richard Roberts and David Kynaston, City State: A Contemporary History of the City of London and How Money Triumphed (London: Profile, 2001), 117. 2. Andrew Marr, A History of Modern Britain (London: Pan Macmillan, 2007), 365. 3. Margaret Thatcher, The Downing Street Years (London: HarperCollins 1993), 10. 4. Quoted in Marr, Modern Britain, 386. 5. Ibid., 387. 6. Ibid., 411. 7. John Campbell, Margaret Thatcher, vol. 2, The Iron Lady (London: Vintage, 2008), 18. 8.


pages: 369 words: 94,588

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

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accounting loophole / creative accounting, 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, 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, global reserve currency, Google Earth, Guggenheim Bilbao, 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, moral hazard, mortgage debt, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, sharing economy, Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, the built environment, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, too big to fail, trickle-down economics, urban renewal, urban sprawl, white flight, women in the workforce

The suspension in 1999 of the distinction between investment and deposit banking in the United States that had been in place since the Glass–Steagall act of 1933 further integrated the banking system into one giant network of financial power. But as the financial system went global, so competition between financial centres – chiefly London and New york – took its coercive toll. The branches of international banks such as Goldman Sachs, deutsches Bank, UBS, rBS and HSBC internalised competition. If the regulatory regime in London was less strict than that of the US, then the branches in the City of London got the business rather than Wall Street. As lucrative business naturally flowed to wherever the regulatory regime was laxest, so the political pressure on the regulators to look the other way mounted. Michael Bloomberg, the mayor of New york City, commissioned a report in 2005 that concluded that excessive regulation in the US threatened his city’s future financial industry. Everyone on Wall Street along with the ‘Party of Wall Street’ in Congress trumpeted these conclusions. ——— The successful politics of wage repression after 1980 allowed the rich to get much richer.

If crises are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit-finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf States – suggests this may be the occasion for such a shift. It is even possible to interpret the current difficulties in the US and UK as payback for what Wall Street and the City of London did to east and south-east Asia in 1997–8. Tectonic shifts of this sort have occurred before, as described at length in Giovanni Arrighi’s 1994 book The Long Twentieth Century. There is, he notes, a clear pattern in which periods of financialisation precede a shift in hegemony. To accommodate endless accumulation, hegemony moves from smaller (e.g. Venice) to larger (e.g. the Netherlands, Britain and then the United States) political entities over time.

Why did Larry Summers when he was Clinton’s Treasury Secretary violently oppose regulating finance, and why did Joseph Stiglitz, who now positions himself on the left of mainstream but who was Clinton’s Chief Economic Adviser in the 1990s, find himself supporting moves that ‘incidentally’ ended up always making the rich richer? Did George W. Bush embrace taxation principles that immensely favoured the rich just because he liked them or needed their support for re-election? Was it simply that the ‘Party of Wall Street’ had taken power both in Congress and in the executive branch? If so, why did Gordon Brown, New Labour’s Chancellor of the Exchequer in Britain, also so easily go along with it? (Did the City of London get to him, too?) And why was it that the wealthier grew immeasurably wealthier everywhere, from Russia and Mexico to India and Indonesia? In the absence of any limits or barriers, the need to reinvest in order to remain a capitalist propels capitalism to expand at a compound rate. This then creates a perpetual need to find new fields of activity to absorb the reinvested capital: hence ‘the capital surplus absorption problem’.


pages: 478 words: 126,416

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

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

Pottersville is riven by self-interest and characterised by tawdry commercialism, and the housing project that was George Bailey’s great achievement is unbuilt. Capra could never have imagined that Pottersville might actually come into being. But by the time my contemporaries accepted early retirement, the world they joined had altered beyond recognition. The causes of this transformation include globalisation, deregulation, technological and product innovation, new ideologies and narratives as well as a shift in social and cultural norms. These factors were not independent: each was bound up with the others. Finance has always been global. The City of London became a pre-eminent financial centre as a result of Britain’s imperial role. The Fidelity Fiduciary Bank in which Mr Banks was manager financed ‘railways through Africa, dams across the Nile’. Wall Street rivalled London in scale and importance because of the size of the US domestic market and the voracious need for finance implied by the scale of its landmass.

The American finance sector, which had been publicly humiliated in 1933, became a more and more powerful lobby. That lobby secured steady relaxation of the restrictions that had been imposed on the industry fifty years earlier. The separation of investment from commercial banking – the principle that had become synonymous in the public mind with the Glass–Steagall Act – was steadily weakened, although not finally repealed until 1999. In Britain, the trigger for change was the ‘Big Bang’ – the deregulation of finance in 1986 – which swept away a mass of restrictions, including most obstacles to the creation of financial conglomerates. The large British commercial banks, with the enormous capital strength derived from their retail deposit base, were immediate diversifiers. These changes in the structure of banking were related to changes in the organisation of stock markets. Traditionally, buyers and sellers of securities traded through agents, and the London and New York stock exchanges enjoyed a monopoly on trading in stocks.

Some people suggested that it might be cheaper to repair the scales, but they were derided: why go back to relying on the judgement of a single auctioneer when you could benefit from the aggregated wisdom of so many clever people? And then the ox died. Amid all this activity, no one had remembered to feed it. INTRODUCTION Far too much of a good thing In the City, they sell and buy. And nobody ever asks them why. But since it contents them to buy and sell, God forgive them, they might as well. Humbert Wolfe, The Uncelestial City, 1930 Anyone passing the skyscrapers of Wall Street or the City of London and its annexe at Canary Wharf will be impressed by the scale and scope of modern finance. Logos display familiar names such as Citigroup and HSBC. More discreet brass plates identify organisations that do not deal with the general public. The most important headquarters building in the industry, the head office of Goldman Sachs, at 200 West Street in Manhattan, remains anonymous. The premises are lavish, the limousines ubiquitous.


pages: 183 words: 17,571

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

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banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, joint-stock company, Joseph Schumpeter, labor-force participation, labour market flexibility, liquidity trap, London Interbank Offered Rate, lump of labour, market bubble, market clearing, Martin Wolf, means of production, mobile money, moral hazard, mortgage debt, mortgage tax deduction, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra

When exchange control came into force in 1939, the Bank had in its sole discretion the right to extend or withdraw a foreign exchange license, the equivalent of a death sentence for banks. Only after the end of exchange control in 1979 was it felt necessary to establish a formal system of regulation presided over by an independent organization—the Financial Services Authority (FSA)—in place of the Bank.This was part of the sweeping series of reforms called Big Bang that came into force in 1986. The old clubby culture of the City of London quickly collapsed as American institutions and practices took over much of UK banking. As a result, the UK financial system balance sheet grew to over five times GDP and came to drive the entire economy, especially greater London. In the wake of the 2008 crisis, which required two trillion-pound banking groups to be bailed out by the government, it is hard to believe that this was a good bargain for the UK taxpayer.

When the bubble was going strong, banks were making major investments in brick-and-mortar Main Street branches, creating jobs and real estate income. This can all go away very quickly. Download from Wow! eBook <www.wowebook.com> Distortion of Bank P & Ls and Balance Sheets Banking is often viewed by the uninformed as the very model and engine of capitalism, which is why critics of capitalism choose to occupy Wall Street and the City of London. Actually, banking has always been in many ways a creature of government and politics. Capitalism demands what the great Austrian economist Josef Schumpeter called “creative destruction.” When markets decide which firms deserve money and which don’t, the latter will fail; and along with the failure of firms, whole communities and thousands of workers may suffer real hardship. However, by trial and error, markets will tend to give capital to new, innovative companies, such as Apple, and take it away from companies with no future, such as GM.

Restriction of Financial Access When the first joint-stock banks (banks owned by shareholders) emerged in the United Kingdom nearly two centuries ago, the established banks were all private partnerships with unlimited liability (the one exception being the Bank of England, which was as a government-backed monopolist a de facto enemy of the privately owned banks and kept out of the clearinghouse). The joint-stock banks were also shunned by the clearinghouse run by the private banks, given their shocking business model: they opened branches where the general public, not just rich City of London merchants and brokers, could open accounts and make payments using checks. The fact that they were public companies allowed them to raise the capital needed to convince the public their money would be safe without unlimited liability and, of course, to put up 63 64 Chapter 3 |  The Economic Consequences of Financial Regulation branches on every British High Street.The business proved insanely profitable by the estimates that Bagehot gave in Lombard Street, but banks were very choosy about who was a suitable customer, and they required substantial sums to open an account (the equivalent of three or four years income for the average UK subject).


words: 49,604

The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

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barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, clean water, computer age, Corn Laws, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invisible hand, Jane Jacobs, Joseph Schumpeter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, McJob, microcredit, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

Thus VHS drove out Betamax, and Microsoft’s Windows dominates the Apple operating system, except in publishing where there exists a subsidiary network because the superiority of the Apple Mac software is so pronounced. London’s triumph One example that illustrates the new geography is the growing dominance of London as a centre for financial market transactions. The financial services industry is on the frontier of the information technology revolution in economics. The ‘Big Bang’ reforms in the City of London in 1986 and similar changes in other financial centres were defined as much by huge investment in information technology and telecommunications as by regulatory change. This investment, the need to stay in the techno- The Weightless World 20 logical wild west, remains the hallmark of the financial markets — the first and biggest cyber-industry. William Mitchell of the Media Lab at the Massachusetts Institute of Technology calls complex financial derivatives ‘pure creations of cyberspace’.27 The economic engine of the financial services industry is the production, transformation, distribution and consumption of digital information.

It is a paradox that as its activity has dematerialised, London as a place has become ever more important. Obviously, some things that were done in London have moved thanks to high technology. This includes back offices, registrars — any functions where the information can be put on a production line. And there has been geographical dispersion within London itself, out of the Square Mile of the City of London to Docklands and the West End. But the high value added functions remain and are becoming increasingly concentrated in London rather than any other centre in the same time zone as more foreign banks move in. There are certainly cost pressures to move out. Rents and taxes are high in the City, the burden of commuting is heavy, deliveries and logistics are difficult, there is even the threat of terrorism.

Small private companies that have gone through a cut-throat tender to get the business will cut wages, reduce holidays, demand longer hours and harder work, and pay less. The pattern is mirrored in the private sector, where it is the norm for cleaning and catering at a minimum to have been contracted out. Look around your own office, if you have one, and see the cleaning staff. Chances are they will be wearing the uniform of some other company, and their faces will be grey with fatigue. Of course, cleaners have some meagre privileges. One tale of the City of London during the recession in the early 1990s records two highly paid financial traders getting into work extra early. They get into the lift with one of the cleaning staff, and ask her to press the fifth floor button. ‘Fifth?’ she says. The Weightless World 108 ‘I’ve been told not to bother with that floor any more.’ This was how they learnt that their entire trading team had been fired overnight thanks to a takeover.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

In the end, household debt, house prices and consumer spending all went up in perfect unison. Meanwhile, the City of London’s traditional strength in the realm of finance, its deregulation under the Thatcher government (also known as the Big Bang) and the City’s links with Wall Street all ensured that a significant portion of the foreign capital flight to the United States passed through the City. That passage gave its institutions access to large sums of money, even if for only a short period of time. Nothing excites bankers more than the challenge of making money for themselves by using transient funds. Together with the proceeds from domestic privatizations of UK industries and of the nation’s stock of social housing, as well as the Great British public’s mountain of borrowing, these financial streams merged into a potent torrent, which allowed the City of London to prosper. In conclusion, over the past three decades, much ink has been spilt in assessing the Reagan–Thatcher years.

Cultural origins In September 2008, Europeans looked smugly over the pond, shaking their heads with a self-serving conviction that the Anglo-Celts, at long last, were getting their comeuppance. After years and years of being lectured on the superiority of the Anglo-Celtic model, on the advantages of flexible labour markets, on how inane it was to think that Europe could retain a generous social welfare net in the era of globalization, on the wonders of an aggressively atomistic entrepreneurial culture, on the wizardry of Wall Street and on the brilliance of the post-Big Bang City of London, the news of the Crash, its sights and sounds as they were beamed all over the world, filled the European heart with an ambiguous mix of Schadenfreude and fear. Of course, it was not too long before the crisis migrated to Europe, metamorphosing in the process into something far worse and more threatening than Europeans had ever anticipated. Nevertheless, most Europeans remain convinced of the Crash’s Anglo-Celtic cultural roots.

From the late 1970s up until 2008, the reason why the world kept growing at a seemingly stable pace was the Global Minotaur. While deregulation, privatization and financialization were running riot, the lack of a discernible Global Plan was tempered by the beast’s active role as a surrogate global surplus recycling mechanism, without which the world economy cannot function. Under the Minotaur, as this book has been arguing, the United States and its satellites (e.g. Britain) were accumulating external national debt, Anglo-American families were amassing retail debt, and Wall Street was generating and accumulating toxic private money. Meanwhile, the oil-producing nations, Germany, Japan, South East Asia (especially after the East Asian crisis of 1998) and, latterly, China, were all building up gargantuan currency reserves, which they were pumping into Wall Street and the City of London. In a never-ending cycle, these capital flows financed America’s twin deficits in ways that kept surplus production going in Europe and East Asia.


pages: 434 words: 150,773

When the Iron Lady Ruled Britain by Robert Chesshyre

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Berlin Wall, Big bang: deregulation of the City of London, British Empire, deskilling, Etonian, Fall of the Berlin Wall, financial deregulation, full employment, housing crisis, manufacturing employment, means of production, North Sea oil, oil rush, Plutocrats, plutocrats, Ronald Reagan, school choice, Silicon Valley, the market place, trickle-down economics, union organizing, young professional

(Although he added the caution that further cuts in supplementary benefits might yet reduce the poor to the dire straits of the past.) Was the renewed fascination, he suggested, because – despite the brave new world apparently emerging from the ‘Big Bang’ in the City of London – the more probable future for most of us lay here in the north where the post-industrial age had already dawned? Two Swiss television teams had recently been in the region pursuing just this thesis. It seemed unlikely to the bishop that money could perpetually breed money in the way it appeared to in the City of London. In this the bishop is in tune with his flock: an Easington miner said: ‘We can’t all live on services like tourism, like those buggers in Spain.’ The bishop himself had just heard of what he considered the ultimate unproductive service industry – a company set up in London to deliver takeaway food from restaurants to diners too idle to go themselves.

Other crucial skilled people – accountants, scientists and surveyors – were being drained away from public service by Big Bang. The report concluded: ‘Analysis shows that salary is one of the reasons for withdrawal given by half of all respondents in the specialist areas.’ In simple English, the Civil Service no longer paid enough, and old-fashioned rewards, like the satisfaction derived from duty, failed to compensate as they once had for comparative poverty. But, as in any gold rush, alongside the admirable entrants, Big Bang drew in those whose avarice outstripped their judgement and morality. Oddly, perhaps, it was an upmarket ‘bookmaker’ who first blew the whistle from inside the Square Mile of the City of London. Christopher Hales, who – after a brief period as a professional golfer – had started in the City as a stock jobber and had been a commodity broker, ran an outfit called City Index, which offered odds on, among other things, the movement of the Financial Times and Wall Street indices.

Those less enamoured with the theory call it ‘trickle-down’ economics, and are frequently cynical about how far the trickle reaches. Supply-siders consider that ‘trickle-downers’ suffer from a further condition – ‘the politics of envy’. The consequence of the new philosophy appeared to be the unabashed spending of money, and rewards for certain classes of people that so distorted the value system that they threatened social stability: while young nurses lived on ‘peanuts’, the City of London’s ‘Big Bang’ had propelled a not particularly productive class of young person towards six-figure salaries; while a civil engineer might earn £15,000 a year, a foreign-currency dealer, without any formal qualifications, could earn ten times that much. These were not, as some of the defenders of these high salaries argued, special people like sports or pop stars, but people with quick wits and fairly readily acquired trading skills.


pages: 193 words: 47,808

The Flat White Economy by Douglas McWilliams

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

Because of the historic importance of property in the London economy,1 it took nearly a decade to work off the excess supply of commercial property in central London and re-establish growth in that sector. But the dominant factor in the economic history of London in this period was the rise of financial services following the “Big Bang” – the deregulation of financial markets in October 1986. Oddly, I was there right at the beginning of the Big Bang. In a rare invitation to 10 Downing Street in the mid-1980s I had my longest ever conversation with Margaret Thatcher, to which my contribution was only three words – “Yes, Prime Minister”. She then left me to cuddle up on a sofa with Sir Nicholas Goodison. Sir Nicholas was then the Chairman of the Stock Exchange, hence the critical figure in the bonfire of regulations that created the Big Bang for London’s financial service industry, that explosion of financial service activity in London. Sir Nicholas was a very straight-laced figure who seemed to shrink further and further into the sofa as the Prime Minister flirted with him.

I was amused that someone as powerful as the Prime Minister was prepared to use feminine wiles to get what she wanted. It had become clear to me while analysing the statistics that, since the Big Bang, London underwent an economic growth to rival the mega-growth of Far East economies. I called it the “Tiger Economy on the Thames”. London’s growth continued until 2007; indeed, for the entire period from 1997–2007, London’s economy grew at an annual rate of 6.2% in cash terms. With inflation averaging perhaps 2% over the period this meant real GDP growth grew at an annual rate of over 4% – fast enough to rival Far East economies. This growth was underpinned by the City of London: the number of “City jobs” rose from a plateau of 170,000 in the mid-1980s to a peak of 230,000 in 1989; it collapsed to 190,000 in 1993; but it had recovered to over 350,000 by 2007.2 As the number of jobs increased, so did the money on the payslips.

As early as 2007, Cebr identified for the Corporation of London a potential symbiotic relationship between the City and its fringes. The City Fringes are defined as the boroughs neighbouring the City of London – Camden, Hackney, Islington, Lambeth, Southwark, Newham and Tower Hamlets. In 2007 they all had unemployment substantially above the London average.5 Moreover, all these boroughs were in the top 25 most deprived of the 354 boroughs (or equivalent) in the UK; this was measured by using the government’s Index of Multiple Deprivation.6 But even then these areas benefited from £1.8 billion of spending from businesses and organisations based in the City of London, with advertising being the largest single area and market research, computer services and auxiliary financial services also contributing. This proved to be the basis of the burgeoning digital economy.


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

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

This removed a restriction on the rise of sterling that had been in force since 1939. UK institutional investors started adding substantially to their overseas investments, although mostly through foreign brokers. _________________________________________ THE CITY OF LONDON 7  In the 1980s, the London Stock Exchange (LSE) was the unrivalled leader among European exchanges. In July 1983, it came to a historic agreement with the government to abolish fixed commission rates and single capacity in stockbrokers, a move intended to make them more competitive. The changes came into force on 27 October 1986, and were known as Big Bang. The jobber had been a wholesaler of stock to the broker but was suddenly made obsolete. In came broker dealers, whose role merged the previous responsibilities of the jobber and broker, and market makers. Overseas securities firms could for the first time become members of the LSE, and trading on the floor of the Exchange was replaced with the screen-based Stock Exchange Automated Quotations (SEAQ) system.

Index 419 fraud 204 9/11 terrorist attacks 31, 218, 242, 243, 254, 257 Abbey National 22 ABN AMRO 103 accounting and governance 232–38 scandals 232 Accounting Standards Board (ASB) 236 administration 17 Allianz 207 Alternative Investment Market (AIM) 44–45, 131, 183, 238 Amaranth Advisors 170 analysts 172–78 fundamental 172–74 others 177–78 Spitzer impact 174–75 technical 175–77 anti-fraud agencies Assets Recovery Agency 211–13 City of London Police 209 Financial Services Authority 208 Financial Crime and Intelligence Division 208 Insurance Fraud Bureau 209 Insurance Fraud Investigators Group 209 International Association of Insurance Fraud Agencies 207, 210, 218 National Criminal Intelligence Service 210 Serious Fraud Office 213–15 Serious Organised Crime Agency 210–11 asset finance 24–25 Association of Investment Companies 167 backwardation 101 bad debt, collection of 26–28 Banco Santander Central Hispano 22 Bank for International Settlements (BIS) 17, 27, 85, 98, 114 bank guarantee 23 Bank of Credit and Commerce International (BCCI) 10, 214 Bank of England 6, 10–17 Court of the 11 credit risk warning 98 framework for sterling money markets 81 Governor 11, 13, 14 history 10, 15–16 Inflation Report 14 inflation targeting 12–13 interest rates and 12 international liaison 17 lender of last resort 15–17 Market Abuse Directive (MAD) 16 monetary policy and 12–15 Monetary Policy Committee (MPC) 13–14 Open-market operations 15, 82 repo rate 12, 15 role 11–12 RTGS (Real Time Gross Settlement) 143 statutory immunity 11 supervisory role 11 Bank of England Act 1988 11, 12 Bank of England Quarterly Model (BEQM) 14 Banking Act 1933 see Glass-Steagall Act banks commercial 5 investment 5 Barclays Bank 20 Barings 11, 15, 68, 186, 299 Barlow Clowes case 214 Barron’s 99 base rate see repo rate Basel Committee for Banking Supervision (BCBS) 27–28 ____________________________________________________ INDEX 303 Basel I 27 Basel II 27–28, 56 Bear Stearns 95, 97 BearingPoint 97 bill of exchange 26 Bingham, Lord Justice 10–11 Blue Arrow trial 214 BNP Paribas 145, 150 bond issues see credit products book runners 51, 92 Borsa Italiana 8, 139 bps 90 British Bankers’ Association 20, 96, 97 building societies 22–23 demutualisation 22 Building Societies Association 22 Capital Asset Pricing Model (CAPM) see discounted cash flow analysis capital gains tax 73, 75, 163, 168 capital raising markets 42–46 mergers and acquisitions (M&A) 56–58 see also flotation, bond issues Capital Requirements Directive 28, 94 central securities depository (CSD) 145 international (ICSD) 145 Central Warrants Trading Service 73 Chancellor of the Exchequer 12, 13, 229 Chicago Mercantile Exchange 65 Citigroup 136, 145, 150 City of London 4–9 Big Bang 7 definition 4 employment in 8–9 financial markets 5 geography 4–5 history 6–7 services offered 4 world leader 5–6 clearing 140, 141–42 Clearing House Automated Payment System (CHAPS) 143 Clearstream Banking Luxembourg 92, 145 commercial banking 5, 18–28 bad loans and capital adequacy 26–28 banking cards 21 building societies 22–23 credit collection 25–26 finance raising 23–25 history 18–19 overdrafts 23 role today 19–21 commodities market 99–109 exchange-traded commodities 101  fluctuations 100 futures 100 hard commodities energy 102 non-ferrous metals 102–04 precious metal 104–06 soft commodities cocoa 107 coffee 106 sugar 107 Companies Act 2006 204, 223, 236 conflict of interests 7 consolidation 138–39 Consumer Price Index (CPI) 13 contango 101 Continuous Linked Settlement (CLS) 119 corporate governance 223–38 best practice 231 Cadbury Code 224 Combined Code 43, 225 compliance 230 definition 223 Directors’ Remuneration Report Regulations 226 EU developments 230 European auditing rules 234–35 Greenbury Committee 224–25 Higgs and Smith reports 227 International Financial Reporting Standards (IFRS) 237–38 Listing Rules 228–29 Model Code 229 Myners Report 229 OECD Principles 226 operating and financial review (OFR) 235– 36 revised Combined Code 227–28 Sarbanes–Oxley Act 233–34 Turnbull Report 225 credit cards 21 zero-per-cent cards 21 credit collection 25–26 factoring and invoice discounting 26 trade finance 25–26 credit derivatives 96–97 back office issues 97 credit default swap (CDS) 96–97 credit products asset-backed securities 94 bonds 90–91 collateralised debt obligations 94–95 collateralised loan obligation 95 covered bonds 93 equity convertibles 93 international debt securities 92–93  304 INDEX ____________________________________________________ junk bonds 91 zero-coupon bonds 93 credit rating agencies 91 Credit Suisse 5, 136, 193 CREST system 141, 142–44 dark liquidity pools 138 Debt Management Office 82, 86 Department of Trade and Industry (DTI) 235, 251, 282 derivatives 60–77 asset classes 60 bilateral settlement 66 cash and 60–61 central counterparty clearing 65–66 contracts for difference 76–77, 129 covered warrants 72–73 futures 71–72 hedging and speculation 67 on-exchange vs OTC derivatives 63–65 options 69–71 Black-Scholes model 70 call option 70 equity option 70–71 index options 71 put option 70 problems and fraud 67–68 retail investors and 69–77 spread betting 73–75 transactions forward (future) 61–62 option 62 spot 61 swap 62–63 useful websites 75 Deutsche Bank 136 Deutsche Börse 64, 138 discounted cash flow analysis (DCF) 39 dividend 29 domestic financial services complaint and compensation 279–80 financial advisors 277–78 Insurance Mediation Directive 278–79 investments with life insurance 275–76 life insurance term 275 whole-of-life 274–75 NEWICOB 279 property and mortgages 273–74 protection products 275 savings products 276–77 Dow theory 175 easyJet 67 EDX London 66 Egg 20, 21 Elliott Wave Theory 176 Enron 67, 114, 186, 232, 233 enterprise investment schemes 167–68 Equiduct 133–34, 137 Equitable Life 282 equities 29–35 market indices 32–33 market influencers 40–41 nominee accounts 31 shares 29–32 stockbrokers 33–34 valuation 35–41 equity transparency 64 Eurex 64, 65 Euro Overnight Index Average (EURONIA) 85 euro, the 17, 115 Eurobond 6, 92 Euroclear Bank 92, 146, 148–49 Euronext.liffe 5, 60, 65, 71 European Central Bank (ECB) 16, 17, 84, 148 European Central Counterparty (EuroCCP) 136 European Code of Conduct 146–47, 150 European Exchange Rate Mechanism 114 European Harmonised Index of Consumer Prices 13 European Union Capital Requirements Directive 199 Market Abuse Directive (MAD) 16, 196 Market in Financial Instruments Directive (MiFID) 64, 197–99 Money Laundering Directive 219 Prospectus Directive 196–97 Transparency Directive 197 exchange controls 6 expectation theory 172 Exxon Valdez 250 factoring see credit collection Factors and Discounters Association 26 Fair & Clear Group 145–46 Federal Deposit Insurance Corporation 17 Federation of European Securities Exchanges 137 Fighting Fraud Together 200–01 finance, raising 23–25 asset 24–25 committed 23 project finance 24 recourse loan 24 syndicated loan 23–24 uncommitted 23 Financial Action Task Force on Money Laundering (FATF) 217–18 financial communications 179–89 ____________________________________________________ INDEX 305 advertising 189 corporate information flow 185 primary information providers (PIPs) 185 investor relations 183–84 journalists 185–89 public relations 179–183 black PR’ 182–83 tipsters 187–89 City Slickers case 188–89 Financial Ombudsman Service (FOS) 165, 279–80 financial ratios 36–39 dividend cover 37 earnings per share (EPS) 36 EBITDA 38 enterprise multiple 38 gearing 38 net asset value (NAV) 38 price/earnings (P/E) 37 price-to-sales ratio 37 return on capital employed (ROCE) 38 see also discounted cash flow analysis Financial Reporting Council (FRC) 224, 228, 234, 236 Financial Services Act 1986 191–92 Financial Services Action Plan 8, 195 Financial Services and Markets Act 2001 192 Financial Services and Markets Tribunal 94 Financial Services Authority (FSA) 5, 8, 31, 44, 67, 94, 97, 103, 171, 189, 192–99 competition review 132 insurance industry 240 money laundering and 219 objectives 192 regulatory role 192–95 powers 193 principles-based 194–95 Financial Services Compensation Scheme (FSCS) 17, 165, 280 Financial Services Modernisation Act 19 financial services regulation 190–99 see also Financial Services Authority Financial Times 9, 298 First Direct 20 flipping 53 flotation beauty parade 51 book build 52 early secondary market trading 53 grey market 52, 74 initial public offering (IPO) 47–53 pre-marketing 51–52 pricing 52–53 specialist types of share issue accelerated book build 54  bought deal 54 deeply discounted rights issue 55 introduction 55 placing 55 placing and open offer 55 rights issues 54–55 underwriting 52 foreign exchange 109–120 brokers 113 dealers 113 default risk 119 electronic trading 117 exchange rate 115 ICAP Knowledge Centre 120 investors 113–14 transaction types derivatives 116–17 spot market 115–16 Foreign Exchange Joint Standing Committee 112 forward rate agreement 85 fraud 200–15 advanced fee frauds 204–05 boiler rooms 201–04 Regulation S 202 future regulation 215 identity theft 205–06 insurance fraud 206–08 see also anti-fraud agencies Fraud Act 2006 200 FTSE 100 32, 36, 58, 122, 189, 227, 233 FTSE 250 32, 122 FTSE All-Share Index 32, 122 FTSE Group 131 FTSE SmallCap Index 32 FTSE Sterling Corporate Bond Index 33 Futures and Options Association 131 Generally Accepted Accounting Principles (GAAP) 237, 257 gilts 33, 86–88 Giovanni Group 146 Glass-Steagall Act 7, 19 Global Bond Market Forum 64 Goldman Sachs 136 government bonds see gilts Guinness case 214 Halifax Bank 20 hedge funds 8, 77, 97, 156–57 derivatives-based arbitrage 156 fixed-income arbitrage 157 Hemscott 35 HM Revenue and Customs 55, 211 HSBC 20, 103 Hurricane Hugo 250  306 INDEX ____________________________________________________ Hurricane Katrina 2, 67, 242 ICE Futures 5, 66, 102 Individual Capital Adequacy Standards (ICAS) 244 inflation 12–14 cost-push 12 definition 12 demand-pull 12 quarterly Inflation Report 14 initial public offering (IPO) 47–53 institutional investors 155–58 fund managers 155–56 hedge fund managers 156–57 insurance companies 157 pension funds 158 insurance industry London and 240 market 239–40 protection and indemnity associations 241 reform 245 regulation 243 contingent commissions 243 contract certainty 243 ICAS and Solvency II 244–45 types 240–41 underwriting process 241–42 see also Lloyd’s of London, reinsurance Intercontinental Exchange 5 interest equalisation tax 6 interest rate products debt securities 82–83, 92–93 bill of exchange 83 certificate of deposit 83 debt instrument 83 euro bill 82 floating rate note 83 local authority bill 83 T-bills 82 derivatives 85 forward rate agreements (FRAs) 85–86 government bonds (gilts) 86–89 money markets 81–82 repos 84 International Financial Reporting Standards (IFRS) 58, 86, 173, 237–38 International Financial Services London (IFSL) 5, 64, 86, 92, 112 International Monetary Fund 17 International Securities Exchange 138 International Swap Dealers Association 63 International Swaps and Derivatives Association 63 International Underwriting Association (IUA) 240 investment banking 5, 47–59 mergers and acquisitions (M&A) 56–58 see also capital raising investment companies 164–69 real estate 169 split capital 166–67 venture capital 167–68 investment funds 159–64 charges 163 investment strategy 164 fund of funds scheme 164 manager-of-managers scheme 164 open-ended investment companies (OEICs) 159 selection criteria 163 total expense ratio (TER) 164 unit trusts 159 Investment Management Association 156 Investment Management Regulatory Organisation 11 Johnson Matthey Bankers Limited 15–16 Joint Money Laundering Steering Group 221 KAS Bank 145 LCH.Clearnet Limited 66, 140 letter of credit (LOC) 23, 25–26 liability-driven investment 158 Listing Rules 43, 167, 173, 225, 228–29 Lloyd’s of London 8, 246–59 capital backing 249 chain of security 252–255 Central Fund 253 Corporation of Lloyd’s 248–49, 253 Equitas Reinsurance Ltd 251, 252, 255–56 Franchise Performance Directorate 256 future 258–59 Hardship Committee 251 history 246–47, 250–52 international licenses 258 Lioncover 252, 256 Member’s Agent Pooling Arrangement (MAPA) 249, 251 Names 248, one-year accounting 257 regulation 257 solvency ratio 255 syndicate capacity 249–50 syndicates 27 loans 23–24 recourse loan 24 syndicated loan 23–24 London Interbank Offered Rate (LIBOR) 74, 76 ____________________________________________________ INDEX 307 London Stock Exchange (LSE) 7, 8, 22, 29, 32, 64 Alternative Investment Market (AIM) 32 Main Market 42–43, 55 statistics 41 trading facilities 122–27 market makers 125–27 SETSmm 122, 123, 124 SETSqx 124 Stock Exchange Electronic Trading Service (SETS) 122–25 TradElect 124–25 users 127–29 Louvre Accord 114 Markets in Financial Instruments Directive (MiFID) 64, 121, 124, 125, 130, 144, 197–99, 277 best execution policy 130–31 Maxwell, Robert 186, 214, 282 mergers and acquisitions 56–58 current speculation 57–58 disclosure and regulation 58–59 Panel on Takeovers and Mergers 57 ‘white knight’ 57 ‘white squire’ 57 Merrill Lynch 136, 174, 186, 254 money laundering 216–22 Egmont Group 218 hawala system 217 know your client (KYC) 217, 218 size of the problem 222 three stages of laundering 216 Morgan Stanley 5, 136 multilateral trading facilities Chi-X 134–35, 141 Project Turquoise 136, 141 Munich Re 207 Nasdaq 124, 138 National Strategy for Financial Capability 269 National Westminster Bank 20 Nationwide Building Society 221 net operating cash flow (NOCF) see discounted cash flow analysis New York Federal Reserve Bank (Fed) 16 Nomads 45 normal market share (NMS) 132–33 Northern Rock 16 Nymex Europe 102 NYSE Euronext 124, 138, 145 options see derivatives Oxera 52  Parmalat 67, 232 pensions alternatively secured pension 290 annuities 288–89 occupational pension final salary scheme 285–86 money purchase scheme 286 personal account 287 personal pension self-invested personal pension 288 stakeholder pension 288 state pension 283 unsecured pension 289–90 Pensions Act 2007 283 phishing 200 Piper Alpha oil disaster 250 PLUS Markets Group 32, 45–46 as alternative to LSE 45–46, 131–33 deal with OMX 132 relationship to Ofex 46 pooled investments exchange-traded funds (ETF) 169 hedge funds 169–71 see also investment companies, investment funds post-trade services 140–50 clearing 140, 141–42 safekeeping and custody 143–44 registrar services 144 settlement 140, 142–43 real-time process 142 Proceeds of Crime Act 2003 (POCA) 211, 219, 220–21 Professional Securities Market 43–44 Prudential 20 purchasing power parity 118–19 reinsurance 260–68 cat bonds 264–65 dispute resolution 268 doctrines 263 financial reinsurance 263–64 incurred but not reported (IBNR) claims insurance securitisation 265 non-proportional 261 offshore requirements 267 proportional 261 Reinsurance Directive 266–67 retrocession 262 types of contract facultative 262 treaty 262 retail banking 20 retail investors 151–155 Retail Prices Index (RPI) 13, 87 264  308 INDEX ____________________________________________________ Retail Service Provider (RSP) network Reuters 35 Royal Bank of Scotland 20, 79, 221 73 Sarbanes–Oxley Act 233–34 securities 5, 29 Securities and Futures Authority 11 self-regulatory organisations (SROs) 192 Serious Crime Bill 213 settlement 11, 31, 140, 142–43 shareholder, rights of 29 shares investment in 29–32 nominee accounts 31 valuation 35–39 ratios 36–39 see also flotation short selling 31–32, 73, 100, 157 Society for Worldwide Interbank Financial Telecommunications (SWIFT) 119 Solvency II 244–245 Soros, George 114, 115 Specialist Fund Market 44 ‘square mile’ 4 stamp duty 72, 75, 166 Sterling Overnight Index Average (SONIA) 85 Stock Exchange Automated Quotation System (SEAQ) 7, 121, 126 Stock Exchange Electronic Trading Service (SETS) see Lloyd’s of London stock market 29–33 stockbrokers 33–34 advisory 33 discretionary 33–34 execution-only 34 stocks see shares sub-prime mortgage crisis 16, 89, 94, 274 superequivalence 43 suspicious activity reports (SARs) 212, 219–22 swaps market 7 interest rates 56 swaptions 68 systematic internalisers (SI) 137–38 Target2-Securities 147–48, 150 The Times 35, 53, 291 share price tables 36–37, 40 tip sheets 33 trading platforms, electronic 80, 97, 113, 117 tranche trading 123 Treasury Select Committee 14 trend theory 175–76 UBS Warburg 103, 136 UK Listing Authority 44 Undertakings for Collective Investments in Transferable Securities (UCITS) 156 United Capital Asset Management 95 value at risk (VAR) virtual banks 20 virt-x 140 67–68 weighted-average cost of capital (WACC) see discounted cash flow analysis wholesale banking 20 wholesale markets 78–80 banks 78–79 interdealer brokers 79–80 investors 79 Woolwich Bank 20 WorldCom 67, 232 Index of Advertisers Aberdeen Asset Management PLC xiii–xv Birkbeck University of London xl–xlii BPP xliv–xlvi Brewin Dolphin Investment Banking 48–50 Cass Business School xxi–xxiv Cater Allen Private Bank 180–81 CB Richard Ellis Ltd 270–71 CDP xlviii–l Charles Schwab UK Ltd lvi–lviii City Jet Ltd x–xii The City of London inside front cover EBS Dealing Resource International 110–11 Edelman xx ESCP-EAP European School of Management vi ICAS (The Inst. of Chartered Accountants of Scotland) xxx JP Morgan Asset Management 160–62 London Business School xvi–xviii London City Airport vii–viii Morgan Lewis xxix Securities & Investments Institute ii The Share Centre 30, 152–54 Smithfield Bar and Grill lii–liv TD Waterhouse xxxii–xxxiv University of East London xxxvi–xxxviii

Most stakeholders welcomed the FSA’s recent move to a risk-based approach to fraud prevention within regulated firms, but there was a view that it might leave room for abuse. ___________________________________________ FINANCIAL FRAUD 209  City of London Police The City of London Police force has 158 officers dedicated to preventing and investigating fraud, and is well resourced for this purpose in comparison with other police forces. In 2006, 75 per cent of crime investigated by the unit was cleared up. The fraud squad makes good use of fraud data. It has a good database on plastic cards, and another on boiler room frauds. If government proposals following consultation on the Fraud Review come about (see early in this chapter), the City of London Police will be elevated from south-east lead to national lead force. The force has agreed to take on between four and six cases of serious fraud a year that fall just below the Serious Fraud Office’s (see below) acceptance criteria.


pages: 388 words: 125,472

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

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

The modern Establishment has been financialized to an unprecedented degree. Above all, the financial sector is a threat to British democracy. Governments have surrendered their economic powers, whether it be through the abandonment of exchange controls or the promotion of deregulation. Through lobbying, political donations and the concentration of so many former City figures at the heart of power, the financial sector wields formidable clout. It sums up the notion of ‘one rule for the elite, another rule for everybody else’. Those who oppose the dominance of this sector face being sidelined and ridiculed. The City of London is surely the Establishment in its purest, undistilled form. 8 The Illusion of Sovereignty The ambitions of the outriders were never confined to Britain’s borders. These are ideologues whose ideas coincided with the interests of corporate power regardless of national boundaries, and their project was always global in scope.

A list of some of the cases of benefit sanctions that have trickled into the press is kept here: http://stupidsanctions.tumblr.com. 2. Andrew Hill, ‘The Urge to Punish all Bankers has Gone Far Enough’, The Financial Times, 25 March 2009. 3. David Kynaston, City of London: The History (London, 2011), p. 422. 4. E. H. H. Green, ‘The Conservatives and the City’, in R. Michie and P. Williamson, The British Government and the City of London in the Twentieth Century (Cambridge, 2011), pp. 171–2. 5. Kynaston, City of London, p. 542. 6. Jonathan Kirshner, Appeasing Bankers: Financial Caution on the Road to War (Princeton, NJ, 2007), p. 165. 7. Kynaston, City of London, p. 544. 8. Earl Aaron Reitan, The Thatcher Revolution: Margaret Thatcher, John Major, Tony Blair and the Transformation of Modern Britain (London, 2002), p. 86. 9. Ibid., pp. 587–9. 10. Ewald Engelen et al., After the Great Complacence: Financial Crisis and the Politics of Reform (Oxford, 2011), p. 147. 11. http://www.nao.org.uk/highlights/taxpayer-support-for-uk-banks-faqs. 12. http://blogs.spectator.co.uk/coffeehouse/2012/08/qe-the-ultimate-subsidy-for-the-rich. 13. http://www.bath.ac.uk/news/2012/10/09/quantitative-easing. 14.

An ambulance operator asked to speak to the police, but officers refused to do so. The initial police story could hardly have been less accurate.5 ‘I sat in the police station in the City of London on the 8th of April, eight days after he’d died,’ says Jules Carey. ‘I listened to the City of London investigator claiming that the dog bite on Tomlinson’s leg was probably glass thrown by protesters, or that the baton mark on his leg was probably caused by baton handles belonging to the protesters. He claimed that protesters had stolen police officers’ uniforms, and he wasn’t ruling out the assault on Tomlinson being a protester.’ Initially, the City of London coroner Paul Matthews appointed Dr Freddy Patel to conduct a post-mortem on Tomlinson’s body. The conclusion was that Tomlinson had died of coronary artery disease.


pages: 475 words: 155,554

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

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

But there was no clear divide between these high-risk operations and the conventional banks. The ‘universal’ banks that bestrode this divide were increasing risky exposures to, say, property on their trading books, while reining in property exposure on their conventional loan books. It made little sense. It goes back to the deregulatory Big Bang of 1986, and even before that. One British financial CEO filled me in. ‘What is the City since Big Bang? Mostly American-owned or American-influenced,’ he told me. ‘You should stop thinking of the City of London during the boom time as anything other than an extension of Wall Street.’ The City grew fat on offshore dollars traded internationally (nicknamed ‘eurodollars’). From the 1960s a US tax change called ‘Subpart F’ offered huge tax breaks to US multinationals on dollars earned abroad, as long as they stayed abroad.

David Cameron himself, in a speech to the City after the crisis began in March 2008, fully endorsed the strategy of outcompeting Wall Street on deregulation. ‘The UK has a long history of benefiting from over-regulation elsewhere,’ he told his audience. ‘The worst response to the current crisis would be a knee-jerk response and proscriptive over-regulation.’ A crisis bank chief executive concurs: ‘There’s some truth in the Americanisation story. The City moved to take advantage of the Sarbox Act, and Gordon [Brown] was not interested in taxing “nondoms”. The Nondom rules were designed specifically to attract American bankers.’ The Americans brought meritocracy, technology and a can-do attitude to the cosy gentlemen’s club of the pre-Big Bang City. Many City figures bitterly resisted the Big Bang reforms forced upon them by Mrs Thatcher. It was another example of the City not even knowing what was good for itself – at the time, at least.

Events had been set in train that would lead to the collapse of hedge funds, the collapse of investment banks, the collapse of lending to banks, the collapse of Northern Rock, and eventually the collapse of half the UK banking system. The conventional high-street banking crises, epitomised by the bank run on Northern Rock, was the most visible manifestation of failure in UK banking. But there were twin crises in Britain, centred on the City of London. The one most commonly read about in the news, and another, just as important, in the invisible banking system. So May 2007 was also the high watermark of what would become known as the ‘shadow banking’ system – a parallel international system of loans, lending, creditors and debtors that operated on low levels of capital, and had few of the safety systems of the conventional banking system.


pages: 481 words: 120,693

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

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Albert Einstein, algorithmic trading, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, conceptual framework, corporate governance, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy

A recent study found that 60 percent of the increased share in income of the top 10 percent went to bankers—meaning that nearly two-thirds of the enrichment of the earners at the top was driven by the City of London. As in the United States, the gains are skewed to the very tip of the pyramid: among the financiers who are part of Britain’s top 1 percent, the top 5 percent (or 0.05 percent of workers overall) take 23 percent of the total wages of that gilded slice of the population. The dominance of top dogs in finance is even stronger than that of the 0.05 percent in other jobs. — One reason the preeminence of the financiers within the global super-elite matters is that it highlights how crucial financial deregulation has been to the emergence of the plutocracy. That story has been told most convincingly in a historical study published in 2011 by economists Thomas Philippon and Ariell Reshef.

In the knowledge economy, more and more professions use a laptop rather than a steam engine, and that means that the superstars in these fields are earning ever greater rewards. The intellectuals are on the road to class power. THE STREET AND THE SUPERSTARS The biggest winners are the bankers. They did well enough, to be sure, in the industrial revolution. They were among that era’s plutocrats—think J. P. Morgan in New York, or Siegmund Warburg in the City of London. But these were the owners of capital. Their employees, the salaried financial professionals, weren’t nearly as richly rewarded. Their job was just to keep score. In the postwar era, with the steady rise of the knowledge economy, the bankers’ role has been dramatically transformed. Instead of working for the owners of capital—whether they are industrial magnates or the shareholders of publicly traded companies—financiers have discovered they can themselves own the capital and, with it, the companies.

Which is why the real story of Kryvorizhstal isn’t the successful multibillion-dollar sale of a Ukrainian steel mill to an Indian magnate, it is how it dramatizes the vast giveaway of the rest of the assets of the former Soviet Union. That shift from state to private ownership is probably the single largest transfer of assets in human history. When it comes to the creation of twenty-first-century billionaires, the USSR’s sale of the century is also the most powerful driver, more important than Silicon Valley’s technology revolution or the flourishing of finance on Wall Street and in the City of London. Just consider: of the 1,226 billionaires on the Forbes 2012 rich list, 111 were oligarchs from the former Soviet Union, 90 were technologists, and 77 were financiers. The number of billionaires relative to the size of the economy and the gap between the billionaires and everyone else are even more striking: The fortunes of Russia’s billionaires could buy roughly a fifth of the country’s annual economic output.


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

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

I think Great Recession about covers it. deregulation The process of ripping up rules, and the main demand of the financial world in the Anglo-American world for about thirty years. The financiers got what they wanted, culminating in measures such as the repeal of the Glass-Steagall Act separating retail and investment banking in the United States, and the “Big Bangderegulating the City of London in October 1986. The momentum behind deregulation grew to such an extent that in the case of newly invented financial derivatives, the industry was able successfully to lobby Congress to pass a law, the Commodity Futures Modernization Act, which prohibited the making of any laws to regulate the new inventions. In other words, not just deregulation, but an outright ban on any regulation in the future. The idea behind deregulation was that markets could do a better job of regulating themselves than regulations ever could.

And then the two things converged, as things sometimes do. The editor of the London Review of Books, Mary-Kay Wilmers, called me up and suggested that I do “one of my pieces about companies” about banks; as it happened that was exactly what I had just started to think about for the purposes of my novel. I’d realized that you can’t really write about London without starting to take an interest in the City of London, because finance is so central to the place London has become. So that was how I ended up getting my education in the language of money: by following the subject in order to write about it. It wasn’t a crash course; I didn’t immerse myself in it up to the eyeballs and try and ingest every single detail about economics in one go. Instead I just followed it, for years, by reading the financial papers and financial pages, and following the economic news.

It’s impossible for an outsider to know for sure, but if you’re a hedge fund, and you own a lot of something, and plan to sell it, you will hedge your position and try to make money if the market moves against you. If you get the hedge wrong, and prices move outside the limits you’ve allowed for, you can end up losing a lot of money. My hunch would be that something like that happened to Armanjaro. Remember, pretty much all hedge funds close or go broke; this is just an unusually vivid example. City of London A term often used as a metonymy for the UK’s financial services industry, equivalent to “Wall Street” in the United States. As it happens, most of the people who work in the financial services in the UK don’t work in London at all; even the ones who work “in the City” often don’t work in the City but at, say, Canary Wharf (whose inhabitants include Barclays, Citigroup, HSBC, JPMorgan Chase) or Mayfair (which is where the hedge funds tend to be).


pages: 632 words: 159,454

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

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

., 296–7, 305–14, 321, 330–2, 348 Business China, 292 Byrnes, James, 182 Cajamarca, 16 Callaghan, James, 241 Calonne, Charles-Alexandre, 43–5 Cambridge Apostles, 111, 149 Campbell, John, 245 Canada, 39, 352 Cantor, Eric, 349 capital, free movement of, 243–4 capitalization rates, 326–7 Cardin, Benjamin, 297 Carnegie, Andrew, 75, 77, 80 Carter, Jimmy, 235–6, 238–9, 249, 308, 310 Case, Walter, 128 Cassel, Sir Ernest, 88–9 Cassel, Gustav, 114–15 Cato Institute, 309 central banks Burns’s paradox, 239–40 and currency stability, 207, 239–40 and global gold stocks, 358–9 invention of, 22 and issue of paper money, 59–60, 64–5 as lenders of last resort, 50 US establishment of, 66–8, 78–80, 108 Chamberlain, Neville, 138 Chandos, Duke of, 37 Charles II, King, 24, 357 Charles V, Emperor, 11–12, 19–20 Chase, Salmon, 71–2 Chase Manhattan Bank, 230–1, 238 Cheney, Dick, 132 Chiang Kai-shek, 193 China communist victory in, 193 and currency value, 285–8, 291–2, 296–9, 319, 351 dollar reserves, 299–301, 318–19 economic expansion, 78, 83, 282–300 and financial crisis, 351–2 financial reforms, 293–4 foreign exchange reserves, 287, 358 and global financial system, 358 gold reserves, 358 infrastructure spending, 294–6 Japanese war in, 191 and Korean War, 163 and mercantilism, 284–5 national debt, 295 state enterprises, 293–4 symbiosis with US, 318–19, 321 welfare provision, 296 Chinese Communist Party, 282, 288, 294 Chongqing, 293 Church assets, taxation of, 44–6 Churchill, Winston, 4, 100, 107, 118, 138, 142, 147, 181, 246, 331 Cieza de Léon, Pedro, 13 Citicorp, 230 Citizens Against Government Waste, 310 City of London, 24–5, 27 ad hoc financial arrangements, 86 Bagehot’s account of, 63–4 and Barings crisis, 85–6 Big Bang deregulation, 258 decline as financial centre, 97, 106, 108 dependence on government, 38 in Edwardian period, 82–3, 86–90 and outbreak of First World War, 91–3 post-war, 171–2 social structure, 86–9 working week, 88 see also Lombard Street Clarke, Richard (‘Otto’), 173 Clay, Henry, 70–1 Clay, Lucius D., 181–5 Cleveland, Grover, 74 Clinton, Bill, 307–8, 310, 348 Cobbett, William, 52 Cobbold, Cameron, 178–9 Cobden, Richard, 160, 246 Coggan, Philip, 5, 320, 325, 329, 355 Cold War, 157, 159, 186, 198, 234, 237, 261 collateralized debt obligations (CDOs), 324–7 Colombian Mining Association, 56 Columbus, Christopher, 12 Compagnie d’Occident, 30–1, 34 Companies Act, 87 company indebtedness, high levels of, 233 Company of the Indies, 31–3 ‘compensatory finance’, 203 ‘competitive devaluation’, 132 Connally, John, 216–19 conquistadors, 12–16, 23 Conrad, Kent, 305 ‘consumption function’, 136 ‘contagion’, 290 Continental Congress, 41–2 ‘continental’ currency, 5, 41–3, 46, 71 Cooke, Jay, 71 Coolidge, Calvin, 119 Cornwell, Rupert, 277 Cortés, Hernan, 12–15 Council of the Indies, 19 Countrywide mortgage lenders, 322–3 Covarrubias, Diego de, 20 Craggs, James, 32, 37 Crawford, Thomas, 35 credit bubbles, ending of, 123 Crimean War, 61 Cripps, Sir Stafford, 175, 179–80 Crosland, Anthony, 172 ‘Currency School’, 64 Curtice, Harlow, 154 Curtis, Timothy Abraham, 57 Czechoslovakia, 157 Daily Mail, 180 Dalton, Hugh, 171–2, 174–5 Darling, Alistair, 332–3, 343 de Gaulle, Charles, 209–11, 214 de Zoete, Walter, 88 debt-for-equity swaps, 31 Delors, Jacques, 262, 264, 267–8, 276 Delors Committee, 272, 276 democracy, and public spending, 2–3, 93, 279 Deng Xiaoping, 282–4 Der Spiegel, 275–6, 279 deregulation, of financial services, 257–8 derivatives, 320 Detroit Bank, 193, 207 Deutschmark devaluation, 188 dollar exchange rate, 254–5 and ERM, 264, 266–72 and German reunification, 266, 268 introduction of, 183–7 and single currency, 274–5, 278 and the snake, 263 Dillon, Douglas, 210 Disraeli, Benjamin, 56–7 Dodd, David, 161 Dodd–Frank Act, 351 Dodge, Joseph, 184, 193–6, 201 dollar break with gold, 5, 214, 218–20, 223, 225, 255, 262 Bretton Woods and link to gold, 140, 143–4, 149–50, 167–70, 208–12, 250–1 defined value of, 42–3 devaluation, 131–2 establishment of, 42–3, 279 importance of exchange rate, 254–6 stabilization of, 237–9 suspension of link to gold, 71–2, 74, 76, 219 Dollar Drain Committee, 175, 179 ‘dollar financing problem’, 154–5 ‘dollar shortage’, 158, 181 dot-com bubble, 314, 316 Dow Jones average, 218, 226, 237, 259–60, 331 Drew, Daniel, 75 ducats, 11 duelling, 27–8 Duncan, Richard, 315–16, 355 East Germany, 186, 266, 268 East India Company, 32 Eckstein, Otto, 228 Economic Club of Detroit, 165, 207–8 Economic Journal, 97, 107, 111 Economist, 82, 91, 99, 104, 113, 142, 226, 292, 299, 338 articles on Japan, 198–9 Friedman obituary, 234 and launch of euro, 279–80 and shift in economic power, 228–9 Eden, Anthony, 246 Edward VII, King, 89, 147 Eichengreen, Barry, 131–2 Einzig, Paul, 135–6 Eisenhower, Dwight D., 168–70, 193, 202, 204, 207, 252, 259, 306, 308, 311, 339 Ekali swimming pools, 335–6 El Dorado, 13 Elizabeth II, Queen, 270 Ellerman, John, 87–8 ‘emerging markets’, 289 Emminger, Otmar, 187, 254–6 English, Phil, 297 Erhard, Ludwig, 182 ERM (exchange rate mechanism), 263–72, 276, 280 euro conditions for joining, 272–3, 277, 336 Greece joins, 280–1, 335–7 introduction of, 272–81, 334–5 and moral hazard, 274 risk of collapse, 346–7 European Central Bank, 272, 346 European Commission, 346 European Economic Community (EEC), 211, 226, 262, 276 European Financial Stabilization Facility (EFSF), 338 European Union, 267, 276, 337, 352 Evening Standard, 118 excess profits duty, 104–5 Export-Import Bank of Japan, 195 Export-Import Bank of Washington, 154, 164 Fairchild, Fred, 103 Faisal, King, 229–30 Federal Reserve Accord of 1951, 164–5, 169 under Bernanke, 327, 343 under Burns, 215, 233 establishment of, 108 Federal Open Market Committee (FOMC), 163–4 and Great Depression, 126–8 under Greenspan, 258–60, 301–4, 310, 313–14, 325 and market stabilization, 259–60 under Martin, 205–6, 215 Meltzer’s history of, 212–13 relationship with Treasury, 163–7, 169 Strong and New York branch, 123 under Volcker, 223, 237–8, 249–50 Feis, Herbert, 83 Ferguson, Niall, 6, 90, 318–19, 351 fiat money, 5, 61, 320 Field, Marshall, 75 ‘Financial Revolution’, 24 Financial Times, 227, 265, 271–2, 326, 347 Finland, 278 First Bank of the United States, 67 First World War, outbreak of, 90–3 fiscal policy, primacy of, 2–3 ‘fiscal repression’, 357–8 Fish, Hamilton, 157 Fisher, Irving, 121–2 Fisk, James, Jr (‘Big Jim’), 76 Fleming, Ian, 4 floating currencies, 226, 231, 234–5, 262, 299 florins, 11 Forbes, Steven, 299 Ford Motor Company, 121 Ford, Gerald, 232, 235, 308 foreign exchange controls, abolition of, 242–3 Forster, E.

A Britain which still had a vast quantity of state-owned assets on its balance sheet would probably have been forced to sell them at very low prices in the wake of the global recession which descended in 2008–9. State assets would undoubtedly have made Britain’s poor public finances in the aftermath of the events of 2008 even worse. In addition to privatization, there also occurred the regulatory reform of the City of London. In 1986, ‘Big Bang’ changed life within the Square Mile for ever. The ‘traditional and class-based’ culture of the City was swept away. Big Bang itself happened on 27 October 1986, but for three years, following the 1983 agreement between the Stock Exchange and the Department of Trade and Industry, ‘the structure and the form of the City’ underwent a revolution.49 As one historian explains: ‘A new dealing system was established together with a new regulatory framework to police it.

Relationships with clients had to be redefined. Within firms a new contract between employer and employee had to be created.’50 There were inevitably cultural tensions as big American banks acquired more traditional English brokerage firms and merchant banks. The initial 1983 deal between the Stock Exchange and the government had been an undertaking, on the part of the City of London, to drop fixed commissions and to open itself to competition. These steps had ushered in the market reforms of 1986 known as Big Bang. In the light of the events of October 1987 in which international markets crashed, many questioned the pace and efficacy of the reforms that Mrs Thatcher’s government had introduced.51 Yet, as in so much else associated with her government, the direction and philosophy were clear. Policies flowed consistently from a set of ideological premises.


pages: 207 words: 86,639

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

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Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Jane Jacobs, land reform, loss aversion, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Washington Consensus, working-age population

Those who grew up with George Orwell’s novel with that year as its title looked ahead to 1984 as a symbol of everything that could go wrong with society – and with the hope that the world might be different from that experienced by Big Brother and Winston Smith. In the event, there were certainly convulsions enough – the British Miners’ Strike, the emergence of Mikhail Gorbachev and the arrival in the UK of cruise missiles. There was the Greenham Common Women’s Peace Camp, and the start of the countdown towards the Big Bang deregulation in the City of London, and the wild worldwide speculation that we have become used to since. There was no one Big Brother, but there was – in a sense – a series of them. They were the six Big Brothers and one Big Sister of the G7, the leaders of the seven richest industrial countries of the A BRIEF HISTORY OF THE NEW ECONOMICS 23 world, whose increasingly influential summit meetings every summer presumed to decide the economic future of the planet.

But if they had peered out of the window of that tower, and if the politicians do now, they might be forced to ask themselves why the system requires huge indebtedness, from rich to poor, just to chug on. Nearly all the money in circulation was created in the form of bank loans: under the current system we need these loans in order to have the money to exchange goods and services. And since most of that money began as mortgages, we need them – in this sense at least – in order to survive. There is also the peculiar irrelevance to real life of this bizarre dance in Wall Street and the City of London, justified by their occasional ability to raise loans for productive expansion, but actually leaching vast fees and bonuses from the income of savers, pensioners, insurance payers and taxpayers. And behind that, there is a more fundamental problem: this global financial system, underpinning all our lives yet increasingly disconnected from real life, accelerates $3 trillion through the system every day, nearly 90 per cent of which is speculation, mostly speculation in the foreign exchange markets.9 We find ourselves colluding in that system through our savings, pensions and credit card debts, but it has nothing to do with the job that the financial system is supposed to do – to facilitate the exchange of goods and services, to make capital available for people so that they can create productive businesses in the future. 8 THE NEW ECONOMICS The money system is no longer designed for this basic work of economics.

Escos, or energy service companies, contract with a city, or housing developer or hospital, for example, to install energy efficient technology. The city gets the equipment and the Esco gets paid back from a share of the energy savings that result. The Esco idea was developed mainly in eastern Europe to deal with the need for urgent investment after 1989. And in the UK, once again, it was Woking that took the lead. And once again, it was Danish investors, rather than their conservative equivalents in the City of London, who put up the money. Woking’s Esco began by building a co-generation plant in the town centre – cogeneration means combined heat and power – which now powers local businesses, car parks and events centres, as well as the council’s offices and leisure centre. Public housing and old people’s homes are getting photovoltaic cells and the council’s vehicle fleet is being converted to liquid natural gas.


pages: 334 words: 98,950

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

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affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

The tribute paid to foreigners is … odious … We have outgrown the necessity of submitting to the humiliation of going to London, Paris or Frankfort [sic] for capital has become amply abundant for all home demands.’ 33 Foreign lenders were also badly treated. In 1842, the US became a pariah in the international capital market when 11 state governments defaulted on foreign (mainly British) loans. Later that year, when the US federal government tried to raise a loan in the City of London, The Times hit back, saying: ‘[t]he people of the United States may be fully persuaded that there is a certain class of securities to which no abundance of money, however great, can give value; and that in this class their own securities stand pre-eminent’. As cited in T. Cochran & W. Miller (1942), The Age of Enterprise: A Social History of Industrial America (The Macmillan Company, New York), p. 48. 34 The second Bank of USA, set up in 1816 under a 20-year charter, was 20% owned by the government and federal tax revenue was deposited there, but it did not have note issue monopoly, so it could not be considered a proper central bank. 35 As cited in Wilkins (1989), p. 84. 36 Even until as late as 1914, when it had become as rich as the UK, the US was one of the largest net borrowers in the international capital market.

.* In addition to the impact of the introduction of New Public Management, neo-liberal policies have also indirectly, and unintentionally, increased corruption by promoting trade liberalization, which weakens government finances, which, in turn, makes corruption more likely and difficult to fight.14 Also, deregulation, another key component of the neo-liberal policy package, has increased corruption in the private sector. Private sector crookedness is often ignored in the economic literature because corruption is usually defined as the abuse of public office for personal gain.15 But dishonesty exists in the private sector too. Financial deregulation and relaxation of accounting standards have led to insider trading and false accounting even in rich nations – recall cases like the energy company Enron, and the telecommunications company WorldCom and their accountancy firm Arthur Andersen in the ‘Roaring Nineties’ in the US.16 Deregulation can also increase the power of private-sector monopolies, which expands the opportunities for their unscrupulous purchasing managers to take bribes from sub-contractors.

It looks like Vietnam!’ There was less than 20 years’ age gap between us, but scenes that were familiar to me were totally alien to her. I turned to Joe and told him how ‘privileged’ I was as a development economist to have lived through such a change. I felt like an historian of mediaeval England who has actually witnessed the Battle of Hastings or an astronomer who has voyaged back in time to the Big Bang. Our next family house, where I lived between 1969 and 1981, at the height of Korean economic miracle, not only had a flushing toilet but also boasted a central heating system. The boiler, unfortunately, caught fire soon after we moved in and almost burned the house down. I don’t tell you this in complaint; we were lucky to have one – most houses were heated with coal briquettes, which killed thousands of people every winter with carbon monoxide poisoning.


pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

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affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

The tribute paid to foreigners is … odious … We have outgrown the necessity of submitting to the humiliation of going to London, Paris or Frankfort [sic] for capital has become amply abundant for all home demands.’ 33 Foreign lenders were also badly treated. In 1842, the US became a pariah in the international capital market when 11 state governments defaulted on foreign (mainly British) loans. Later that year, when the US federal government tried to raise a loan in the City of London, The Times hit back, saying: ‘[t]he people of the United States may be fully persuaded that there is a certain class of securities to which no abundance of money, however great, can give value; and that in this class their own securities stand pre-eminent’. As cited in T. Cochran & W. Miller (1942), The Age of Enterprise: A Social History of Industrial America (The Macmillan Company, New York), p. 48. 34 The second Bank of USA, set up in 1816 under a 20-year charter, was 20% owned by the government and federal tax revenue was deposited there, but it did not have note issue monopoly, so it could not be considered a proper central bank. 35 As cited in Wilkins (1989), p. 84. 36 Even until as late as 1914, when it had become as rich as the UK, the US was one of the largest net borrowers in the international capital market.

If they know that they are not going to stay in the civil service very long, they will have all the more incentive to cultivate their future employment prospects.iii In addition to the impact of the introduction of New Public Management, neo-liberal policies have also indirectly, and unintentionally, increased corruption by promoting trade liberalization, which weakens government finances, which, in turn, makes corruption more likely and difficult to fight.14 Also, deregulation, another key component of the neo-liberal policy package, has increased corruption in the private sector. Private sector crookedness is often ignored in the economic literature because corruption is usually defined as the abuse of public office for personal gain.15 But dishonesty exists in the private sector too. Financial deregulation and relaxation of accounting standards have led to insider trading and false accounting even in rich nations – recall cases like the energy company Enron, and the telecommunications company WorldCom and their accountancy firm Arthur Andersen in the ‘Roaring Nineties’ in the US.16 Deregulation can also increase the power of private-sector monopolies, which expands the opportunities for their unscrupulous purchasing managers to take bribes from sub-contractors.

It looks like Vietnam!’ There was less than 20 years’ age gap between us, but scenes that were familiar to me were totally alien to her. I turned to Joe and told him how ‘privileged’ I was as a development economist to have lived through such a change. I felt like an historian of mediaeval England who has actually witnessed the Battle of Hastings or an astronomer who has voyaged back in time to the Big Bang. Our next family house, where I lived between 1969 and 1981, at the height of Korean economic miracle, not only had a flushing toilet but also boasted a central heating system. The boiler, unfortunately, caught fire soon after we moved in and almost burned the house down. I don’t tell you this in complaint; we were lucky to have one – most houses were heated with coal briquettes, which killed thousands of people every winter with carbon monoxide poisoning.


pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

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Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, borderless world, British Empire, capital controls, complexity theory, computer age, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, knowledge economy, knowledge worker, labor-force participation, labour market flexibility, labour mobility, laissez-faire capitalism, low skilled workers, manufacturing employment, Marshall McLuhan, means of production, megacity, Menlo Park, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, planetary scale, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl

The ratio between the annual turnover of foreign exchange and the volume of world exports increased from 12:1 in 1979 to 60:1 in 1996, thus revealing the predominantly speculative nature of currency exchange. The global interdependence of financial markets is the result of five main developments. The first factor is the deregulation of financial markets in most countries, and the liberalization of cross-border transactions. A turning point in this process of deregulation was the so-called “Big Bang” of the City of London on October 27, 1987. This new financial freedom allowed capital from all sources to be mobilized from anywhere to be invested anywhere. In the US, between 1980 and the late 1990s, investment by pension funds, mutual funds, and institutional investors increased by a factor of 10, so that in 1998 stock market capitalization in the US amounted to 140 percent of GDP.

The Asian financial markets, particularly Hong Kong and Singapore, took advantage of their loosely regulated environment to attract financial transactions, winning market shares over a more regulated Tokyo stock-exchange market. The full deregulation of financial markets in the City of London in October 1987 opened a new era of financial globalization, in spite (or because?) of the simultaneous October 1987 crash in the New York stock exchange. Yet, the first round of supply-side economic policies did not work entirely to the expectations of their ideologues in the US and Britain because of a basic, internal contradiction in their position: they were, at the same time, nationalists and globalizers. In principle, these two positions are not contradictory under the condition of imperialist policies – and, indeed, that was the case of Victorian England which is often presented as an historical example of earlier globalization.

Thompson, E.P. (1967) “Time, work-discipline, and industrial capitalism”, Past and Present, 36: 57–97. Thrift, Nigel J. (1986) The “Fixers”: the Urban Geography of International Financial Capital, Lampeter: University of Wales Department of Geography. —— (1990) “The making of capitalism in time consciousness”, in J. Hassard (ed.), The Sociology of Time, London: Macmillan, pp. 105–29. —— and Leyshon, A. (1992) “In the wake of money: the City of London and the accumulation of value”, in L. Budd and S. Whimster (eds), Global Finance and Urban Living: A Study of Metropolitan Change, London: Routledge, pp. 282–311. Thurow, Lester (1992) Head to Head: the Coming Economic Battle among Japan, Europe, and America, New York: William Morrow. —— (1995) “How much inequality can a democracy take?”, New York Times Magazine, special issue: The Rich, November 19: 78.


pages: 851 words: 247,711

The Atlantic and Its Enemies: A History of the Cold War by Norman Stone

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affirmative action, anti-communist, Ayatollah Khomeini, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, British Empire, central bank independence, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, European colonialism, facts on the ground, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, illegal immigration, income per capita, interchangeable parts, Jane Jacobs, Joseph Schumpeter, labour mobility, land reform, means of production, Mikhail Gorbachev, new economy, North Sea oil, oil shock, Ponzi scheme, price mechanism, price stability, RAND corporation, rent-seeking, Ronald Reagan, Silicon Valley, special drawing rights, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, trade liberalization, trickle-down economics, V2 rocket, War on Poverty, Washington Consensus, Yom Kippur War, éminence grise

Carrington, Peter, 6th Baron cars see automobile industry Carter, Jimmy: background and character Camp David accords (1978) and Chile and CIA defence policy economic policy education policy election as President energy policy failures of Administration Governor of Georgia and Iran loses 1980 election to Reagan and Margaret Thatcher moralizing refuses to meet Bukovsky reputation retirement and Turkish coup (1980) work regimen Carter, Rosalynn Casaroli, Cardinal Agostino Casey, William Castro, Fidel: background and education and Bay of Pigs invasion and Crisis of 1962 imprisonment and Khrushchev revolution US campaign to limit appeal visits Chile Castro, Raúl Catherine the Great Catholic Church: in Austria in Chile and Christian Democracy and Communism Counter-Reformation in Czechoslovakia and economic development in France in Germany in Hungary in Ireland and the Left in Poland and Reagan administration Rerum Novarum (enyclical) Thirty Years War Vatican(ecumenical council) in Vietnam see also Vatican CDU see Christian Democrats (German) Ceauşescu, Elena Ceauşescu, Nicolae cell phones censorship: in Czechoslovakia in USSR in West Central African Empire Centre National de la Recherche Scientifique (CNRS) Cézanne, Paul Chaldean Christians Chambord, château de Chams (Vietnamese Moslems) Chandler, Alfred Channel Tunnel Chaplin, Sir Charlie Charles, Prince of Wales Charles X, King of France Chateaubriand, François-René de Chaudhuri, Nirad Chaunu, Pierre Chechens Chechnya Cheka (Russian secret police) see also KGB Chéreau, Patrice Chernenko, Konstantin Chevalier, Maurice Chevron (oil company) Cheysson, Claude Chiang Kai-shek: American view of andwar government in Taiwan mausoleum Chicago Chicago school of economics Chile: under Allende Carter’s handling of Catholic Church Christian Democrats civil war (1891) Communist Party copper industry coup of 1973 DINA (secret police) education system (see also universities) and Falklands War (1982) geography inflation land reform native Indian population peasantry Pinochet regime political instability population growth poverty privatizations trade unions unemployment universities wine industry China, Republic of: backwardness civil war Communist Party emergence of communist movement intelligentsia Japanese invasion and occupation Kuomintang (Nationalists) land redistribution Long March (1934-5) membership of UN Security Council peasantry Protestant missionaries Second World War Soviet invasion trade unions see also Taiwan China, People’s Republic of: and Afghan War atomic and nuclear weapons border conflicts with India border conflicts with Russia/ USSR ‘cultural revolution’ economic growth famines and starvation friendship treaty with USSR (1950) ‘hundred flowers’ campaign intelligentsia international support for Korean War Mao’s inauguration of People’s Republic Nixon’s visit (1972) and ‘peaceful coexistence’ doctrine Sino-Soviet split and Taiwan Tiananmen Square massacre (1989) tyranny and destruction of regime and Vietnam Chirac, Jacques Cholkovsky, Konstantin Chonchol, Jacques Chou En-lai Christian Democrats (Chilean) Christian Democrats (German; CDU) Christian Democrats (Italian) Christian Women’s Camp (Hungarian) Chrudinák, Aladár Chrysler (automobile manufacturer) Church of England Churchill, Sir Winston: calls for European unity and Chiang Kai-shek Congress of Europe (1948) declining influence and Eden’s premiership and Greece hopes for reconciliation with USSR on India ‘Iron Curtain’ speech loses 1945 election and Poland reputation Teheran conference (1943) Yalta conference (1945) and Yugoslavia CIA (US Central Intelligence Agency): and Afghanistan and Bay of Pigs invasion and Cambodia and Chile and collapse of USSR Congressional restriction of establishment of and Greek Colonels’ coup (1967) journalists’ attacks on and overthrow of Mossadegh and ‘Second Cold War’ and Suez crisis and Vietnam Ciba (chemical company) Čierna nad Tisou cigarettes smoking bans City of Londonbig bang’ (1986) Clark Kerr, Archibald, 1st Baron Inverchapel Clark, William Clay, Lucius Clayton, William. 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Business investment rose by 20 per cent. The adaptation of advanced computers to financial transactions somehow catapulted London back to the centre of the world’s money, and as the bond market got under way, older divisions between deposit banks, operating on classic old-fashioned lines, and investment ones, involved in speculation, were elided. In October 1986 came an important moment, deregulation of the City, otherwise known as ‘Big Bang’, such that old-fashioned banks and stockbroking firms gave up their staid ways. Venerable (and well-run) establishments such as Lawrence, Prust were bought up by a Deutsche Bank anxious to escape from the stuffy confines of Frankfurt, where, it was said, there was a night-life, but she went to see her aunt on Tuesdays. In New York and London the money poured in, and in the British case Alan Walters himself called it a ‘miracle’, comparable with the earlier German one, for there had been steady growth since 1981, weekly earnings had risen by 14 per cent in real money between 1983 and 1987, and inflation had been held below 5 per cent.

They had exploded their own first bomb in October 1952 and were obviously looking for some independent role. In the first place, Churchill himself hoped to have a last grand international moment, reconciling the USSR and the rest, and in the early fifties, before German competition properly started, British exports boomed, and there was some life in the British Commonwealth. A third of the world’s trade was conducted in pounds, and money therefore came back to the City of London: Churchill could imagine that he had an independent role. With the French, matters were simpler. There was a large Communist Party; there was a great deal of resentment against Germany; there was cultural resentment of American domination; and there was a colonial war going on, in Vietnam, where Soviet help might be helpful. To have pushed all of them together, in NATO, had been extraordinarily clumsy.


pages: 823 words: 220,581

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

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accounting loophole / creative accounting, banking crisis, banks create money, barriers to entry, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, Fractional reserve banking, full employment, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, invisible hand, iterative process, John von Neumann, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, open economy, place-making, Ponzi scheme, profit maximization, quantitative easing, RAND corporation, random walk, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave

Often, these revolutions outpace the popular understanding of a science. Astronomy provides an example of this. I expect that most lay people think that the dominant theory of how the universe came into being is the ‘Big Bang.’ In this theory, the universe originated in a ‘quantum singularity’ some 12–15 billion years ago. This explosion kick-started matter and time, leading to the immense universe we observe today. Back in the 1950s, this theory won out against its rival, that the universe had always been in a ‘steady state’ of expansion. The Big Bang was indeed the dominant theory for some time – until it was pointed out that, according to calculations from quantum mechanics, the Big Bang would have resulted in a universe consisting of a mere handful of elementary particles. A rival theory then developed which argued that, for a substantial period of time, the laws of physics of the current universe did not apply.

For stock market investors, uncertainty means that the expected yield of an investment over the medium- to long-term future simply can’t be known: Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London, amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behavior does not govern the market. (Keynes 1936) Uncertainty, not risk, is the main factor standing between investors and an accurate knowledge of the future prospects of companies. As a result, the expected yield of an investment, the other variable in the EMH model of investor behavior, simply can’t be known.

A rival theory then developed which argued that, for a substantial period of time, the laws of physics of the current universe did not apply. Matter, for example, could move much faster than the speed of light. This ‘inflationary universe’ theory has subsequently been embellished to predict that there are many universes – as opposed to the one universe postulated by the Big Bang. The shifts from the Big Bang paradigm to the inflationary universe, to ‘multiverses,’ are big ones conceptually. The first envisages a single finite universe, while the last muses that ours may be only one of many universes, each with different ‘fundamental’ physical laws. But the science of astronomy made this move over a period of about twenty years, and it continues to undergo development today. Now even the inflationary/multiverse theory is under challenge, as measurements imply that the rate of expansion of the universe is actually increasing with time.5 Economics, in contrast, has had only one acknowledged revolutionary episode in the last century – the Keynesian revolution during the 1930s.


pages: 741 words: 179,454

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

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

In the sixteenth century the Conquistadors brought the ambitions, prejudices, attitudes, and values of Spain to the New World. Achievements were validated with riches, rank, and power. Failures brought disease and death, mollified by the consolations of faith and the afterlife. The financial elite undertook similar conquest and plunder, marshaling vast sums of money and creating intricate financial structures. In the new age, Masters of the Universe strutted through the City of London, Wall Street, Finanzplatz Deutschland, Zurich’s Bahnofstrasse, Singapore’s Raffles Place, Hong Kong’s Exchange Square, and Tokyo’s Marunouchi, parodying a banker in the movie The Bank who believes he is just like God, but with a better suit. Factories for Unhappy People7 In the 1967 film The Graduate, Dustin Hoffman’s character Ben Braddock received career advice. Then it was “PLASTICS,” now it was “MONEY.”

The term “shadow banking system” is attributed to Paul McCulley of PIMCO, who coined it at the 2007 Jackson Hole conference; see Paul McCulley “Teton reflections” (July/August 2007), Pimco Global Central Banking Focus. 2. Roger Merrit, Ian Linnell, Robert Grossman and John Shiavetta “Hedge funds: an emerging force in global credit markets” (18 July 2005), Fitch Ratings, New York. 3. Speech at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London (17 June 2009), Mansion House, London. 4. Gretchen Morgenson and Louise Story “Bundled bad debt, bet against it and won” (23 December 2009) New York Times. 5. Based on Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 257–61. It is assumed that 80 percent of the underlying loans were subprime, 80 percent of the Magnetar transactions were synthetic, and 20 percent of subprime component of these CDOs were 2006 vintage BBB subprime tranches.

One English merchant banker described Goldman Sachs as: “nothing more than high-priced interlopers who produce a massive stream of impractical ideas that have no relevance.” The banker gave the Americans credit only “for making a lot of noise.”4 Cool Britannia Under Margaret Thatcher, things changed. Exchange controls were abandoned in 1979. Freer capital movements allowed London to recapture its position as an international market. In 1989 the government implemented the Big Bang, reforms ending the City’s archaic practices. Financial regulations were overhauled, becoming more market friendly. In 2001 a single regulator—the Financial Services Authority (FSA)—was created to oversee financial markets. London’s resurgence was helped by Wall Street’s stumbles. John F. Kennedy’s interest equalization tax (closing access to the U.S. market for foreign borrowers) prompted the creation of the London based euro dollar market—attributed to Siegmund Warburg.


pages: 471 words: 109,267

The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

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banking crisis, Big bang: deregulation of the City of London, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, knowledge economy, labour market flexibility, market bubble, millennium bug, North Sea oil, Northern Rock, offshore financial centre, pension reform, Plutocrats, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, shareholder value, Skype, smart meter, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

., 1, 2, 3, 4 business, 1 company governance, 1 competition policy, 1 see also manufacturing Business Links, 1, 2 Cable, Vince, 1 Cadbury, 1 Caine, Judy, 1 Callaghan, James, 1 Cameron, David, 1, 2, 3, 4 Campaign for Real Ale, 1 Campbell, Alastair, 1, 2 Campbell, Naomi, 1 Canada, 1 cancer research, 1 cannabis, 1, 2 Cannock Chase Hospital, 1 Capel Manor College, 1 Carbon Trust, 1 Cardiff, 1, 2 Millennium Stadium, 1 see also Welsh assembly Care Quality Commission, 1, 2, 3 carers, 1 Carousel children’s centre, 1 Casey, Louise, 1, 2 casinos, 1 Castle, Barbara, 1 cataracts, 1, 2 Cator Park School, 1 CCTV, 1, 2, 3 celebrity culture, 1 Central Office of Information, 1 Ceuta, 1 Charity Commission, 1 Charleroi, 1 Chase Farm Hospital, 1, 2, 3 Cheltenham, 1 Cheney, Dick, 1 Chicago, 1 Chilcot inquiry, 1, 2, 3, 4 Child Maintenance and Enforcement Commission, 1 child poverty, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 Child Support Agency, 1 child trafficking, 1 Child Trust Funds, 1, 2 childcare, 1, 2, 3, 4, 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suspension of, 1 Hacienda Club, 1 Hackney, 1 Hale, Baroness Brenda, 1 Hallé Orchestra, 1 Ham, Professor Chris, 1 Hamilton, Lewis, 1 Hammersmith Hospital, 1 Hammond, Richard, 1 Hardie, Keir, 1 Hardy, Thea, 1 Haringey, 1, 2 Harman, Harriet, 1 Harris of Peckham, Lord, 1 Harrison, PC Dawn, 1, 2 Harrow School, 1 Hartlepool, 1, 2 Hastings, 1, 2 Hatfield rail crash, 1 Hatt family, 1, 2, 3, 4 health, 1 and private sector, 1, 2 and social class, 1 spending on, 1, 2 Health Action Zones, 1 Health and Safety Executive, 1 Heathcote, Paul, 1 Heathrow airport, 1, 2, 3, 4 Hellawell, Keith, 1 Hennessy, Professor Peter, 1 Henry, Donna Charmaine, 1, 2, 3 heroin, 1 Hewitt, Patricia, 1, 2 Higgs, Sir Derek, 1 Hills, Professor John, 1, 2, 3 Hirst, Damien, 1 HMRC, 1, 2, 3 Hogg, John, 1, 2, 3 Hoggart, Richard, 1 Holly, Graham, 1 homelessness, 1, 2 Homerton Hospital, 1 homosexuality, 1, 2, 3 ‘honour’ killings, 1 Hoon, Geoff, 1 hospital-acquired infections, 1 hospitals and clinics, 1, 2, 3, 4 A&E units, 1, 2 closures, 1, 2, 3 foundation trusts, 1, 2, 3, 4, 5 and PFI, 1 House of Commons reforms, 1, 2 House of Lords reforms, 1, 2, 3, 4 housing market, 1, 2, 3 housing policies, 1, 2, 3, 4, 5 Howe, Elspeth, 1 Hoxton, 1 Huddersfield, 1 Hudson, Joseph, 1 Hull, 1, 2, 3 Human Rights Act, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Humber Bridge, 1 hunting ban, 1 Hussein, Saddam, 1, 2, 3, 4 Hutton, John, 1 Hutton, Will, 1, 2 identity cards, 1, 2 If (Kipling), 1 Imperial War Museum North, 1 income inequalities, 1, 2, 3 gender pay gap, 1, 2 and high earners, 1 and social class, 1 Independent Police Complaints Commission (IPCC), 1 Independent Safeguarding Authority, 1 independent-sector treatment centres (ISTCs), 1 Index of Multiple Deprivation, 1 India, 1, 2, 3, 4, 5, 6 individual learning accounts, 1 inflation, 1 and housing market, 1, 2 International Criminal Court, 1 International Monetary Fund (IMF), 1, 2, 3 internet, 1, 2, 3 and crime, 1 and cyber-bullying, 1 file sharing, 1 gambling, 1 and sex crimes, 1 Iran, 1, 2, 3 Iraq, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 arms supplies, 1 Chilcot inquiry, 1, 2, 3, 4 and Territorial Army, 1 and WMD, 1 Ireland, 1, 2, 3 Irish famine, 1 Irvine of Lairg, Lord, 1, 2 Ishaq, Khyra, 1 Islamabad, 1 Isle of Man, 1 Isle of Wight, 1, 2 Israel, 1 Italy, 1, 2, 3 and football, 1 Ivory Coast, 1 Japan, 1, 2, 3, 4 Jenkins, Roy, 1, 2 Jerry Springer: The Opera, 1 Jobcentre Plus, 1, 2 John Lewis Partnership, 1, 2 Johnson, Alan, 1, 2, 3, 4 Johnson, Boris, 1, 2 Judge, Lord (Igor), 1 Judge, Professor Ken, 1 Julius, DeAnne, 1 jury trials, 1, 2 Kabul, 1 Kapoor, Anish, 1, 2 Karachi, 1 Karadžic, Radovan, 1 Kashmir, 1 Kaufman, Gerald, 1 Keegan, William, 1 Keep Britain Tidy, 1 Kelvingrove Art Gallery and Museum, 1 Kensit, Patsy, 1 Keynes, John Maynard, 1 Keys, Kenton, 1 Kidderminster Hospital, 1 King, Sir David, 1, 2 King, Mervyn, 1 King Edward VI School, 1 King’s College Hospital, 1 Kingsnorth power station, 1 Kirklees, 1 Knight, Jim, 1 knighthoods, 1 knowledge economy, 1 Kosovo, 1, 2, 3, 4 Kynaston, David, 1 Kyoto summit and protocols, 1, 2, 3 Labour Party membership, 1 Lacey, David, 1 Ladbroke Grove rail crash, 1 Lamb, General Sir Graeme, 1 Lambert, Richard, 1 landmines, 1 Lansley, Andrew, 1 lapdancing, 1 Las Vegas, 1 Lawrence, Stephen, 1 Lawson, Mark, 1 Layard, Professor Richard, 1 Le Grand, Professor Julian, 1 Lea, Ruth, 1 Lea Valley High School, 1, 2, 3, 4, 5, 6 Leahy, Sir Terry, 1, 2 learndirect, 1 Learning and Skills Council, 1 learning difficulties, 1, 2 learning mentors, 1 Leeds, 1, 2, 3, 4 legal reforms, 1 Leigh, Mike, 1 Lenon, Barnaby, 1 Lewes, 1 Lewisham, 1 Liberty, 1 licensing laws, 1, 2 life expectancy, 1, 2, 3, 4, 5 Life on Mars, 1 Lincoln, 1 Lindsell, Tracy, 1, 2 Lindsey oil refinery, 1 Lisbon Treaty, 1 Liverpool, 1, 2, 3, 4, 5, 6 Liverpool FC, 1 living standards, 1, 2 living wage campaign, 1, 2 Livingstone, Ken, 1, 2, 3, 4, 5 Livni, Tzipi, 1 Loaded magazine, 1 local government, 1, 2, 3 and elected mayors, 1 Lockerbie bomber, 1 London, 1, 2, 3, 4, 5, 6 bombings, 1, 2 congestion charge, 1, 2 detention of foreign leaders, 1 G20 protests, 1 Iraq war protests, 1, 2 mayoral election, 1, 2 and transport policy, 1, 2, 3 London Array wind farm, 1 Longannet, 1 Longfield, Anne, 1 Lord-Marchionne, Sacha, 1 Lorenzetti, Ambrogio, 1 lorry protests, 1, 2 Lowry Museum, 1 Lumley, Joanna, 1 Luton, 1, 2, 3, 4 Lyons, Sir Michael, 1 Macfadden, Julia, 1 Machin, Professor Stephen, 1, 2 Maclean, David, 1 Macmillan, Harold, 1 Macmillan, James, 1 McNulty, Tony, 1 Macpherson, Sir Nick, 1 Macpherson, Sir William, 1 McQueen, Alexander, 1 Madrid, 1, 2, 3 Major, John, 1, 2, 3, 4, 5, 6 Malaya, 1 Malloch Brown, Mark, 1 Manchester, 1, 2, 3, 4, 5, 6 club scene, 1, 2 and crime, 1, 2 Gorton, 1, 2, 3, 4, 5, 6 and local government, 1 and transport policy, 1, 2, 3 Manchester Academy, 1 Manchester United FC, 1, 2 Manchester University, 1 Mandelson, Peter, 1, 2 Manpower Services Commission, 1 manufacturing, 1, 2, 3 Margate, 1 ‘market for talent’ myth, 1 marriage rate, 1 Martin, Michael, 1 maternity and paternity leave, 1, 2 Mayfield, Charlie, 1 Medical Research Council, 1 mental health, 1, 2, 3, 4 mephedrone, 1 Metcalf, Professor David, 1 Metropolitan Police, 1, 2, 3 Mexico, 1, 2 MG Rover, 1 Michael, Alun, 1 Middlesbrough College, 1, 2 migration, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 Milburn, Alan, 1, 2, 3, 4, 5 Miliband, David, 1, 2, 3, 4, 5, 6 Miliband, Ed, 1, 2, 3 Millennium Cohort Study, 1, 2 Millennium Dome, 1, 2, 3 Miloševic, Slobodan, 1 Milton Keynes, 1 minimum wage, 1, 2, 3, 4, 5, 6, 7 Mitchell, Senator George, 1 modern art, 1 Mohamed, Binyam, 1 Monbiot, George, 1 Moray, 1 Morecambe, 1, 2 Morecambe Bay cockle pickers, 1 Morgan, Piers, 1 Morgan, Rhodri, 1 mortgage interest relief, 1 Mosley, Max, 1 motor racing, 1 Mowlam, Mo, 1 Mozambique, 1 MPs’ expenses, 1, 2, 3, 4, 5 MRSA, 1 Mugabe, Robert, 1 Muijen, Matt, 1 Mulgan, Geoff, 1 Mullin, Chris, 1 Murdoch, Rupert, 1, 2, 3 Murphy, Richard, 1 museums and galleries, 1, 2, 3 music licensing, 1 Muslims, 1, 2, 3, 4, 5 mutualism, 1 Myners, Paul, 1 nanotechnology, 1, 2, 3 National Air Traffic Control System, 1 National Care Service, 1 national curriculum, 1 national debt, 1 National Forest, 1 National Health Service (NHS) cancer plan, 1 drugs teams, 1 and employment, 1, 2 internal market, 1 IT system, 1 league tables, 1 managers, 1, 2 NHS direct, 1 primary care, 1 productivity, 1, 2 and public satisfaction, 1 staff numbers and pay, 1 and targets, 1, 2, 3 waiting times, 1, 2, 3, 4, 5, 6, 7, 8 National Heart Forum, 1 National Institute for Health and Clinical Excellence (NICE), 1, 2 National Insurance, 1, 2, 3, 4, 5 National Lottery, 1, 2, 3 National Offender Management Service, 1 National Savings, 1 National Theatre, 1 Natural England, 1, 2 Nazio, Tiziana, 1 Neighbourhood Watch, 1 Netherlands, 1, 2 neurosurgery, 1 New Deal, 1, 2, 3, 4, 5, 6, 7 New Deal for Communities, 1, 2 New Forest, 1 Newcastle upon Tyne, 1, 2 Newham, 1, 2 newspapers, 1, 2, 3, 4, 5 Nigeria, 1 Nightingale, Florence, 1 non-doms, 1 North Korea, 1 North Middlesex Hospital, 1 North Sea oil and gas, 1 Northern Ireland, 1, 2, 3, 4, 5, 6, 7 Northern Rock, 1, 2, 3, 4, 5 Norway, 1 Nottingham, 1, 2 NSPCC, 1 nuclear power, 1 Number Ten Delivery Unit, 1 nurses, 1, 2, 3, 4 Nutt, Professor David, 1 NVQs, 1 O2 arena, 1 Oakthorpe primary school, 1, 2 Oates, Tim, 1 Obama, Barack, 1, 2 obesity, 1, 2 Octagon consortium, 1 Office for National Statistics, 1, 2 Office of Security and Counter Terrorism, 1 Ofsted, 1, 2, 3, 4, 5 Ofwat, 1 Oldham, 1, 2, 3, 4 O’Leary, Michael, 1 Oliver, Jamie, 1, 2 Olympic Games, 1, 2, 3 Open University, 1 O’Reilly, Damien, 1, 2 orthopaedics, 1 Orwell, George, 1, 2 outsourcing, 1, 2, 3, 4 overseas aid, 1, 2 Oxford University, 1 paedophiles, 1, 2, 3 Page, Ben, 1, 2 Pakistan, 1, 2, 3, 4, 5, 6, 7 Palestine, 1, 2 parenting, 1 absent parents, 1 lone parents, 1, 2 teenage parents, 1 Paris, 1, 2 Park Lane, 1 Parkinson, Professor Michael, 1 particle physics, 1 party funding, 1, 2, 3 passport fraud, 1 Passport Office, 1 Patch, Harry, 1 Payne, Sarah, 1, 2 Peach, Blair, 1 Pearce, Nick, 1 Peckham, 1, 2 Aylesbury estate, 1 Peel, Sir Robert, 1 pensioner poverty, 1, 2 pensions, 1, 2 occupational pensions, 1, 2 pension funds, 1, 2 private pensions, 1 public-sector pensions, 1 state pension, 1, 2 Persian Gulf, 1 personal, social and health education, 1 Peterborough, 1 Peugeot, 1 Philips, Helen, 1 Phillips, Lord (Nicholas), 1, 2 Phillips, Trevor, 1 Pilkington, Fiona, 1 Pimlico, 1 Pinochet, Augusto, 1 Plymouth, 1, 2 Poland, 1, 2 police, 1 and demonstrations, 1 numbers, 1, 2, 3 in schools, 1, 2, 3 pornography, 1 Portsmouth FC, 1, 2 Portugal, 1 post offices, 1 Postlethwaite, Pete, 1 poverty, 1, 2, 3 see also child poverty; pensioner poverty Premier League, 1 Prescott, John, 1, 2, 3, 4, 5 press officers, 1 Preston, 1 Prevent strategy, 1 Primary Care Trusts (PCTs), 1, 2 prisons, 1, 2 Private Finance Initiative (PFI), 1, 2 probation, 1, 2 property ownership, 1 prostitution, 1, 2, 3 Public Accounts Committee, 1 public sector reform, 1, 2 public service agreements, 1 public spending, 1, 2, 3 and the arts, 1 and science, 1 Pugh, Martin, 1 Pullman, Philip, 1 QinetiQ, 1 Quality and Outcomes Framework, 1 quangos, 1, 2 Queen, The, 1 Quentin, Lieutenant Pete, 1, 2 race relations legislation, 1 racism, 1, 2 RAF, 1, 2, 3 RAF Brize Norton, 1 railways, 1 Rand, Ayn, 1 Rawmarsh School, 1 Raynsford, Nick, 1 Reckitt Benckiser, 1 recycling, 1 Redcar, 1 regional assemblies, 1, 2 regional development agencies (RDAs), 1, 2, 3 regional policy, 1 Reid, John, 1 Reid, Richard, 1 religion, 1, 2 retirement age, 1, 2 right to roam, 1 Rimington, Stella, 1 Rio Earth summit, 1 road transport, 1 Rochdale, 1, 2 Roche, Barbara, 1 Rogers, Richard, 1 Romania, 1, 2 Rome, 1 Rooney, Wayne, 1 Roosevelt, Franklin D., 1 Rosetta Stone, 1 Rosyth, 1 Rotherham, 1, 2, 3 Royal Opera House, 1 Royal Shakespeare Company, 1 Royal Society for the Protection of Birds, 1 Rugby, 1 rugby union, 1 Rumsfeld, Donald, 1 rural affairs, 1, 2 Rushdie, Salman, 1 Russia, 1, 2 Rwanda, 1 Ryanair, 1, 2 Sainsbury, Lord David, 1 St Austell, 1 St Bartholomew’s Hospital, 1, 2 St Pancras International station, 1 Salford, 1, 2, 3, 4 Sanchez, Tia, 1 Sandwell, 1 Sarkozy, Nicolas, 1, 2 Savill, Superintendent Paul, 1 Saville, Lord, 1 savings ratio, 1 Scandinavia, 1, 2, 3 Scholar, Sir Michael, 1 school meals, 1, 2 school uniforms, 1 school-leaving age, 1 schools academies, 1, 2, 3, 4 building, 1 class sizes, 1 comprehensive schools, 1, 2 faith schools, 1, 2, 3, 4 grammar schools, 1, 2, 3 and inequality, 1 nursery schools, 1 and PFI, 1, 2, 3 police in, 1, 2, 3 primary schools, 1, 2, 3, 4, 5 private schools, 1, 2 secondary schools, 1, 2, 3 in special measures, 1 special schools, 1 specialist schools, 1 and sport, 1 science, 1, 2, 3, 4, 5 Scotland, 1, 2, 3, 4, 5, 6, 7, 8, 9 and children, 1 devolution, 1 electricity generation, 1 and health, 1, 2, 3, 4, 5 Scottish parliament, 1, 2 Section 1, 2 security services, 1 MI5, 1, 2, 3 Sedley, Stephen, 1 segregation, 1 self-employment, 1 Sellafield, 1 Serious Organized Crime Agency, 1 sex crimes, 1 Sex Discrimination Act, 1 Shankly, Bill, 1 Sharkey, Feargal, 1 Shaw, Liz, 1 Sheen, Michael, 1 Sheffield, 1, 2, 3, 4, 5, 6 Sheringham, 1 Shetty, Shilpa, 1 Shipman, Harold, 1 shopping, 1 Short, Clare, 1 Siemens, 1 Siena, 1 Sierra Leone, 1, 2 Skeet, Mavis, 1 skills councils, 1 slavery, 1 Slough, 1 Smith, Adam, 1 Smith, Chris, 1 Smith, Jacqui, 1, 2 Smith, John, 1, 2 Smithers, Professor Alan, 1, 2 smoking ban, 1, 2 Snowden, Philip, 1 social care, 1, 2, 3 Social Chapter opt-out, 1 social exclusion, 1, 2 Social Fund, 1 social mobility, 1, 2 social sciences, 1 social workers, 1 Soham murders, 1, 2, 3, 4 Solihull, 1, 2 Somalia, 1, 2 Souter, Brian, 1 South Africa, 1 South Downs, 1 Spain, 1, 2, 3 special advisers, 1 speed cameras, 1 Speenhamland, 1 Spelman, Caroline, 1 Spence, Laura, 1 sport, 1, 2 see also football; Olympic Games Sri Lanka, 1, 2 Stafford Hospital, 1 Staffordshire University, 1 Standard Assessment Tests (Sats), 1, 2, 3 Standards Board for England, 1 statins, 1, 2, 3 stem cell research, 1 STEM subjects, 1 Stephenson, Sir Paul, 1 Stern, Sir Nicholas, 1, 2 Stevenson, Lord (Dennis), 1 Stevenson, Wilf, 1 Steyn, Lord, 1 Stiglitz, Joseph, 1 Stockport, 1 Stonehenge, 1 Stoppard, Tom, 1 Straw, Jack, 1, 2, 3, 4, 5 student fees, 1 Stuff Happens, 1 Sudan, 1, 2 Sugar, Alan, 1 suicide bombing, 1 suicides, 1 Sun, 1, 2 Sunday Times, 1, 2 Sunderland, 1, 2 supermarkets, 1, 2 Supreme Court, 1, 2 Sure Start, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 surveillance, 1, 2 Sutherland, Lord (Stewart), 1 Swansea, 1 Sweden, 1, 2, 3, 4, 5 Swindon, 1 Taliban, 1, 2 Tallinn, 1 Tanzania, 1 Tate Modern, 1 Taunton, 1 tax avoidance, 1, 2, 3 tax credits, 1, 2, 3, 4, 5, 6, 7, 8 council tax credit, 1 pension credit, 1, 2, 3 R&D credits, 1 taxation, 1, 2 10p tax rate, 1 capital gains tax, 1, 2 corporation tax, 1, 2, 3, 4 council tax, 1, 2 fuel duty, 1, 2, 3 green taxes, 1, 2 and income inequalities, 1 income tax, 1, 2, 3, 4 inheritance tax, 1, 2 poll tax, 1 stamp duty, 1, 2, 3 vehicle excise duty, 1 windfall tax, 1, 2, 3 see also National Insurance; VAT Taylor, Damilola, 1 Taylor, Robert, 1 teachers, 1, 2, 3 head teachers, 1, 2 salaries, 1, 2 teaching assistants, 1, 2 teenage pregnancy, 1, 2, 3 Teesside University, 1 television and crime, 1 and gambling, 1 talent shows, 1 television licence, 1, 2, 3 Territorial Army, 1 terrorism, 1, 2, 3, 4, 5, 6, 7 Terry, John, 1 Tesco, 1, 2, 3, 4 Tewkesbury, 1 Thames Gateway, 1 Thameswey, 1 Thatcher, Margaret, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 Thatcherism, 1, 2, 3 theatre, 1 Thornhill, Dorothy, 1 Thorp, John, 1 Tibet, 1 Tilbury, 1 Times, The, 1 Times Educational Supplement, 1, 2 Timmins, Nick, 1 Titanic, 1 Tomlinson, Mike, 1 Topman, Simon, 1, 2 torture, 1, 2 trade unions, 1, 2, 3 Trades Union Congress (TUC), 1, 2, 3 tramways, 1 transport policies, 1, 2 Trident missiles, 1, 2, 3 Triesman, Lord, 1 Turkey, 1, 2 Turnbull, Lord (Andrew), 1 Turner, Lord (Adair), 1, 2, 3 Tweedy, Colin, 1 Tyneside Metro, 1 Uganda, 1 UK Film Council, 1 UK Sport, 1 UK Statistics Authority, 1 unemployment, 1, 2, 3, 4, 5, 6, 7 United Nations, 1, 2, 3 United States of America, 1, 2 Anglo-American relationship, 1, 2, 3, 4, 5, 6, 7 and child poverty, 1 and clean technologies, 1 economy and business, 1, 2, 3 and education, 1, 2, 3 and healthcare, 1, 2 and income inequalities, 1 and internet gambling, 1 and minimum wage, 1 universities, 1, 2, 3, 4, 5 and migration, 1 and terrorism, 1 tuition fees, 1 University College London Hospitals, 1 University for Industry, 1 University of East Anglia, 1 University of Lincoln, 1 Urban Splash, 1, 2 Vanity Fair, 1 VAT, 1, 2, 3 Vauxhall, 1 Venables, Jon, 1 Vestas wind turbines, 1 Victoria and Albert Museum, 1 Waitrose, 1 Waldfogel, Jane, 1 Wales, 1, 2, 3, 4, 5, 6, 7, 8, 9 and children, 1 devolution, 1 Walker, Sir David, 1 walking, 1, 2 Walsall, 1 Wanless, Sir Derek, 1 Wanstead, 1 Warm Front scheme, 1 Warner, Lord Norman, 1 Warsaw, 1 Warwick accord, 1 water utilities, 1 Watford, 1 welfare benefits child benefit, 1, 2 Employment Support Allowance, 1 and fraud, 1, 2, 3, 4 housing benefit, 1 incapacity benefit, 1, 2 Income Support, 1 Jobseeker’s Allowance, 1, 2, 3 and work, 1, 2 Welsh assembly, 1, 2 Wembley Stadium, 1 Westfield shopping mall, 1 Wetherspoons, 1 White, Marco Pierre, 1 Whittington Hospital, 1 Wiles, Paul, 1 Wilkinson, Richard, and Kate Pickett, 1 Williams, Professor Karel, 1 Williams, Raymond, 1 Williams, Rowan, 1 Wilson, Harold, 1, 2, 3, 4, 5, 6, 7 Wilson, Sir Richard, 1 wind turbines, 1, 2 Winslet, Kate, 1 winter fuel payments, 1 Wire, The, 1 Woking, 1, 2 Wolverhampton, 1 Woolf, Lord, 1 Wootton Bassett, 1, 2 working-class culture, 1 working hours, 1, 2 World Bank, 1 Wrexham, 1 Wright Robinson School, 1, 2, 3 xenophobia, 1 Y2K millennium bug, 1 Yarlswood detention centre, 1 Yeovil, 1 Yiewsley, 1 York, 1, 2, 3, 4 Young Person’s Guarantee, 1 Youth Justice Board, 1 Zimbabwe, 1, 2 About the Author Polly Toynbee is the Guardian’s social and political commentator.

A ‘health’ government would have cut hospitals and expanded home and community care, but ministers were reluctant to invite riotous campaigns to keep open inefficient, expensive and much-loved hospitals. They had not helped themselves when in opposition they had shamelessly attacked the Tories over closures, and they came to power promising to save every hospital under threat, including the redundant St Bartholomew’s in the City of London; the Tories repeated the error in 2010 with what sounded like a promise never to close a single unit. Yet it is all too easy to prescribe calm and considered policy-making when ministers’ lives were made nasty and short thanks to the brutish hysteria of the media. Labour’s attachment to Tory spending plans intensified the pressures during their first three years. As Mrs Thatcher had found, the NHS is a smouldering volcano.

Leisure Parcs, the company that had bought tracts of Blackpool in anticipation of the super-casino, sold the tower and Winter Gardens to the council. It still hoped, like Margate, Hastings, Morecambe and other forlorn English seaside towns that had seen better days, that strategy and regeneration pots could somehow mitigate alteration in leisure habits and the British weather. From 2001 gambling tax came from bookmakers’ gross profits rather than bets laid by punters. The UK gambling industry – the one located outside the City of London – boomed, but winnings were not pouring into the Treasury. Betting was moving into new exchanges, interactive television, mobile phones, online and offshore. In 2009 William Hill and Ladbrokes moved abroad, threatening to cut the tax take. Labour could have followed the American example. Congress dealt with the new phenomenon by banning online gambling altogether, stopping US credit-card companies paying out to gambling sites.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial innovation, financial intermediation, George Akerlof, Growth in a Time of Debt, income inequality, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, sovereign wealth fund, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

Information that has become available since his estimate—for example, on the sizes of the “bad bank” portfolios of Hypo Real Estate and WestLB and of losses in these portfolios from the sovereign debt crisis in Europe—suggests that this estimate should be raised by some €20–30 billion. The Dexia bailouts in 2008 and 2011 were costly to France as well as Belgium (see note 3). In the mid-1990s, Crédit Lyonnais, then the largest French bank, had losses in excess of €20 billion and required an injection of taxpayer money amounting to €15 billion. 8. As an example, see the discussion of the role of the City of London in ICB (2011, 15), which reads, “The recommendations in this report will be positive for UK competitiveness overall by strengthening financial stability. That should also be good for the City’s international reputation as a place to do business.” Andrew Tyrie, chair of the Parliamentary Committee on Banking Standards, wrote that banking is “one of the UK’s most important industries and if banks are to be at the heart of our economy, they must be allowed to remain internationally competitive” (“A Mandate to Tackle Our Banks’ Failure,” Financial Times, October 1, 2012).

See also Chapter 5, note 28, and Chapter 10, note 46. 28. The Depository Institutions Deregulation and Monetary Control Act of 1980 was the key piece of federal legislation that ended the regulation of the banking industry. This act deregulated banks while giving the Federal Reserve more authority over nonmember banks. Particularly, it required nonmember banks to abide by Federal Reserve decisions but allowed for greater leeway in bank mergers. It also allowed savings institutions to offer demand deposits, eliminated interest rate ceilings for all deposits other than demand deposits, and permitted individual banks to set their own interest rates for loans. In addition, the Act raised deposit insurance to $100,000 per account. Further deregulation—in particular, of savings institutions—came through the Garn–St. Germain Depository Institutions Act of 1982, which authorized savings institutions to make commercial loans and gave the federal agencies the ability to approve bank acquisitions. 29.

See Susanne Craig, Ben Protess, and Mathew Saltmarsh, “UBS Faces Questions on Oversight after a Trader Lost $2 Billion,” New York Times, September 14, 2011, as well as “Chronology: UBS in Turmoil,” http://www.drs.ch/www/de/drs/nachrichten/wirtschaft/ubs-vom-musterschueler-zum-problemfall/72270.218256.chronologie-die-ubs-in-turbulenzen.html, accessed October 14, 2012. 57. See, for example, “Basel III Implementation Delay Looms,” Wall Street Journal, August 22, 2012, describing delays in Europe, China, and elsewhere. “Europe’s Big Bang for Bank Rules Set to Sputter” (Reuters, August 24, 2012) quotes the chair of the EU committee involved in negotiating the banking regulation as saying, “It is likely that dates will be revised” and an accounting consultant as stating, “Banks have a good idea of what might be required but it’s a bit of a range at the moment.” In Chapter 11 we discuss how banks and the system can be strengthened fairly quickly given the authority that regulators already have under existing rules. 58.


pages: 497 words: 150,205

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

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

In early 2010, British banks had a $13.5 billion exposure to Greek, Irish and Portuguese government debt – much less than French banks’ $56.1 billion or German ones’ $36.4 billion, but more than Spanish banks’ $11.7 billion or Italian ones’ $6.4 billion.56 It’s not just central bankers and financial regulators who encouraged or ignored bankers’ excesses, so too did the financial police, who failed to step in to stop bankers’ recklessness. Britain’s financial watchdogs prided themselves on their “light touch” – ie, soft-touch – approach. Instead of reining in the City of London’s excesses, they became cheerleaders for it. Their Continental counterparts were more suspicious of the City’s “casino capitalism”, but just as corporatist in championing, rather than curbing, their country’s banks. Financial self-interest and economic nationalism often overlap. Infamously, Jacques de Larosière chaired a high-level group tasked by the European Commission in 2008 with writing a report for EU leaders on EU financial regulation and supervision while on the payroll of France’s biggest bank, BNP Paribas.

Perhaps unsurprisingly, the report argues that banking oversight should involve “more reliance on judgement” by wise, impartial financial supervisors in his vein.57 For the most part, international watchdogs such as the European Commission and the International Monetary Fund (IMF) failed to bark. Only Bill White at the Bank for International Settlements spoke out (and was first ignored then rubbished). Last but not least, blame lies with politicians who are meant to take a wider view of financial safety yet failed to protect voters’ interests. As Britain’s finance minister from 1997 to 2007, Gordon Brown argued that what was good for the City of London was good for Britain, seeing the City’s profits as a means of paying for a Scandinavian-style welfare system with American levels of tax.58 As City minister, Ed Balls, now the opposition Labour party’s finance spokesman, championed London’s light-touch regulatory approach. The ties between the French government and BNP Paribas are so intimate that its traders boast that it is inconceivable that the government would let it fail.

It wasn’t clear whether Germany and the ECB wanted the euro to survive in its current form or would be willing to do enough to prevent its break-up. On 1 December Draghi hinted that, following agreement on a “fiscal compact”, “other things might follow”, triggering a burst of hope. EU leaders duly complied, agreeing eight days later to a compact that would entrench stringent limits on government borrowing in national constitutions. While David Cameron “vetoed” the deal after his bid to get special treatment for the City of London was given short shrift, other EU governments proceeded without him. With Britain marginalised, the eurozone crisis had now become an EU one too. Merkel was delighted by the new fiscal straightjacket. Others hoped that Berlin might reciprocate with a roadmap towards Eurobonds. Above all, they hoped the ECB would finally step in. But on 15 December, Draghi disingenuously said that his comments had been misinterpreted.


pages: 613 words: 151,140

No Such Thing as Society by Andy McSmith

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anti-communist, Ayatollah Khomeini, Berlin Wall, Big bang: deregulation of the City of London, British Empire, call centre, cuban missile crisis, Etonian, F. W. de Klerk, feminist movement, Francis Fukuyama: the end of history, friendly fire, full employment, glass ceiling, greed is good, illegal immigration, index card, means of production, Mikhail Gorbachev, mortgage debt, mutually assured destruction, North Sea oil, Northern Rock, Ronald Reagan, South Sea Bubble, strikebreaker, The Chicago School, union organizing, upwardly mobile, urban decay, Winter of Discontent, young professional

Instead, an extra clause was slipped into the Bill as it was going through its committee stage in the Commons.9 When the Big Bang came, on 27 October 1986, the separate tribes of jobbers and brokers merged and huge multinational finance houses moved in. The City of London regained its competitive edge, at the cost of ending what had been, for many, a cosy way of staying prosperous. On the day of the Big Bang, Sir Nicholas Goodison was sharing a lift with Guy Farage, a well-known character in the city, who accepted that the changes had to happen, but regretted them. Asked for his opinion, he told Sir Nicholas: ‘You have destroyed the finest gentleman’s club in the world.’10 The City became a draw for American investment banks that were going through a stage of aggressive expansion, backed by a US administration as keen on deregulation as Mrs Thatcher. In the three years from December 1985, the number of staff employed in London by the Wall Street investment bank Salomon Brothers rose from 150 to 900, with state-of-the-art new premises near Victoria Station to accommodate them.

Sir Nicholas knew a good offer when he saw one. It was very likely that the Stock Exchange would lose the court case that OFT was bringing, which was due to be heard in January, and would have to disentangle its centuries-old customs in one chaotic Big Bang. After consultation, he came back to Parkinson and said that the Stock Exchange would comply with the law, and organize its own Big Bang, but not yet. Instead of doing it almost overnight, as Wall Street had already done, they would have a gentle three-year changeover. Parkinson agreed. There followed a slow explosion in the City. Size was going to count in a deregulated money market, so firms merged and recruited, and salaries spiralled, sweetened by huge golden hellos, golden handcuf s and other perks. House prices shot up within miles of the City as banks and finance houses encouraged their young employees to take on huge mortgage commitments in the hope of tying them down.

Enfield, a Labour supporter, did not mind that, but he did not like it when the Sun took it up as a celebration of Thatcherism, using ‘£oadsamoney’ to plug its Lotto and Bingo games. He instructed his solicitors to try to warn them off, but gave up after the Sun counterattacked, telling him to ‘buy yourself a sense of humour’.1 The phenomenon that Enfield was observing did not originate in Tottenham’s White Hart Lane. It came out of the City of London, which in a few dramatic years was transformed from a club run by an old-boy network of public-school alumni to a place where the ambitious sons of working-class families were given free rein to make a great deal of money quickly. This development could be said to have begun when Margaret Thatcher called Cecil Parkinson to her office in June 1983 to reward him for his valiant work as chairman of the Conservative Party, presiding over the party’s best election result since the 1930s.


pages: 438 words: 109,306

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

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

Crocket came to the BIS in 1994 from the Bank of England, where he had spent four years as an executive director. There he could observe firsthand the after-effects of the “Big Bang,” the 1986 deregulation of the City of the London. Until the Big Bang, the Square Mile had been still a clubby, comfortable place of old school tie connections and long lunches, where Montagu Norman would have felt at home. That world vanished almost overnight. Wall Street investment banks poured into the Square Mile, bringing aggressive new tactics. The 1933 Glass-Steagall Act, which separated investment banking and deposit taking, was still in force in the United States. London, newly unburdened from cumbersome regulations, offered fabulous opportunities, heightened by the rapid growth of computer technology, which accelerated trading. The BIS gave the Big Bang a cautious welcome. “It was feared that if nothing was done, the Stock Exchange would be unable to compete with foreign institutions and business would move abroad,” the BIS noted in its 1987 Annual Report.18 The changes had brought a “major inflow” of capital to British and foreign banks, the BIS noted, but had highlighted the importance of Chinese walls within firms to avoid conflicts of interest.

Randolph, 50 Buro IG, 51, 101 Bush, Prescott, 145 C Caesar, Hans, 107 Canada, xi, 198 Carney, Mark, 249–250, 263 Caruana, Jaime, xi, 259–260 Casey, William, 186 Catto, Thomas, 1st Baron Catto, 125, 139 Cecchetti, Stephen, 254, 259, 260, 272 CEEC (Conference for European Economic Cooperation), 140, 146 Central bankers economic and political power of, 43–44 growing prominence of, 249 need for awareness of concerns of public, 251 responsibility for financial stability, 250, 253 Central banks, argument for, 31 Chamberlain, Neville, 48, 70 Chase National Bank, 106–108, 133, 144 Château de Rougemont, 81 Château d’Oex, 81 Chemnyco, 101 China, xi, xxii, 228, 257 Churchill, Winston, 173 Cicero, “sinews of war” quote from, 66 City of London, deregulation of, 227–228 Clay, Lucius, 138 Clements, Piet, 60, 85, 259 Cochran, Merle, 41, 49, 54, 73, 80, 106 Cold War, 201–202 Committee for Foreign Economic Affairs, 153 Committee for the Study of Economic and Monetary Union, 210 Committee on Global Financial System, xxii, 239, 250, 257 Committee on Gold and Foreign Exchange, 189 Committee on Payment and Settlement Systems, xxii, 257 Concentration camp inmates, use of in industry, 184, 185 Conference for European Economic Cooperation (CEEC), 140, 146 Connolly, Frederick, 145, 146 Coombs, Charles, xv, 179–181, 188, 189–191 Craig, Bruce, 142 Cravath law firm, 142, 169 Credit Anstalt bank, 44 Croatia, 184 Crockett, Andrew, 225–226, 243, 258–259 Czechoslovak gold affair, 59–63 Czechoslovakia Act, 62 D Daily Herald, on transfer of Czech gold, 61 Dalziel, Charles, 76 Das Reich, on BIS, 124–125 Dawes, Charles, 9 Dawes Committee (1924), 9–10 Dawes Plan German External Loan, 74 De Gaulle, Charles, 194 The Death of a Diplomat (Jacobssen), 52 Degesch, 104 Delors, Jacques, 210, 215, 226, 233 Delors Committee, xxi, 210–214 Denmark, 8, 245, 246 Deutsche Bank, 74, 153, 154 Deutschmark, 151–152 Devisenschutzkommando (DSK), 86 Dodd, Thomas, 106, 177 Donovan, William J.

“I do hope we shall become friends,” said Norman, with a shy smile. Schacht told Norman that he wanted the Bank of England to lend $25 million to a new subsidiary of the Reichsbank, the Gold Discount Bank. The new bank would instantly alter global perceptions of the country’s financial prospects. The imprimatur of the governor of the Bank of England would open doors throughout Wall Street and the City of London. Tenacious as ever, Schacht got his money. SCHACHT HAD SWEET-TALKED Norman, but the reparations question remained unresolved. America was tired of squabbling Europeans who could not get their houses in order and also recognized that there could be no lasting prosperity while Europe lurched from one financial crisis to another. A new reparations committee was set up under the chairmanship of Charles Dawes, an irascible American banker.


pages: 1,335 words: 336,772

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

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bank run, banking crisis, Big bang: deregulation of the City of London, Bolshevik threat, Boycotts of Israel, Bretton Woods, British Empire, California gold rush, capital controls, collective bargaining, Etonian, financial deregulation, German hyperinflation, index arbitrage, interest rate swap, margin call, Monroe Doctrine, North Sea oil, oil shale / tar sands, paper trading, Plutocrats, plutocrats, Robert Gordon, Ronald Reagan, short selling, strikebreaker, the market place, the payments system, too big to fail, transcontinental railway, Yom Kippur War, young professional

., 309–10, 324–25, 348, 369 Wheeler hearings and, 413–14 Vatican, the, 285–86, 296, 407, 521, 546–47 World War II and, 451, 455–59 Verbeck, Guido, 532 Vermilye, Peter, 561, 564, 565 Victoria, Queen, 12, 25, 98, 100 Peabody and, 7, 14, 15 Villa, Pancho, 239 Volcker, Paul, 545, 644, 660, 690 Preston and, 643, 645, 658, 659, 716, 717 Volpi, Count Guiseppe, 281, 479 Voting trust, 38, 68–69, 152–53, 189 W Wachtell, Lipton, Rosen, and Katz, 600 Wadsworth Atheneum, 59–60, 119, 174 Wagg, Helbert, 524 Walker, Barney, 570–71 Walker, Elisha, 416 Wallace, Henry, 441 Wallace, Lila Acheson, 510 Wall Hall, 97, 191, 264, 410, 430, 460, 475 Wall Street, 151 assumption of government protection, 229 conscience of, 19, 114 crashes on, see Stock market crash of 1929; Stock market crash of 1987 Depression and, 346, 376, 381–84 explosion on, 212–14 fire of 1835 on, 18 Jewish-Yankee competition on, 30, 36, 84, 88–90, 195–200, 205, 215–17, 258 Northern Pacific corner and, 88–94 panic of 1873 and, 37 panic of 1907 and, 123–28 Pecora hearing revelations and, 355–57, 362, 370–74 power of, 65, 98–99, 205–207, 225–29, 244–45, 257 Reagan years on, 690–91 rise of, 33, 36, 99 Roaring Twenties on, 255, 302–15 robber barons and, 30–32 short selling and, 351–53 speculation on, 84–86, 91–93, 122, 124, 375 triumph over the City of London, 65, 98–99, 184–85, 270–71, 518–19 trusts and, 68–69, 81–86, 105, 109; see also New York Stock Exchange Walsh, Graham, 675, 678, 687–88, 689 Walston, Vernon, 623 Walston and Company, 623 Walter, Norma, 564, 565 Wang, Stephen Sui-Kuan, Jr., 712–13 Warburg, Paul M., 130, 182, 217, 252 Warburg, Siegmund, 522–26, 570, 573, 576, 713 Euromarkets and, 545 Warburg bank, S. G., 522–26, 545, 570, 572, 590, 615, 674, 677, 679, 689, 715 after Big Bang, 675 Ward, Thomas, 5, 6 Wardwell, Allan, 254–55 Warner-Lambert, 596 War Resources Board, 441 Washington Post, 152 Wasserstein, Bruce, 602, 632, 692, 711 Weatherstone, Dennis, 568, 656, 719 Webster, Daniel, 6, 339, 340 Webster, Edwin, 325 Weinberg, Sidney, 124, 512 Welles, Sumner, 455 Wells, H.

Unlike Warburgs, it never graduated into the front ranks of the City’s Eurobond and foreign-exchange markets. In that larger City, capital was decisive, with cosy ties counting for little—the reason takeover work had been such a godsend to Morgan Grenfell. The firm had thrived only in the insular City of British work, which would be a dangerous shortcoming as the decade progressed. The so-called Big Bang deregulation of October 1986 tore down the walls that had divided the two Cities since the Euromarkets emerged in the early 1960s. To guarantee London’s survival as a financial center, the Thatcher government decided to stop cosseting London banks and expose them to more domestic and foreign competition. Despite their evocative names, British merchant banks were tiny beside the new global conglomerates.

., 5, 39, 40 Belridge Oil, 631, 632 Bendall, David, 589–90, 592, 613 Bendix Corporation, 500 Benét, Stephen Vincent, 278 Bennett, John, 626 Berenson, Bernard, 117, 141, 173, 280 Berkovitch, Boris S., 656 Berle, Adolf A., 419, 420 Bernard, Lewis W., 581, 595, 596, 624, 634, 663, 695 Bethlehem Steel, 417, 534 World War I and, 189, 190, 200 Bicester, Lord, see Smith, Vivian Hugh Big Bang deregulation, 673–76, 684, 685, 688, 714, 715 Biggs, Barton, 587, 700 Bishop, Jerry E., 564, 565 Bismarck, Otto von, 26, 27 Black, Eugene, 518, 552–53 Black, William, 512, 518, 623 Blackett, Basil, 187, 198, 246 Black Monday, 664, 699, 700–702, 717 Black Thursday, 303, 313, 315–17, 355–56 Block Community Organization, 347 Blood Brotherhood, 342–43 Blough, Roger M., 536–37 Blum, Léon, 478 Blumenthal, Charles, 215, 216, 248 Blunden, George, 687 Blyth, Charles, 390–91 Boer War, 98, 99, 195 Boesky, Ivan, 683, 684, 685, 686, 712–13 Bolivia, 354 Bolshevism, 210, 211, 225, 292, 338 Bonsal, Dudley J., 565–66 Boocock, Howard and Adele, 218 Booth, Willis, 282–83 Borglum, Gutzon, 347 Boston and Maine Railroad, 175–76 Brackenridge, A.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

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bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Plutocrats, plutocrats, private military company, Republic of Letters, Richard Feynman, Richard Feynman, Robert Shiller, Robert Shiller, Scientific racism, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

In the days when Lloyds and Barclays were still little more than provincial counting houses, one bank ruled the City like no other before or since. This was the famous Quaker firm of Overend, Gurney and Co., or the “Corner House” as it was known to a generation of Victorian financiers, because it stood as a rival to the Bank of England itself, not only metaphorically in the financial markets, but in hard reality on the corner of Lombard Street and Birchin Lane in the heart of the City of London. The Gurney family had begun as wool merchants in the prosperous farming district of East Anglia, and had evolved naturally into merchant bankers by borrowing on their good name in London and lending to the local sheep-farmers. As Britain’s economy grew and diversified, the opportunity to capitalise on this generic line of business—connecting the local capitalists in need of credit at the base of the pyramid to the London banks in its higher echelons—became more and more attractive.

As the Governor put it afterwards, “I do not think that anyone would have thought of predicting, even at the shortest period beforehand, the greatness of those advances.”32 By Saturday, everything was confusion. In the morning, the Chancellor of the Exchequer, William Ewart Gladstone, reassured the House of Commons that although there was “panic and distress … without parallel in the recollection of even the oldest men of business in the City of London,” he had “not the least reason to suppose” that the Bank would ask him to suspend the Act stipulating the strict upper limit to the note issue.33 He then returned to the Treasury to find the Bank’s Governor telling him that with only £3 million left in its reserve, the Bank could not withstand another day like Friday, and asking just that. Gladstone acceded, signing a letter of suspension like the ones that had been needed in 1847 and 1857, on the condition that Bank Rate be further raised to 10 per cent.

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


pages: 655 words: 151,111

London: The Autobiography by Jon E. Lewis

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affirmative action, Big bang: deregulation of the City of London, John Snow's cholera map, side project, strikebreaker, Winter of Discontent

During the twentieth century the City’s fortunes sank in line with the contraction of British trade. However, courtesy of the Big Bang of 1987 the City was able to establish highly-competitive, multipurpose financial conglomerates that used electronic dealing technology instead of the old scrummage on the Stock Market trading floor. By the late 1990s the City was processing over $300 billion of exchange per day. The City had become the globe’s capital for processing capital. Like the City burghers of old, the City players of the twenty-first century celebrated their wealth and power in buildings. Arisen from the Wreckage: 30 St Mary Axe, December 2003 Jonathan Glancy THE DAY I visited 30 St Mary Axe, the City of London was smothered in a Dickensian mist. Norman Foster’s 180m tour de force was all but invisible.

A copy of the British Library Cataloguing in Publication data is available from the British Library UK ISBN: 978-1-84529-942-2 eISBN: 978-1-78033-750-0 1 3 5 7 9 10 8 6 4 2 First published in the United States in 2009 by Running Press Book Publishers All rights reserved under the Pan-American and International Copyright Conventions No part of this work may be produced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage and retrieval system, without permission in writing from the publisher. 9 8 7 6 5 4 3 2 1 Digit on the right indicates the number of this printing US Library of Congress Control Number: 2009920964 US ISBN: 978-0-7624-3734-4 Running Press Book Publishers 2300 Chestnut Street Philadelphia, PA 19103-4371 www.runningpress.com Printed and bound in the EU For Penny, a London girl Contents List of Illustrations Foreword Boudicca Sacks Londinium, AD 60 TACITUS The Romans in London: Graffiti VARIOUS Londoners Reject Christianity, 616 THE VENERABLE BEDE Viking Raids, 842–1009 THE ANGLO-SAXON CHRONICLE London Bridge is Pulled Down by King Olaf, c. 1014 SNORRI STURLUSON Edward the Confessor Builds Westminster Abbey, 1060–5 A MONK OF ST BERTIN’S ABBEY The Coronation of William the Conqueror, Christmas Day, 1066 ORDERIC VITALIS The Charter of Henry I in Favour of the Citizens of London, Michaelmas 1130–August 1133 HENRY I A Description of the City of London, c. 1173 WILLIAM FITZ STEPHEN Building Regulations, 1189 THE LONDON ASSIZES Tax Riot, 1194 ROGER OF WENDOVER The Thames Floods, 1241 MATTHEW PARIS Misadventures in Childhood, 1301–37 CALENDAR OF THE CORONERS’ ROLLS Street Life, 1301–80 VARIOUS Trick of the Trade: A Fraudulent Baker, 1327 THE CITY OF LONDON LETTER-BOOK The Ordinances of the Spurriers, 1346 ANONYMOUS City of the Dead: The Black Death, 1348 ROBERT OF AVESBURY Flagellants, Michaelmas 1349 ROBERT OF AVESBURY Expulsion of a Leper, 1372 THE CITY OF LONDON LETTER-BOOK An Inventory of the Goods in a Fishmonger’s City House, 1373 CALENDAR OF PLEA AND MEMORANDA ROLLS The Peasants’ Revolt Comes to London, 1381 SIR JOHN FROISSART Richard II Quarrels with the City of London, 1392 THE MONK OF WESTMINSTER London Lickpenny, c. 1410 ANONYMOUS Henry V’s Victory March After Agincourt, 23 November 1415 ANONYMOUS Richard Whittington is Elected Mayor for the Third Time, 13 October 1419 THE CITY OF LONDON LETTER-BOOK Public Nuisances, 1422 THE GENERAL COURT OF THE MAYOR OF THE CITY OF LONDON Wars of the Roses: The Beginning of Strife, 1454 JOHN STODELY The Dignity of the Mayor of London, 1464 ANONYMOUS The Joust Between Lord Scales and the Bastard of Burgoyne, 1467 EDWARD HALL The Sweating Sickness, 1485 EDWARD HALL Tudor London: A Portrait, 1497 ANDREAS FRANCISCUS Evil May Day, 1 May 1517 THE CHRONICLE OF THE GREY FRIARS The Beheading of Sir Thomas More, 1535 WILLIAM ROPER Protestant Revolution: Edward VI Suppresses Popery in London, 1547 THE CHRONICLE OF THE GREY FRIARS Queen Mary Seizes the Crown, 1553 HENRY MACHYN Mary Persecutes the Protestants: The Burning of Bradford and Leaf at Smithfield, 1555 JOHN FOXE Elizabethan London: City Life, 1564–99 VARIOUS Elizabethan London: The Oath of Every Freeman, 1580 ANONYMOUS Riots, Puritans and Shakespeare: Theatre-going, 1584–1613 WILLIAM FLEETWOOD, THE LORD MAYOR AND ALDERMEN, AND THOMAS PLATTER Queen Elizabeth at Greenwich, c. 1596 PAUL HENTZNER The Torturing of a Jesuit Priest in the Tower of London, April 1597 FATHER JOHN GERARD The Diary of a Tourist, 5 July 1598 BARON WALDSTEIN The Gunpowder Plot, 5 November 1605 SIR EDWARD HOBY The Attempted Arrest of the Five Members, 4 January 1642 JOHN RUSHWORTH The Battle of Newbury: Sergeant Henry Foster in Action, 20 September 1643 SERGEANT HENRY FOSTER, RED REGIMENT OF THE TRAINED BANDS OF THE CITY OF LONDON The Execution of Charles I, 30 January 1649 PHILIP HENRY Ranters, 1651 JOHN TAYLOR A Whale in the Thames, 3 June 1658 JOHN EVELYN The Restoration: The Arrival of Charles II in London, 29 May 1660 ANONYMOUS Notices for a Lost Dog, 21–8 June 1660 CHARLES II Journal of the Plague Year, 1665 SAMUEL PEPYS The Great Fire, 2–7 September 1666 JOHN EVELYN The Dutch in the Thames, June 1667 JOHN EVELYN A Visit to a Gaming House, 1 January 1668 SAMUEL PEPYS Highway Robbery, 11 May 1674 JOHN VERNEY London Arisen from the Ashes: Wren Rebuilds St Paul’s Cathedral, 1675–1710 DANIEL DEFOE The Great Frost, 1683–4 JOHN EVELYN Cockfighting, 18 June 1710 ZACHARIAS VON UFFENBACH Making Hay in Chelsea, 19 May 1711 JONATHAN SWIFT The Mohock Club, March 1712 LADY STRAFFORD Handel’s Water Music, 17 July 1717 DAILY COURANT Coffee-houses, c. 1722–5 JOHN MACKY AND CÉSAR DE SAUSSURE John Wesley Stoned, 12 September 1742 JOHN WESLEY A Hanging at Tyburn, c. 1745 SAMUEL RICHARDSON Earthquake, 11 March 1750 HORACE WALPOLE Gin Lane, 1751 WILLIAM HOGARTH Man About Town: A Rake’s Progress, 25 November 1762–4 June 1763 JAMES BOSWELL Wilkes and the Mob, 1768 HORACE WALPOLE The Lord Mayor’s Banquet, 1768 WILLIAM HICKEY The Gordon Riots, 6 June 1780 IGNATIUS SANCHO Ranelagh Pleasure Gardens, 12 June 1782 KARL PHILIPP MORITZ London Hospitals, 1788 JOHN HOWARD ‘The Rage for Building’: The Growth of London, 8 June 1791 HORACE WALPOLE London: A Georgian Poet’s View, 1794 WILLIAM BLAKE Mr Whitbread’s Brewery, c. 1800 JOHANNA SCHOPENHAUER Shooting Under London Bridge in a Boat, 12 July 1810 LOUIS SIMOND The Season: Jane Austen’s Party, April 1811 JANE AUSTEN Death of a Climbing Boy, 29 March 1813 THE PARLIAMENTARY COMMITTEE ON CLIMBING BOYS Mrs Fry at Newgate, March 1822 MARIA EDGEWORTH ‘Peelers’: The Formation of the Metropolitan Police, October 1829 SIR ROBERT PEEL William IV Rambles the Streets, 19 July 1830 CHARLE S GREVILLE King Cholera, 1832 CHARLES GREVILLE The Opening of the London to Deptford Railway, 14 December 1837 JOHN O’LONDON Queen Victoria at Her Coronation, 28 June 1838 QUEEN VICTORIA The Condition of the Working Class in London, c. 1844 FRIEDRICH ENGELS Chartist Demonstration, 10 April 1848 LORD JOHN RUSSELL Victorian London: Street Life, c. 1850 HENRY MAYHEW A Visit to the Great Exhibition, 7 June 1851 CHARLOTTE BRONTE High Society: A Fancy-dress Ball at Buckingham Palace, 1851 ANNE THACKERAY RITCHIE Karl Marx at Home, 1852 KARL MARX Some London Wonders: Gaslights, Penny Gaffs and Omnibuses, 1853 MAX SCHLESINGER Fog, 1853 CHARLES DICKENS The Great Stink, Summer 1858 CHARLES DICKENS AND GEORGE GODWIN Nine a.m.: Clerks on Their Way to Work, 1858 GEORGE AUGUSTUS SALA White Slavery: Maids and Match Girls, 1860–83 HANNAH CULLWICK AND JAMES GREENWOOD A Day at the Races: The Derby, Epsom, 28 May 1861 HIPPOLYTE TAINE Tothill Fields, 1861 HENRY MAYHEW AND JOHN BINNY Prostitutes on the Haymarket, 1862 FYODOR DOSTOEVSKY Into Hades: The Metropolitan Underground Railway Commences Service, 9 January 1863 THE TIMES Murder on the North London Railway, July 1864 ILLUSTRATED LONDON NEWS The Founding of the International Working Men’s Association, Covent Garden, 28 September 1865 KARL MARX William Morris at Home, 10 March 1869 HENRY JAMES A Socialist March Through the West End, Autumn 1886 H.M.

The GLC, in truth, had made itself an easy target, being a by-word for profligacy and ‘loony Leftism’ – the nadir being reached when the head of an infant school in Hackney banned her pupils from watching Romeo and Juliet because it was ‘blatantly heterosexual’. Whatever the reason, London was now the only capital in the West to not have its own government. The GLC went out with a bang, holding a massive firework party outside County Hall. Across in the City, there was a ‘Big Bang’ of a different sort. On 27 October the City was deregulated. No longer was the City the site of small gentlemanly firms operating eons-old price-fixing cartels, it was an international casino where the game was stocks and shares. To prepare and run the deregulated system banks and brokerage firms paid bright young things handsome wages. So was born the ‘Yuppie’, the Young Urban Professional. A favourite haunt of the Yuppie was the East End, then being redeveloped by the London Docklands Development Corporation into chichi housing and spangly glass office blocks.


pages: 381 words: 101,559

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

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

Leading English banks had made leveraged investments in illiquid assets funded with short-term liabilities, exactly the type of investing that destroyed Lehman Brothers in 2008. As those liabilities came due, foreign creditors converted their sterling claims into gold that soon left England headed for the United States or France or some other gold power not yet feeling the full impact of the crisis. With the outflow of gold becoming acute and the pressures of the bank run threatening to destroy major banks in the City of London, England went off the gold standard on September 21, 1931. Almost immediately sterling fell sharply against the dollar and continued dropping, falling 30 percent in a matter of months. Many other countries, including Japan, the Scandinavian nations and members of the British Commonwealth, also left the gold standard and received the short-run benefits of devaluation. These benefits worked to the disadvantage of the French franc and the currencies of the other gold bloc nations, including Belgium, Luxembourg, the Netherlands and Italy, which remained on the gold exchange standard.

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. Hoboken: Wiley, 2007. Braudel, Fernand. The Structures of Everyday Life: Civilization and Capitalism, 15th–18th Century, Volume 1. New York: Harper and Row, 1979. ———. The Wheels of Commerce: Civilization and Capitalism, 15th–18th Century, Volume 2. New York: Harper and Row, 1979. Brown, Cynthia Stokes. Big History: From the Big Bang to the Present. New York: New Press, 2007. Brown, Stephen R. Merchant Kings: When Companies Ruled the World, 1600–1900. New York: St. Martin’s, 2009. Bruner, Robert F., and Sean D. Carr. The Panic of 1907: Lessons Learned from the Market’s Perfect Storm. Hoboken: Wiley, 2007. Buchanan, Mark. Ubiquity: The Science of History, or Why the World Is Simpler Than We Think. New York: Crown, 2001. Capie, Forrest.

We also received “Baseline Scenario” briefing books, which described the near future economic world of 2012, in which we would be playing the game, and a “Mechanics” book, which was basically a rulebook. I recalled how my brothers and I used to fight over the rules in Risk as kids and often had to dig the Parker Brothers rulebook out of the game box to settle disputes. Now we had a war game rulebook, but this would go quite differently. I wanted to break as many rules as I could to help the Pentagon understand how capital markets really work in an age of greed, deregulation and bad intent. Wall Street was like the Wild West in the best of times, but with globalization and too-big-to-fail government backing, it was now even more out of control. After a few hours of instruction, orientation and snap training on the groupware, we broke out to our separate capitals to work on move one. This broadly involved a long-term trade agreement between Russia and Japan that would reduce the availability of Russian oil and natural gas to the rest of the world.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, haute couture, illegal immigration, income inequality, invention of the telephone, invention of the wheel, invisible hand, John Nash: game theory, John von Neumann, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Washington Consensus, women in the workforce, yield curve, yield management

In Britain, the mechanism of financial regulation was for decades described as "the raising of the eyebrows of the governor of the Bank of England." This was a metaphor for informal but powerful expressions of regulatory disapproval. The system was made possible by the common social background of market participants. It ceased to be sustainable when the City of London became a more democratic institution, and when globalization brought into the marketplace foreigners who did not understand what these signals meant, or that failure to observe them would have adverse consequences. So Britain acquired a rule book and an analogue of the Securities and Exchange Commission. The internationalized City of London could no longer sustain the informal regulation symbolized by the eyebrows of the governor. But these structures are pervasive in the world's most successful economies-the small states of Western Europe, such as Denmark, Culture and Prosperity { 15} Norway, and Switzerland.

In the city, Shylock sharpened his knife in anticipation of a pound of Antonio's flesh. Only later in the Venetian Republic was marine insurance invented. This enabled the risks faced by merchants to be spread over many individuals. All could sleep easily in their beds, knowing that no single event could expose them to perils as grave as Antonio's. The market was developed further in Edward Lloyd's coffeehouse in the City of London. Lloyd's of London is still a center of the marine insurance market today. Several hundred years afterward, Hurricane Hugo hit the South Carolina coast in September 1989. The fishing village of McClellanville, halfway between Charleston and Georgetown, was flattened by eighteen-foot waves and 140 mile per hour winds, and the devastation extended to the neighboring cities and some way inland.

Chicago: University of Chicago Press, 2000. Bibliography { 409} Transparency International. 2001. Global Corruption Report. Berlin: Transparency International. Travers,]., and S. Milgram. 1969. "An Experimental Study of the Small World Problem." Sociometry 32 (4) (December): 425-33. Trump, D., with T. Schwartz. 1987. Trump: The Art ofthe Deal. London: Century. Tsurumi, M., ed. 2001. Financial Big Bang in Asia. Aldershot: Ash gate. Tudge, C. 1998. Neanderthals) Bandits and Farmers: How Agriculture Really Began. London: Weidenfield and Nicolson. Turnbull, C. D. 1961. The Forest People. London: Pimlico, new ed., 1993. ---. 1973. The Mountain People. London: Pimlico, new introd. 1994. Turner,]. A. 2001. Just Capital: The Liberal Economy. London: Macmillan Publishing. Ullman,]. E. 1988. TheAnatomyofindustrialDecline.


pages: 218 words: 63,471

How We Got Here: A Slightly Irreverent History of Technology and Markets by Andy Kessler

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Albert Einstein, Andy Kessler, automated trading system, bank run, Big bang: deregulation of the City of London, Bretton Woods, British Empire, buttonwood tree, Claude Shannon: information theory, Corn Laws, Edward Lloyd's coffeehouse, fiat currency, floating exchange rates, Fractional reserve banking, full employment, Grace Hopper, invention of the steam engine, invention of the telephone, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, James Hargreaves, James Watt: steam engine, John von Neumann, joint-stock company, joint-stock limited liability company, Joseph-Marie Jacquard, Maui Hawaii, Menlo Park, Metcalfe's law, packet switching, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, railway mania, RAND corporation, Silicon Valley, Small Order Execution System, South Sea Bubble, spice trade, spinning jenny, Steve Jobs, supply-chain management, supply-chain management software, trade route, transatlantic slave trade, transatlantic slave trade, tulip mania, Turing machine, Turing test, William Shockley: the traitorous eight

It mainly traded metals like tin and copper, but soon shares of companies like the Russia Company and Levant Company began to trade. These trading companies were provided access to capital to build ships and finance trading expeditions, and the era of organized capital markets for the English was born. On Dec 31, 1600, when everyone else was singing Auld Lang Syne, 218 knights and merchants in the City of London created the East Indies Company, and were given exclusive rights by the crown to all trade in the East Indies. At the time, this was no lay-up as the Dutch and those nasty Portuguese controlled the trade routes. But the EIC, with a trading business and its own private military to protect it, became the largest Non Government Organization. Think Exxon with weapons. The creation of the East Indies Company was the first of many government-anointed trading companies that formed the backbone of mercantilism.

So he demanded membership in the NYSE so he could, in effect, get a rebate on the painful commission rates. The NYSE of course refused, so he took his problem to Washington. Reform was in their air after a nasty bear market of 1974, when the Nifty Fifty turned shifty, and lost a fair amount of value. The Security Exchange Act of 1975 did away with fixed commissions on trading, and mandated an electronic National Market System. The socalled Big Bang would expose the fat cats on Wall Street to the full winds of technology-induced change and that was to be the end of them. Some, like a firm called White Weld, disappeared, mainly by merging into bigger firms. The rest adapted. THE MODERN STOCK MARKET 199 With most of the weak players wiped out from the paper crunch in 1969, and systems like DTC in place to handle the volume, Wall Street firms adapted to lower commissions by putting up their own capital to facilitate trades and getting paid for their liquidity.

Then 26 percent in 1999, 36 percent in 2000 and close to 50 percent of NASDAQ volume was done by ECNs by the end of 2001. It is now over half and growing. Those traders should have answered their phones. A big chunk of Wall Street’s small stock trading profits disappeared. *** Until 1975, technology was needed to save the back office and its clearing problems, but Wall Street enjoyed a period of fixed commissions and increasing volume. Big Bang meant commissions and spreads dropped, but volume increased. Large Wall Street firms THE MODERN STOCK MARKET 203 provided liquidity and their own capital to differentiate themselves. They quickly made up for declining commissions. The ‘80s saw trading volumes increase, and a bull market sure helps. Big Wall Street firms made money hand over fist. But by the mid ‘90s, spreads were shot to hell by SOES bandits and day traders.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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

These discontents have been a source of fascination to me since the outset of my career. When I left Oxford University in 1966, I embarked on what I confidently expected to be the great twentieth-century novel. With about a third of it written, it dawned on me that it was horrendously devoid of literary merit. When I binned the incomplete manuscript, I had no Plan B and thus succumbed to parental pressure to join one of the big firms of chartered accountants in the City of London, where a great uncle of mine had been the dominant figure through most of the first half of the century. Three years there left me with a profound distaste for accountancy and a qualification that I did not expect to be of much use. Yet I acquired a growing interest in the workings of the global economy and an enduring concern about the ethical basis of capitalism. These are subjects that I pursued in my subsequent career in journalism, which was later to be informed by practical experience as, among other things, a non-executive director and chairman of a quoted company, and pro bono work on corporate governance around the globe for the World Bank Group and the Organisation for Economic Cooperation and Development.

His building activities relied heavily on credit, yet he was notoriously reluctant to pay his creditors, even stipulating in his will that his debts should not be met. He ignored restrictions imposed by Acts of Parliament on new building and often demolished existing structures without permission. And he cut corners in his building work as well as with the law. So cheap were the materials in the houses he built in Mincing Lane in the City of London that they collapsed soon after construction. Barbon’s modus operandi in clearing and assembling sites for development is nicely caught by Roger North, Barbon’s architect for the rebuilding of the Temple, who describes him turning up, invariably late, to deal with the occupants of potential development land: He would make his entry, as fine and as richly dressed as a lord of the bedchamber on a birthday.

In 2004, Ben Bernanke, governor of the Fed and later its chairman, said: ‘My view is that improvements in monetary policy, though certainly not the only factor, have probably been an important source of the Great Moderation.’45 This plaudit for central bankers included by implication a pat on the back for Bernanke himself. The approach to central banking outlined here was in marked contrast to the days before academics and professional economists took over from banking practitioners at the head of leading central banks. David Kynaston quotes, in his colourful history of the City of London, a paper prepared in 1962 at the Bank of England for a course on central banking. The authors, Maurice Allen and Humphrey Mynors, economic adviser and deputy governor respectively, assembled a list of propositions circumspectly called ‘Opinions Attributed to Central Bankers’. Among the more revealing were these: A central banker needs a sense of smell. Analysis is only theorising but may be encouraged when it confuses critics.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

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AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, butterfly effect, buttonwood tree, buy low sell high, capital asset pricing model, citizen journalism, collateralized debt obligation, corporate governance, Craig Reynolds: boids flock, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, Emanuel Derman, en.wikipedia.org, experimental economics, financial innovation, Gordon Gekko, implied volatility, index arbitrage, index fund, information retrieval, Internet Archive, John Nash: game theory, Khan Academy, load shedding, Long Term Capital Management, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, moral hazard, mutually assured destruction, natural language processing, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Renaissance Technologies, Richard Stallman, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, semantic web, Sharpe ratio, short selling, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, too big to fail, transaction costs, Turing machine, Upton Sinclair, value at risk, Vernor Vinge, yield curve, Yogi Berra

Given Moore’s law, it’s not long before the computer that beat Kasparov with seven hours to think could beat him with three minutes. Many facets of trading are more like blitz chess than high-level tournament chess play. Job Insecurity for Traders There is no shortage of paycheck anxiety among traders. Their numbers have been dropping. IBM’s consulting arm published a report called “The Trader Is Dead, Long Live the Trader.”8 A Finextra headline, “City [of London] Trading Jobs to Fall by 90% as Banks Take Up Algorithmic Technology,”9 no doubt contributed to trader stress. Even the Economist magazine, in a story headlined “The March of the Robo-Traders,” observed that “programs that buy and sell shares are becoming ever more sophisticated. Might they replace human traders?”10 Like global warming, this is a reality that can’t be ignored. Gawronski comments, “Specialist firms have been cutting staff at an extremely rapid rate—30 percent here, 50 percent there—which is no surprise considering keystrokes are down more than 50 percent, I believe, and algos are being employed to do some of the routine heavy lifting of market making.”

If we are lucky, more technology solves them. An Illustrated History of Wir ed Markets 7 Changes in markets brought about by technology are anything but subtle: The exchange floor in Tokyo closed down and was replaced by electronics in 1998. Here’s an earlier example, the London Stock Exchange trading floor the day before . . . . . . and the day of the introduction of screen trading—the so-called Big Bang—on October 27, 1986. You could have gone bowling and no one would have noticed. The trading floors that have been emblematic of financial markets around the world are an endangered species. Brokers and traders who used to rely on fast reflexes and agile elbows and knees now rely on computer programs, tweaked to be milliseconds faster than the next guy’s program. Clearing the floor and rolling in the machines has a sentimental cost.

However, these are largely theoretical analyses or simulations. It is reminiscent of the joke about the mathematician who wakes up in a hotel that is on fire, walks to the sink, turns on the water, says, “A solution exists,” and goes back to sleep. There is a vast amount of work to be done. From the Vault: Bits, Bucks, and BTUs I first wrote about this subject in a RAND paper, “Real Time Pricing and Deregulating the Electricity Market,”8 published in 1980—at the same time as the other RAND paper mentioned in the Introduction, Kevin Lewis’s banned classic “The Tumescent Threat.”9 I was flattered that RAND scanned the paper version of my work and reissued it last year on its web site. This work was done at the end of the Carter administration as part of RAND’s research program sponsored by the Department of Energy and the EPA.


pages: 364 words: 101,286

The Misbehavior of Markets by Benoit Mandelbrot

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Albert Einstein, asset allocation, Augustin-Louis Cauchy, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black-Scholes formula, British Empire, Brownian motion, buy low sell high, capital asset pricing model, carbon-based life, discounted cash flows, diversification, double helix, Edward Lorenz: Chaos theory, Elliott wave, equity premium, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, full employment, Georg Cantor, Henri Poincaré, implied volatility, index fund, informal economy, invisible hand, John von Neumann, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market microstructure, new economy, paper trading, passive investing, Paul Lévy, Plutocrats, plutocrats, price mechanism, quantitative trading / quantitative finance, Ralph Nelson Elliott, RAND corporation, random walk, risk tolerance, Robert Shiller, Robert Shiller, short selling, statistical arbitrage, statistical model, Steve Ballmer, stochastic volatility, transfer pricing, value at risk, volatility smile

Each time, he probed how markets work, how to develop a good economic model for them—and, ultimately, how to avoid loss in them. Today, some of his ideas are accepted as orthodoxy. As the last chapter will show, they are incorporated into some of the mostsophisticated mathematical models with which banks and brokerage houses manage money, into the ways math Ph.D.’s price exotic options or measure portfolio risk from Wall Street to the City of London. For the sake of historical precision, a technical listing is in order here. Mandelbrot was the first to take seriously and study the so-called power-law distributions. His 1962 argument that prices vary far more than the standard model allows—that their distributions have “fat tails”—is now widely accepted by econometricians. (Scientific nomenclature is not always straightforward. The probability distribution behind this particular approach is variously called L-stable, stable Paretian, Lévy, or Lévy-Mandelbrot.)

A Citigroup study in 2002 found unpleasantly sharp price swings in several currencies—dollar, euro, yen, pound, peso, zloty, even the Brazilian real. On one day, the dollar vaulted over the yen by 3.78 percent. That is 5.1 standard deviations, or 5.1σ, from the average. If exchange rates were Gaussian that would be expected to happen once in a century. But the biggest fall was a heart-stopping 7.92 percent, or 10.7σ. The normal odds of that: Not if Citigroup had been trading dollars and yen every day since the Big Bang 15 billion years ago should it have happened, not once. No bell curve. Four centuries of history and turmoil are recorded here, in this record (from DeVries 2002) of the frequency of differentsize changes in the sterling-guilder exchange rate. These data, from 1609 to 2000, do not fit the standard bell curve: There are too many price changes that are very small, and too many that are very large—hence too few points in between.

What is more, he found that the same formula also applied to a broad range of other phenomena: the way clay layers accumulate on a Crimean lake bed, the annual pattern of rainfall in New York, the growth of tree rings on Pike’s Peak. That is not all. Picking up Hurst’s trail in the 1960s, I discovered the same “Nile pattern” in many other contexts—oddest of all, in how a stock price fluctuates. The Nile pattern is a crucial part of fractal geometry. Other researchers, broadening my work in recent years, have found it in international crude oil prices, London gold fixings, and the deregulated U.S. electricity market. Indeed, the Nile pattern provides the second major link in my theory of how financial markets work—a necessary complement to the first one about scaling laws and “fat tails” of the last chapter. Adding a third link in a later chapter, a comprehensive market model results. Good scientists are often circumspect in their formal, academicjournal utterances. The most famous understatement in science may be Watson and Crick’s one-sentence observation, in their original 1953 Nature report on the structure of DNA, that “it has not escaped our notice that the specific pairing we have postulated immediately suggests a possible copying mechanism for the genetic material.”


pages: 415 words: 125,089

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

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Albert Einstein, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, Big bang: deregulation of the City of London, Bretton Woods, buttonwood tree, capital asset pricing model, cognitive dissonance, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Lloyd's coffeehouse, endowment effect, experimental economics, fear of failure, Fellow of the Royal Society, Fermat's Last Theorem, financial deregulation, financial innovation, full employment, index fund, invention of movable type, Isaac Newton, John Nash: game theory, John von Neumann, linear programming, loss aversion, Louis Bachelier, mental accounting, moral hazard, Nash equilibrium, probability theory / Blaise Pascal / Pierre de Fermat, random walk, Richard Thaler, Robert Shiller, Robert Shiller, spectrum auction, statistical model, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, trade route, transaction costs, tulip mania, Vanguard fund

And there is pleasure in doing something new, though never so little."6 But he had a serious objective, too: "[T]o know how many people there be of each Sex, State, Age, Religious, Trade, Rank, or Degree, &c. by the knowing whereof Trade and Government may be made more certain, and Regular; for, if men know the People as aforesaid, they might know the consumption they would make, so as Trade might not be hoped for where it is impossible."7 He may very well have invented the concept of market research, and he surely gave the government its first estimate of the number of people available for military service. Information about births and deaths had long been available in parish churches, and the City of London itself had started keeping weekly tallies from 1603 onward. Additional data were available in Holland, where the towns were financing themselves with life annuities-policies purchased for a lump sum that would pay an income for life to the owner of the policy, and occasionally to survivors. Churches in France also kept records of christenings and deaths. Hacking reports that Graunt and Petty had no knowledge of Pascal or Huygens, but, "Whether motivated by God, or by gaming, or by commerce, or by the law, the same kind of ideas emerged simultane ously in many minds."8 Clearly Graunt had chosen a propitious moment for publishing and analyzing important information about the population of England.

His line of analysis is known today as "statistical inference"-inferring a global estimate from a sample of data; subsequent statisticans would figure out how to calculate the probable error between the estimate and the true values. With his ground-breaking effort, Graunt transformed the simple process of gathering information into a powerful, complex instrument for interpreting the world-and the skies-around us. The raw material that Graunt gathered was contained in "Bills of Mortality" that the City of London had started collecting in 1603. That was only incidentally the year in which Queen Elizabeth died; it was also the year in which London suffered one of the worst infestations of the plague. Accurate knowledge of what was going on in the field of public health was becoming increasingly important.10 The bills of mortality revealed the causes of death as well as the number of deaths and also listed the number of children christened each week.

For the year 1632, for example, he listed nearly sixty different causes of death, with 628 deaths coming under the heading of "aged." The others range from "affrighted" and "bit with mad dog" (one each) to "worms," "quinsie," and "starved at nurse." There were only seven "murthers" in 1632 and just 15 suicides. In observing that "but few are Murthered ... whereas in Paris few nights came without their Tragedie," Graunt credits the government and the citizen guard of the City of London. He also credits "the natural, and customary, abhorrence of that inhumane Crime, and all Bloodshed by most Englishmen," remarking that even "Usurpers" during English revolutions executed only a few of their countrymen. Graunt gives the number of deaths from plague for certain years; one of the worst was in 1603, when 82% of the burials were of plague victims. From 1604 to 1624, he calculated that 229,250 people had died of all diseases and "casualties," about a third of which were from children's diseases.


pages: 742 words: 137,937

The Future of the Professions: How Technology Will Transform the Work of Human Experts by Richard Susskind, Daniel Susskind

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23andMe, 3D printing, additive manufacturing, AI winter, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, Andrew Keen, Atul Gawande, Automated Insights, autonomous vehicles, Big bang: deregulation of the City of London, big data - Walmart - Pop Tarts, Bill Joy: nanobots, business process, business process outsourcing, Cass Sunstein, Checklist Manifesto, Clapham omnibus, Clayton Christensen, clean water, cloud computing, computer age, computer vision, conceptual framework, corporate governance, crowdsourcing, Daniel Kahneman / Amos Tversky, death of newspapers, disintermediation, Douglas Hofstadter, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, Google Glasses, Google X / Alphabet X, Hacker Ethic, industrial robot, informal economy, information retrieval, interchangeable parts, Internet of things, Isaac Newton, James Hargreaves, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, knowledge economy, lump of labour, Marshall McLuhan, Narrative Science, natural language processing, Network effects, optical character recognition, personalized medicine, pre–internet, Ray Kurzweil, Richard Feynman, Richard Feynman, Second Machine Age, self-driving car, semantic web, Skype, social web, speech recognition, spinning jenny, strong AI, supply-chain management, telepresence, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transaction costs, Turing test, Watson beat the top human players on Jeopardy!, young professional

These medieval guilds (mainly merchant guilds and craft guilds) were associations of specialists and artisans involved with the same trade or craft—they came together to set standards, control competition, to look after the interests of their members and families, and to enjoy the prestige of being part of a group of recognized experts. Here, amongst cobblers, bakers, carpenters, and many others, we find early signs of the self-regulation, monopoly, and the hankering after status that continues to prevail in many modern professions. In the City of London, members of particular guilds could be distinguished from one another by their livery (ceremonial dress), which led to these guilds becoming known as livery companies. It is telling that new livery companies continue to be set up and flourish. For example, the 100th livery company, the Worshipful Company of Information Technologists, was granted livery status in 1992, while the Worshipful Company of Management Consultants became the City’s 105th livery company in 2004.

Our claim instead is that a significant number of tasks that used to require handcrafting are already being done very differently. And, as cost pressures build and increasingly capable systems emerge, more and more tasks that used to require the engagement of human experts will be undertaken either by less-qualified people with the support of appropriate systems, or taken out of human hands altogether. We can draw again here on an analogy from the world of traditional crafts. Some history helps. In the City of London there is a thriving community of ‘livery companies’. As we note in section 1.3, these organizations can be traced back to the ancient guilds and, in their early years, their focus was largely on regulating their trades. There are now 110 of these institutions, the longest-standing of which is the Mercers’ Company, founded in 1394 and now located in Ironmongers Lane in London. Mercers were traders in fine cloths and silks, but the last of their number to become an apprentice did so in 1888, since when, like many other livery companies, the Mercers have shifted their focus from trade to charity and education.

In the first two parts of the book we describe the changes taking place within the professions, and we develop various theories (largely technological and economic) that lead us to conclude that, in the future—in the fully fledged, technology-based Internet society—increasingly capable machines, autonomously or with non-specialist users, will take on many of the tasks that currently are the exclusive realm of the professions. While we do not anticipate an overnight, big-bang revolution, equally we do not expect a leisurely evolutionary progression into the post-professional society. Instead, we predict what we call an ‘incremental transformation’ in the way in which we organize and share expertise in society, a displacement of the traditional professions in a staggered series of steps and bounds. Although the change will come in increments, its eventual impact will be radical and pervasive.


pages: 584 words: 187,436

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

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

Popper’s masterwork, The Open Society and Its Enemies, created in Soros a lifelong desire to make his own contribution to philosophy. It pointed him toward a distinctive way of thinking about finance and inspired the name of the philanthropy he was to found, the Open Society Institute. Soros left LSE with mediocre grades and spent a while in dead-end jobs, at one point selling handbags in northern Wales. He escaped this version of his destiny by writing to all the investment banks in the City of London, inquiring about entry-level positions. Spurned by the establishment because of his lack of social ties, he eventually landed a job with a brokerage run by Hungarian émigrés; after learning the financial ropes, he found his way to New York in 1956, figuring he could stomach Wall Street for five years, long enough to put aside the savings he needed to support a life as an independent philosopher.2 But he soon found he was too good at the investing game to quit.

In terms of the normal probability distribution, a plunge of the size that befell the S&P 500 futures contracts on October 19 had a probability of one in 10160—that is, a “1” with 160 zeroes after it. To put that probability into perspective, it meant that an event such as the crash would not be anticipated to occur even if the stock market were to remain open for twenty billion years, the upper end of the expected duration of the universe, or even if it were to be reopened for further sessions of twenty billion years following each of twenty successive big bangs. Mandelbrot, who had abandoned financial economics after the brush-off in the early 1970s, returned to the subject with a vengeance. His Soros-like thinking on “chaos theory,” which emphasized that small pieces of information could generate large price moves because of complex feedback loops, acquired a cult following among money managers. As well as challenging the statistical foundation of financial economists’ thinking, Black Monday forced a reconsideration of their institutional assumptions.

He rented an office a block away from his co-op on Central Park West, bringing along his partner from Bleichroeder, an irascible, workaholic analyst named Jim Rogers. Interviewed years later in his Manhattan home, Rogers conducted the discussion while wincing and gasping on an exercise bike that was rigged up with a laptop and phone for maximum multitasking.6 Together with Rogers, Soros continued to look for moments when an unstable equilibrium might reverse. He saw, for example, that financial deregulation was changing the game in banking, transforming a dull sector of the stock market into a sexy one: He made a fortune from bank stocks. He spotted that the Arab-Israeli war of 1973 changed the game for the defense industry, since Soviet weaponry used by Egypt had performed well, demonstrating that the United States faced a greater challenge than previously imagined. Soros predicted that the Pentagon would soon persuade Congress to authorize some catch-up investments.


pages: 1,088 words: 297,362

The London Compendium by Ed Glinert

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1960s counterculture, anti-communist, Big bang: deregulation of the City of London, British Empire, Corn Laws, Dava Sobel, double entry bookkeeping, Edward Lloyd's coffeehouse, Exxon Valdez, hiring and firing, invention of the telegraph, Isaac Newton, John Harrison: Longitude, John Snow's cholera map, Khartoum Gordon, Mahatma Gandhi, Nick Leeson, price stability, Ronald Reagan, South China Sea, South Sea Bubble, spice trade, the market place, trade route, union organizing, V2 rocket

A major blow came in the financial crash of 1931 when the Exchange lost most of its overseas business, while after the Second World War there were fears that the Labour government would nationalize the institution. Although this was averted, the Stock Exchange was hampered by exchange controls that prevented British residents from buying non-Sterling securities until 1979 when the Thatcher government introduced deregulation. This allowed outside corporations to own member firms, abolished minimum levels of commission and resulted in the functions of jobbers and brokers being merged. The so-called ‘Big Bang’ of 27 October 1986 saw the Exchange become a private limited company, with individual members no longer having voting rights, profits used for financing developments by the Exchange, rather than being distributed to shareholders, and trading conducted on computer and telephone, rather than in person.

Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of both the copyright owner and the above publisher of this book EISBN: 978–0–141–90725–3 For Katy and Marian Contents Acknowledgements Foreword The City of London ALDERSGATE, EC1 MOORGATE, EC2 CIRCLE LINE FENCHURCH, EC3 FLEET STREET | ST PAUL’S, EC4 Central London CLERKENWELL | FINSBURY, EC1 BLOOMSBURY, WC1 COVENT GARDEN, WC2 The West End CENTRAL LINE FITZROVIA, W1 MARYLEBONE, W1 MAYFAIR, W1 PICCADILLY LINE SOHO, W1 Westminster | Whitehall DISTRICT LINE VICTORIA LINE River Thames HAMMERSMITH, W6 FULHAM, SW6 CHELSEA, SW3, SW10 PIMLICO, SW1 WESTMINSTER, SW1 STRAND, WC2 CITY OF LONDON, EC4, EC3 WAPPING, E1 LIMEHOUSE, E14 ISLE OF DOGS, E14 BARNES, SW13 PUTNEY, SW15 WANDSWORTH, SW18 BATTERSEA, SW11 NINE ELMS, SW8 LAMBETH, SE1 SOUTH BANK, SE1 BANKSIDE, SE1 BERMONDSEY, SE1 ROTHERHITHE, SE16 DEPTFORD, SE8 GREENWICH, SE10 East London THE EAST END, E1 EAST LONDON LINE BETHNAL GREEN, E2 POPLAR | ISLE OF DOGS, E14 North London THE ANGEL | ISLINGTON, N1 NORTHERN LINE HIGHBURY, N5 HIGHGATE, N6 HOLLOWAY, N7, N19 STOKE NEWINGTON, N16 North-west London CAMDEN TOWN | REGENT’S PARK, NW1 BAKERLOO LINE HAMPSTEAD, NW3 ST JOHN’S WOOD, NW8 METROPOLITAN LINE South-east London SOUTHWARK, SE1 JUBILEE LINE GREENWICH, SE10 KENNINGTON, SE11 South-west London BELGRAVIA, SW1 BRIXTON, SW2, SW9 CHELSEA, SW3, SW10 EARL’S COURT, SW5 SOUTH KENSINGTON, SW7 West London BAYSWATER, W2 HAMMERSMITH, W6 HAMMERSMITH & CITY LINE KENSINGTON, W8 NORTH KENSINGTON, W10 NOTTING HILL, W11 SHEPHERD’S BUSH, W12 WEST KENSINGTON, W14 Select Bibliography People Index Subject Index Acknowledgements Without my agent, Faith Evans, and editor, Margaret Bluman, this book would not have been possible, and I cannot thank them enough for their guidance, hard work and help.

River Thames HAMMERSMITH, W6 FULHAM, SW6 CHELSEA, SW3, SW10 PIMLICO, SW1 WESTMINSTER, SW1 STRAND, WC2 CITY OF LONDON, EC4, EC3 WAPPING, E1 LIMEHOUSE, E14 ISLE OF DOGS, E14 BARNES, SW13 PUTNEY, SW15 WANDSWORTH, SW18 BATTERSEA, SW11 NINE ELMS, SW8 LAMBETH, SE1 THE SOUTH BANK, SE1 BANKSIDE, SE1 BERMONDSEY, SE1 ROTHERHITHE, SE16 DEPTFORD, SE8 GREENWICH, SE10 The great clean-up of London Shipworming under the Thames ‘Waterloo Sunset’ London’s main artery and the second longest river in England, the Thames, which rises in Gloucestershire, meanders through Oxfordshire and Berkshire to London where it was easily forded in ancient times, a factor that led the Romans to set up camp in what is now the City of London in AD 50. The river became its main transport network, and by the nineteenth century was filled with ships unloading goods at one of the world’s busiest ports.